Plans for Logistics Company Certification. Contents 1. Progress to date1 2. Certification criteria (draft) 2 3. Certification via strategic alliances

Plans for LogisticsPlans for LogisticsCompany CertificationCompany Certification

ContentsContents

1. Progress to date 1

2. Certification criteria (draft) 2

3. Certification via strategic alliances (draft) 21

4. Certification procedures 23

5. Future action plans 26

Progress to date• Prepared Logistics Company Fostering System aimed at advancing the logi

stics industry (August 2004)* Newly adopted system aims to foster and certify qualified logistics service provi

ders • Goods Distribution Promotion Act amended in January 2004 for adoption of th

e certification system (effective Jan. 2006) and laid the legal foundation ꊱ Certify companies providing comprehensive logistics services ꊲ Certification criteria and lower regulations stipulated as joint ordinances of

concerned authorities ꊳ Give priority to major logistics facilities, prepare foundation for financial and

other supports

• Drawing up certification criteria and enforcement regulations in preparation for full adoption of the new system beginning 2006

- Joint ministerial ordinance being drafted: task forces set up and working on the draft (public hearing held on 29 July 2005)

1

Comprehensive Logistics Company Certification Criteria (Draft)

1. Basic directions

￭ Do away with simple logistics service providers and focus on companies providing more comprehensive services

￭ Prepare separate criteria for transport-oriented, facilities-oriented, and service-oriented companies reflecting the diverse features of comprehensive logistics companies

￭ Certify strategically allianced companies in order to induce participation of competitive small and medium sized companies

ㅇ Companies applying for certification are to be evaluated in 3 categories (transport, facilities and service perspectives) with the highest of the three scores becoming the candidate company’s final evaluation point.

2

Certification Requirements (Draft)

2. Certification requirements in general ￭ Set basic features of a comprehensive logistics company as essential criteria￭ Diversify the evaluation categories to ensure that special characteristics of

comprehensive logistics companies are taken into account and to ensure that only competitive companies certified

Logistics CompanyLogistics Company

Corporate ScaleDiversity Potentials

Investm

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Sale

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Netw

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Sale

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3rd

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logistics

Glo

baliza

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Informatization

Sta

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Clie

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Hum

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3. Requirements ￭ Minimum requirements to qualify as comprehensive logistics company￭ Companies not meeting the minimum requirements are not eligible for

certification

〔 Logistics businesses〕￭ A company operating at least 3 logistics businesses with transporting,

which has the highest outsourcing rate, and logistics facilities operations as core businesses

* Logistics sales should account for min. 3% of the total sales or be at least 3 billion won

〔 3rd party logistics sales〕￭ Logistic company aiming at 3rd party logistics ￭ 3rd party logistics sales should account for min. 20% of the total

logistics sales

4


4. Evaluation categories for certification￭ Average points for diversity, corporate scales, and growth potentials

should meet minimum required points￭ Different categories will be weighed differently according to the

characteristics of each company * e.g. Growth potential weight more heavily than corporate scales for

service-oriented companies

Transport, facilities, etc. asset-oriented company

Forwarding, consulting and other service-oriented

company

Diversity 25% 25%

Corporate scales

35% 15%

Growth potentials

40% 60%

Total 100% 100%

5


4. Evaluation categories for certification(cont.)

￭ Set perfect scores for each category

- Ceilings set so that excellence in any one field will not be over estimated ⇒ ratios to be calculated within the perfect score range

- Top 20% of the 110 logistics companies surveyed for polls and audited by the Financial Supervisory Commission to be set as the range for perfect scores

* However, large scale categories such as service-oriented category shall be set at top 40% with separate scoring standards applied

6



(1) Diversity standards: Networks, sales structures, clientele

〔 Networks diversity 〕

* Hubs where the sales were generated are recognized as hubs * Multiple hubs in a single region are permitted

PointsPerfect scoreTransportation/

FacilitiesServices

Domestic hubs

5 5Min. 5 cities/provinces or 10 hubs

Overseas hubs

5 5Min. 2 countries or 5 overseas hubs

7



〔 Diversity in sales structure 〕

* Sales for each business type needs to be at least 3% of the total sales or at least 3 billion won in total

* Divided into 11 smaller categories in the annexed table under the Enforcement Decree of the Goods Distribution Promotion Act


