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A report on Preliminary analysis on 4PL business and design of go to market tools for the same & Sales and support for 3PL business Under the guidance of Mr. Anand Balakrishna Head Business Dr. Mani K. Madala, Professor,Group Coordinator General

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A report on

Preliminary analysis on 4PL business and design of go to market tools for the same & Sales and support for 3PL business

Under the guidance of Dr. Mani Mr. Anand Balakrishna K. Madala, Professor,Group Head Business Development Coordinator General GATI, Hyderabad Management, NITIE, Mumbai Submitted by Pramodkumar Lakhmapure Roll No. 49, PGDIM 14, NITIE May 25, 2009

Preliminary analysis on 4PL business and design of go to market tools for the same & Sales and support for 3PL business

CERTIFICATE OF APPROVALThe following Winter Internship Project titled Preliminary analysis on 4PL business and design of go to market tools for the same & Sale and support for 3PL business undertaken by Pramodkumar Lakhmapure during his winter internship at GATI Ltd., Hyderabad from 2nd Feb to 19th May 2009 is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Industrial Management for which it has been submitted to Winter Internship Report Examination Committee for evaluation of Winter Internship Report. Dr. Mani K. Madala Professor, Group Coordinator General Management NITIE DATE : PLACE: Mumbai

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ACKNOWLEDGEMENTS

I take this opportunity to express my gratitude and sincere thanks to Mr. Anand Balakrishna, Head Business Development SCM. His continuous support and mentorship helped me in greater understanding of the business and provided new insights into the project. I also would like to thank Mr. Howard James Scott, Chief of Supply Chain Management who gave his valuable guidance throughout the project which was essential for completion of my project.

I would like to thank Dr. Mani K. Madala, my project guide for the winter internship, who gave her valuable suggestions whenever sought during the course of the project.

Last but not the least I am grateful to NITIE for providing me with an opportunity and platform for putting the theory that we learned as a part of our curriculum, into practice.

Pramodkumar Lakhmapure Roll No. 49, PGDIM 14, NITIE May 25, 2009

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Table of Contents1. Project Charter........................................................................................................................... 1.1 Objectives........................................................................................................................... 1.2 Deliverables........................................................................................................................ 1.3 Additional responsibilities.................................................................................................. 2. Confidentiality clause................................................................................................................ 3. Executive Summary................................................................................................................... 4. Methodology followed for the project....................................................................................... 5. Trends in Logistics Industry...................................................................................................... 5.1 Some trends in the logistics industry.................................................................................. 5.2 4PL Competition radar....................................................................................................... 5.3 Mapping of 3PLs operating in India according to verticals and capabilities..................... 6. An overview on 4PL.................................................................................................................. 6.1 Defining 4PL...................................................................................................................... 6.2 Who Provides 4PL Services?............................................................................................. 6.3 Difference between 3PL, 4PL & LLP................................................................................ 6.4 Deciding whether you want to be a 3PL or 4PL................................................................ 6.5 Difference between 3PL and 4PL....................................................................................... 6.6 Rationale behind forming a 4PL........................................................................................ 6.7 Broad scope of a 4PL service provider............................................................................... 6.8 Why are companies looking for 4PL service?.................................................................... 6.9 Benefits of 4PL................................................................................................................... 6.10 Increasing shareholder value.......................................................................................... 6.11 Verticals served by 4PLs................................................................................................ 7. Products and services offered by 4PL players........................................................................... 8. Defining a value chain and comprehensive services & solutions map for 4PL........................ 8.1 Defining a Value Chain for 4PL......................................................................................... 8.2 Defining products and services for a 4PL.......................................................................... Why this product mix.................................................................................................................... 8.3 Designing service and technology map for 4PL................................................................. 9. Go to market sales tool for a 4PL.............................................................................................. 9.1 Defining Sales Cycle for a 4PL.......................................................................................... 9.2 Designing a questionnaire for customer requirement gathering......................................... 10. Designing a comprehensive survey questionnaire for capturing customer perception on 4PL 11. Go to market sales tool for a 4PL........................................................................................ 12. Live case for integrated logistic services............................................................................... 13. Additional responsibilities..................................................................................................... 13.1 Integrated logistics enquiry............................................................................................. 13.2 Designing different business flows for a new venture.................................................... 14. Findings & recommendations................................................................................................ UPS Supply Chain Solutions: http://www.ups-scs.com/.................................................................. GATI Confidential Page 1 of 69

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DHL: http://www.dhl.com/splash.html............................................................................................. 15. Conclusion............................................................................................................................. 16. References.............................................................................................................................. UPS Supply Chain Solutions: http://www.ups-scs.com/..................................................................