FacilitiesServices

No. of Businesses

5 5At least 5 business types

8



〔 Clientele diversity 〕

* Only long-term contract (min. one year) clients apply * Minimum 5 clients are guaranteed when sales to the largest

clients is 20% or under. * Limited to sales in the logistics sector only


FacilitiesServices

Number of clients 5 510 or more

clients

Largest client sales 5 5 20% or less

9



(2) Structure and scale of companies: capital, assets, sales

〔 Capital volumes 〕

* Scope of capital: paid in capital + funds that are capital in nature and that are actually invested as they appear in the settlement of accounts

Points Perfect score (ratios)

Transportation/Facilities type

5 pts. Minimum capital of 10 billion won

Services type 3 pts. Minimum capital of 5 billion won

10


4. Evaluation categories for certification(cont.) 〔 Asset (transportation) volumes 〕

* Includes vessels and aircraft * 300DWT vessels, 1 ton of aircraft loaded cargo calculated as equivalent to 1 motor ve

hicle * Values of motor vehicles determined based on vehicle sizes (see p. 8) * Owned & secured: owned & operated is owned, leased is secured

PointsTotal value

Perfect score(ratios)Owned Secured

Transportation type 10 pts. 1.0 0.8

Min. 1000 vehiclesFacilities type 5 pts. ″ ″

Services type 2 pts. ″ ″ Min. 500 vehicles

11


4. Evaluation categories for certification(cont.) 〔 Asset (facilities) volumes 〕

* Additional points awarded according to areas and usages ⇒ 1.0 pt for delivery centers, general warehouses & other building areas ⇒ 0.5 pts for storage yards, garages, container yards, other land areas ⇒ 1.0 pt for warehouses in cases of CFS and 0.5 pts for containers yards * Owned and secured: self-owned is owned and long-term lease is secured

Points

Total valuePerfect Score

(ratios)Points

Owned Secured

Transportation type 5 pts. 1 0.8 200,00 ㎡

or largerFacilities type 10 pts. ″ ″

Services type 2 pts. ″ ″ 100,000 ㎡ or larger

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〔 Asset (misc. logistics assets) value 〕

* Containers, pallets, loading/unloading equipment, automation equipment, etc.

⇒ All tangible fixed logistics related assets not including transportation and logistics facilities

PointsAggravated value

Perfect score(ratios)Owned Secured

Transportation/Facilities type

5 pts. 1 0.8 Min. 10 billion won

Services type 2 pts. ″ ″ Min. 5 billion won

13


4. Evaluation categories for certification(cont.) 〔 Sales volumes 〕

* Only pure logistics sector sales apply and goods sales are excluded * 3rd party logistics: Volume consigned to 3rd party shippers, consignors or goods owners (in

cluding logistics companies) based on long-term contacts (min. 1 year). Subsidiary or affiliated companies under Article 11 of the Monopoly Regulation and Fair Trade Act do not qualify as 3rd party companies.

* Turnkey consignment sales: contracted sales that provides integrated logistics services combining 2 or more of the logistics service businesses among 3rd party logistics sales

Points (Total 100)Perfect points criteriaTransport/

Facilities Services

Logistics sector sales 4 2 Min. 100 billion won

3rd party logistics sales 3 2 Min. 50 billion won

Turnkey consignment sales 3 2 Min. 25 billion won

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4. Evaluation categories for certification(cont.) (3) Growth potential based: 3rd party logistics, globalization, informatization, st

ability, human resources, management quality〔 3rd party logistics – Growth potentials 〕

Points

Perfect points criteriaTransport/Facilities Services

3rd party logistics sales ratio 4 4 50% or higher

Turnkey consignment sales

ratio4 4 50% or higher

3PL sales increase rate 4 4 100% for 3PL sales of min.

50%, 50% for 5~50%Turnkey

consignment sales increase rate

3 3100% for turnkey consignment sales ratio of min. 50%, 50% for 5~50%

15



〔 Globalization – Growth potentials 〕

* International investments: Joint venture investments included * International sales: includes all overseas sales by domestics or

overseas companies ⇒ In case of joint ventures, only the portions for actual investment

shares are recognized

PointsPerfect points criteriaTransport/

FacilitiesServices

Overseas investments

3 5 Min. $5 million

Overseas sales 3 5 Min. $5 million

16


4. Evaluation categories for certification(cont.) 〔 Informatization – growth potentials 〕

PointsPerfect points

criteriaTransport/Facilities

Services

Information system asset value

2 4 Min. 5 billion won

Sales/investment in informatization (R&D investment i

ncluded)2 4

Min. 3% or 3 billion won

Accessibility to shared information network

2 2Accessibility to shared information network

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4. Evaluation categories for certification(cont.) 〔 Stability – Growth potentials 〕

* Rate of return: average value of most recent 3 years


FacilitiesServices

Debt ratio 2 4Under 100% (perfect score), over 600% (0 pts.)