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1. Project Charter1.1

Objectivesi. To research and study various aspects of 4PL service providers(definition, difference from3PL, 4PL players and their product profile, verticals served)

ii. To defining a comprehensive value chain and solutions map for a proposed 4PL venture forGati (at least 4 product offerings)

iii. To study existing sales cycle of Gati (RFQ response process) and define a custom sales cycleone for Gati the 4PL services

iv. To design a comprehensive survey questionnaire for capturing customer perception about4PL targeting the current Gati clientele

v. To design go to market sales tool for 4PL Gati Sales Team vi. To build one live sample case for integrated logistics services

1.1 Deliverablesi. 4PL overview presentation (for new joinees) ii. A comprehensive value chain and solutions map for a proposed 4PL (at least 4 productofferings)

iii. Product portfolio offered by the top of 4PL service providerss (at least 5 competitorsinformation)

iv. Go to market sales tool for 4PL (cyclesalessales presentation and ) v. A survey questionnaire for capturing customer perception on 4PL vi. One Customer case study using integrated logistic services (At least 5 customer visits for3PL / 4PL business Development)

1.1

Additional responsibilitiesWorking on integrated logistics enquiries with National BD Head Designing Product Flow, Information Flow and Financial flow for a new venture

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1.

Confidentiality clause

The data contained herein shall not be disclosed, duplicated, or used in whole or in part for any purpose. The information in this report based on the survey findings shall be kept confidential and shall not be presented anywhere else without requisite approval from GATI.

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2.

Executive Summary

The Indian Logistics and Supply Chain arena has changed immensely in the recent past.Some major change in the logistic industry is; PREVIOUS Dedicated Facility Inventory Storage = Availability Local Source Exceptions Tracking Single Business Unit Solution Shared Facilities Inventory Flow Through = Velocity Global Source Proactive Event Management Enterprise Wide Solution NOW

3PL led the way in Logistic outsourcing providing services like forwarding, trucking and warehousing. It was primarily focused on reducing logistics cost. Some 3PL are trying to move past being just a commodity-service logistics provider to become true multi- service providers by offering bundled services including some IT solutions like WMS. But very few 3PL have succeeded in meeting exact needs of the customer who are looking for a comprehensive supply chain service provider. 3PL provided discrete services like transportation, warehousing and some value added services. This led into commoditization of the 3PL services and fragmentation of the 3PL sector. As a consequence of these changes and different expectations from customer a new organization is emerging in the Indian Supply Chain Solutions business called 4th Party Logistics. 4PL falls outside the traditional logistics arena. 4PL exploits and sells intellectual property, consulting practices and solutions design.

A 4PL is a supplier of outsourced supply chain consulting, coordination and managementservices that generally does not own or operate the underlying logistical assets and resources.

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1.

Methodologyfollowed for the project

Information Sources: The information has been gathered from authentic and reliable sources like company websites, Industry portals Newspapers, White papers and articles. Following objective specific methodology was followed for the project; i. Study of 4PL: Identifying the key dDifferences in service offerings of 3PL and 4PL was studies. A detailed research on top 4PL players was done to understand their; Product and service mix and capabilities Verticals served

Rationale behind forming a Gati 4PLand statedwas studied and stated Benefits of 4PL to the customer was studiedValue Proposition to the customer i. Defining sales cycle for 4PL: was studiedfor 3PL le sales cycExisting Study and mapping of the existing sales cycle PL was studiesvarious 4Sales cycle for Study of sales cycle across various 4 PLs Defining a customized sales cycle for Gati 4PL i. Survey questionnaire for capturing customer expectation from a 4PL:

Identifying the Nneeds and pain areas of customer outsourcing supply chain was studied Study and design of the Service mix (Services, Technology and consulting) required to meet customer expectation was studied i. Defining a comprehensive value chain and solutions map for 4PL Study of all All the upstream and downstream activities of a value chain for a supply chainwere studied

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Study of the 4PL service providers offerings were studied Identification of Supply chain services, IT solutions, and activity wise revenue potential for the proposed venturewas identified i. Go to market sales tools for 4PL Study of GATIs in house distribution and warehousing capabilitieswere studied Study of IT technology capabilities of prospective the technology partnerwere studied Developing Aa go to market sales presentation for the 4PL sales force.was developed i. Live case for integrated logistic services contacts of and analyzedCollected Collection and analysis of GATIs customers in Hyderabad Identifying edtargetand ied a few key customers who could be prospects for 3PL / 4PL services Identifyied and consulted a customer for 3PL / 4PL services Gatherred detailed logistics requirement Designing a ed solution for the customer and submitted develop a comprehensive proposal for the same (Negotiations are on for the order finalization would be closed soon)

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1.

Trends in Logistics Industry

1.1 Some trends in the logistics industry Logistics in India is poised for a significant leap forward in the coming years. The Logistics Industry size has touched the level of $ 90 billion and is expected to reach $ 110 billion by 2010. {1} Logistics industry in India has always faced the challenges that any industry has in an emerging market. Due to an under-developed and inefficient infrastructure & related processes, logistics accounts for 13% of Indias GDP, compared to 10% in the US, Japan's 10 percent and Europe at 11 percent. {} This leads to higher costs and a loss of competitiveness. For example, freight is 6% of landed cost in India due to unplanned movement via air. About 75 per cent of the Fortune 100 companies and about 45 per cent of Fortune 500 companies have now gone in for 4PLs. {2} This trend is fast catching up in India too. But less than 55% of Indian companies subscribe to 3PL services as compared to 75 per cent globally. {3} In India, IBM, Dell, Nike and Philips have handed over their logistics operations to 4PLs. The retail supply chain industries as well as Cool Chain, Pharma, FMCG & Hitech (Telecom) are emerging. Indian logistics industry will reach a market size of over $125 billion in year 2010. These trends and huge demand of the logistic services has made many local 3PL rethink on their service mix and value proposition to the customer.

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4PLs have been widely accepted in the western counties. Many successful and multinational 4PLs have established themselves as trusted end-to-end supply chain service providers. These 4PLs are now entering Indian market.

4PLs operating in India Moduslink (4PL), USA Redington (4PL) USA/India/ APAC Kuhne + Nagel (LLP) German/EU/India

Some other worldwide 4PLs/ LLP APL Logistics Brightstar (4PL). USA UPS SCS Ryder Penske Logistics Menlo

1.1

4PL Competition radar

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1.2

Mapping of 3PLs operating India according verticals and to in

Source: A survey by a consultant appointed by GATI

capabilitiesFMCG DHL- Exel SembCorp Logistics(2) Reliance Logistics TCI Supply Chain Retail Safexpress (1) (2) Gati (1) (2) TCI Supply Chain Other Agility Logistics Total Logistics Transystem Logistics (2) International TVS Logistics

MultiIndustry/Global DHL (1) (2) UPS FedEx (2)

Solutions Om Logistics SembCorp Logistics (2)

APL Logistics (2) Gati (1) (2) Menlo Worldwide (2)

Solutions Gati (1) (2) Om Logistics (1) (2) AFL Logistics (1) (2) Safexpress (1) (2) Patel Logistics (1) (2) Dynamic Logistics (2)

(1) Have no integrated solutions execution in India (2) Will work with external 4PL

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2.

An overview on 4PL from Gatis Point of view4PL - Definition

2.1 Defining

4th Party Logistics is a term created by global consulting firm Accenture. Accenture's description of 4PL is "A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution. The 4PL organization typically has three components: 1. A global talent pool comprised of individuals with deep expertise in their region 2. A system which can effectively oversee the network of activities performed by 3PL's and asset-based providers chosen by your organization 3. A strong process focus to provide monitoring, reporting and reengineering of activities The people, process, and technology comprise a holistic methodology for a 4PL organization to drive business efficiencies throughout an organization.

1.1 Who Provides 4PL

Service Providerss?

The term 4PL is something that every organization has their own interpretation of and ideas on what exactly a 4PL should offer. To add more complexity to the interpretation, the following groups of service providers actually provide "4PL type" services: Consultants IT Service Providers "E" Marketplaces Financial institutions Private Organizations Logistics Service Providers (traditionally only known for 3PL activities)

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1.1

Defining the thin line Difference between 3PL, 4PL & LLP

upply chain coordination and management services that generally does not own or operate the underlying logistical assets and resources. 4th Party Logis

4PL

The main difference between 3PL, 4PL and a LLP is provided below;

A '3PL' or third-party logistics provider is a supplier of outsourced logistics services that primarily uses its own assets and resources. 3PL

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or Lead Logistics Provider co-ordinates and integrates its own logistics services with those of others with complementary or supporting capabilities. LLP

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1.2

Differentiating Gatis 4PL services from its 3PL services Deciding whether you want to be a 3PL or 4PLQuestions 3PL 3PLs target the function. They want to handle containers/shipments/freight, not the transport management process, for example. 4PL The true need is the process, which is what the 4PL targets. A 4PL would ask: Is there really a process in placeor a series of standalone transactions? What is the present process? How does it work? Where does it fail? Where are there gaps? Where are there redundancies? The supply chain process crosses organizational lines.