Long-term consignment

contracting ratio2 4 70% or higher

Sales/rate of return ratio

2 4 4% or higher

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4. Evaluation categories for certification(cont.) 〔 Human resources – Growth potentials 〕

* Logistics related license (logistics manager, CPIM, CPM, transport related technicians, customs broker, etc.), master’s degree or higher in related fields (logistics, transportation, etc.)

* Make assessments to see whether company provides training and their performances


FacilitiesServices

Experts availability

2 4 Min. 20 persons

Training system

2 4Training system,

evaluation of training programs

19


4. Evaluation categories for certification(cont.) 〔 Quality management – Growth potentials 〕

* Measure company’s business processing qualities via official certification * Post-certification inspections are conducted to ensure that quality meeting the c

ertification criteria is maintained


FacilitiesServices

Certification in Logistics

2 4 ISO or other certifications

Effective period

1 1Additional points given when

held for 3 years or longer

20

Certification & Strategic Alliance

• Basic concept of strategic alliance

- One company cooperation with another company to strengthen competitiveness

- Used as pre-stage to inducing friendly mergers among companies

• General methods of strategic alliance

- Contracting: Companies contracting with each other with aim to expand their services and service areas as well as joint marketing activities

- Exchange of shares: exchanging shares with companies as a way of entering into strategic alliance

21

Certification & Strategic Alliance

• Certification requirements for companies participating in strategic alliances

- Requirements: same as general logistics companies (p. 4)

- Strategic alliance requirements * Number of participating companied: maximum 5 * Alliance methods: contracting or share exchanging

(undecided) * Alliance period: effective for at least 3 years * Minimum points requirements for participating companies:

minimum 20 certification evaluation points * Minimum 3PL priority requirement: 20% or higher - Operation requirements * Use of joint trademarks * Sharing of logistics information system * Submission of combined logistics accounting reports

22

Certification Procedures• Certification Evaluation Process

신청인 인증기관 인증심사위원회

인증신청

심사결과보고

이의신청 내역 재심사

재심사결과보고

심사위원회 구성 서류심사 및 현장실사

심사결과정리

반려결과통보

심사종료

이의신청

필수요건충족Y es

No

Y es

No

인증운영위원회

인증심사접수

심사결과심의

신청서 접수

재심사여부심의

재심사결과심의

반려결과보고

1. 사전심사

2. 인증심사

심의결과접수

심사결과통보

심사종료

심사위원회 구성

재심사

기각

심사결과정리

심의결과접수

심사결과통보

3. 이의신청

23


〔 Certification Committee 〕 - Summary: Run jointly buy the relevant ministries

- Responsibilities: Designate certification authority, make certification decisions

〔 Certification authority and procedures 〕 - Designate an organization that will be in charge of the certification

system (Korea Transport Institute expected to be designated)

- Set up a certification center within the certification authority (operational funds to be provided by the government)

〔 Run a pool of certification committee members and certification procedures 〕

- Certification authority to compose a pool of certification committee members (50 logistics related experts)

- Sub-committees composed of about 5 members from the pool to undertake evaluation of individual companies

24


〔 Evaluation Process 〕 - Document and on-site inspections - Certification sub-committee makes report of evaluation

outcomes to the certification authority - Certification authority placed those outcomes before the

Certification Committee - Certification Committee makes final decisions

[Scheduled Inspections] - Annual inspections are conducted to determine whether the

company is qualified maintain its certification status - Certification is canceled when requirements are not met

25

Future Action Plans1. Legislate Joint Ministerial Ordinance - Notification: October 2005 - Ministry of Justice deliberations: Early November 2005 - Proclamation: November 2005 - Date of enforcement: 1 January 2006

2. Certification Center and preparations for enforcement - Establishment of certification center: October 2005 - Develop Operational Guidelines for Certification Center:

October ~ November 2005 - Develop and open Certification Center website: October ~

December 2005 - Final presentations on comprehensive logistics company

certification system given: December 2005

26

Thank you!

27

Documents

Plans for Logistics Company Certification. Contents 1. Progress to date1 2. Certification criteria (draft) 2 3. Certification via strategic alliances