Do you outsource a function versus outsource a process?

Do you

you outsource or do outsource

Much 3PL outsourcing is work related. Handle warehousing. Handle shipments. Not manage them. 3PL will have to migrate to next level of outsourcing.

4PL manages the logistics for customer which is the next evolution of outsourcing.

work/tasks managing? As the

outsource

3PLs, especially those which are asset based struggle to be neutral. 3PLs which seek to push shipments through their transport contracts or through their warehouses are not neutral.

4PLs should be neutral if they are to manage the process. Most of the 4PL have a strategic tie up with some of the 3PLs but they are free to choose from any of the logistic service provider.

service provider, are you neutral?

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1.3 Key differences Difference

between 3PL and 4PL services

4PLs provide expert Supply chain consulting services. A 4PL manages a comprehensive supply chain solution for a client.All aspects (ideally) of the client's supply chain are managed by the 4PL organization (3PLs provide firms with forwarding and contract logistics by taking care of the management of complex service chains). 4PLs differentiate themselves from 3PLs by using whatever carrier or warehouse provider best meets the customer's cost and service needs (3PLs use their own equipment and facilities, even if they're not the most cost-effective). 4PL organization acts as a single interface between the client and multiple logistics service providers like 3PL. 4PL offers a range of supply chain technology solutions (3PL may offer transportation / warehousing specific IT applications). 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners (It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure). 4PLs' professional services include benchmarking customers' current supply chain performance in areas like managing inventory, integrating their IT systems with the customer's, and importing the 4PL's experts into the customer's enterprise (3PLs would provide integrated transportation and warehousing solution with traditional IT services to meet customers specific requirement).

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1.1

Fbehind fetionalRaorming a 4PL - Advantages

Historically, where organizations have evolved from 3PL to 4PL/LLSP (but still maintain their 3PL operation) there has been a significant reduction in 3PL business from other 4PLs/LLSPs. This is because the company as a 4PL is in direct competition with other 4PLs/LLSPs for the lucrative Supply Chain Solutions market. A separately formed 4PL entity can use the assets and services of its competitors to generate additional revenue, which eventually pays to the mother 3PL companies top and bottom line.

1.1 Forming a 4PL - Disadvantages

1.1

Defining a Bbroad scope forof Gatis 4PL services4PL service providera

The figure below shows a broad scope covered by a 4PL service provider;

1.2 Why are companies looking for 4PL serviceIdentifying

the need

of 4PL services?Until recently, companies have been outsourcing only discrete segments of their supply chains to niche providers that specialized in activities like transportation or warehousing. A single company may have had to use numerous third-party logistics providers (3PLs) depending on GATI Confidential Page 2 of 69

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how large and complex its supply chain was. Today, however, there's a "fundamental shift" in supply chain management outsourcing.

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Companies Improvements Fourth Processes & contact, 4PLs 4PLs let As a singlecompanies suppliers from who services Complexity Party Logistics using Better business Pointpoint of Lower providersaround thesegmentsdiscrete Benchmarkingalso benchmark customers' current supply chain going Comprehensive ContactProviders Manage Increasing supplyby Singlecan &are Solutionfor Cost manage can link their to chain Operationalof lookingoutsource management globe and Increased Complexity that outsourcing single of offered Global finding to offshore different manufacturing logistics like transportation and of their in Supply Chain suggest because warehousing to one labor activities providers is not improvements. performance andLogisticsreally improving lower-priced company. 3PLs likesegments into and comprehensive solutions that have Efficiencytransportationmore warehousing. their operational Suppliers pool. efficiencies breadth and better business global reach. The result is depth as well as processes and lower costs.

1.3

Direct Bbenefits of

Gati 4PL services to the customerFollowing are some of the compelling benefits of a 4PL; Single point of contact for managing entire supply chain Manages multiple 3PLs and discrete supply chain service providers Benchmarks current supply chain performance and suggests improvements Increases Supply Chain Visibility Lower Total Cost of Ownership (TCO) of SCM Manages increasing complexity in supply Chain Logistics Maintains primary accountability and quality Works towards increasing the shareholder value Implements best-in-class processes and systems Provides expert Supply Chain IT solutions Impacts the entire supply chain increasing revenue, lowering costs, reducing working capital and fixed capital

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1.1 IGatis

proposition to increaseing shareholder value through

4 PL operationsFollowing figure shows how 4PL helps increase a shareholder value;

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1.2

Identifying the prospective Verticals served byto be targeted by Gati 4PLs

4PL serves to following verticals; Automotive Industrial goods FMCG Consumer Durables Government and Defense Healthcare High Tech (Consumer Electronics and Telecom) Retail Aerospace & Defense Construction Chemical Furniture Newsprint Metals

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1. Products and services offered by 4PL playersResearch and study of the product and service mix of the current 4PL players Demand Responsive Model Supply Chain Strategy -Strategic Network Optimization Customer Management Product design Planning Procurement Production Fulfillment Cash management Supply chain design & planning International trade Logistics services Design & Planning, Distribution Order fulfillment: Pick, Pack, and Kitting ,Repair and refurbishment ,Reverse logistics ,Service parts logistics , Distribution services network: Inbound receiving, Storage services, Replenishment, Pick-and-pack operations, Integrated shipping system, Basic returns, Inventory management, Standardized management reports, Value added services) UPS Order To CashSM, Materials recovery Post-Sales Support, Supplier Management International Trade Customs Brokerage Services Import/Export Technologies International Trade Consulting Managed Services Advanced Analytics - Flex Global View Documents imaging Technologies EDI, returns and repair management system, UPS Order To CashSM, Consulting

UPS

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Distribution system

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Main Services

Key Services

IT Solutions

APL LogisticsSupply Chain Management Consolidation and Vendor Services Warehousing and Distribution Global Freight Management Manufacturing Support Asset Management APL Guaranteed Continental FCL Service OceanGuaranteed LCL Service Airfreight Forwarding ASN 123 Barcode Printing Labeling & Scanning Consolidation Customs Brokerage Customs Packaging Deconsolidation Documents Management & Scanning Domestic Distribution Door Delivery Service FCL Sea Freight Forwarding ,Garment on Hanger (GOH) International Hub Inventory Management ISO Certification Support Kitting LCL Sea Freight Forwarding Milk Run Multi-Country Consolidation (MCC) PO Management ,Quality Assurance Rail ,Returns Goods Processing Scan & Pack SeeChange Sequencing Sub-Assembly Trucking Vendor Management Warehousing RFID Solutions Product Data Transportation/Freight Management Warehouse Management SeeChange (supply chain visibility and event management tool for international shipments) GATI Confidential Page 4 of 69

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Shipment Tracking Plus EDI

Penske LogisticsSCM Inbound Logistics Manufacturing support logistics Outbound logistics lead logistics provider Warehouse deign Network design Warehouse operations Regional International Dedicated Logistics Management System (LMS) RouteAssist - an advanced routing tool Web-based metric reporting system and Order tracking software

Warehousing & Distribution Optimization Transportation Optimization Logistics technology solutions

RyderSupply Chain Solutions Lead Logistics Management (LLM) Inbound Manufacturing Product Flow Integrated Logistics Network Design Ryder Logistics Release Integrated Logistics Planning System RFID Lab Logistics Cadence Suite Transportation Management System (TMS) Online Tools Warehouse Facilities management Cross-docking Vendor Managed Inventory (VMI) Value-Added Services (Product Configuration and Testing , Sequencing, Kitting) Transportation Management Dedicated Contract Carriage

Technology Solutions

Warehousing Solutions

Transportation Solutions

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Menlo Worldwide LogisticsSupply chain solutions Operations/Logistics Strategy Alignment Transportation Strategy Optimization Outsource vs. In-house Analyses Strategic Network Configuration Global Supply Chain Solution Design Lean Logistics Postponement Warehouse management Value-added services Truckload brokerage Intermodal Order Aggregation Carrier Management and Route Selection Multimodal Rating and Execution Routing Compliance Visibility Merge-in-Transit Continuous Moves Logistics management Warehouse management Business intelligence Partner integration

Logistics services

Transportation management

Information technology

Geodis

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1.

Defining a value chain and comprehensive services & solutions map for proposed Gati 4PL

1.1

Defining a Value Chain for proposed Gati 4PL

The value chain above is typical for any retail supply chain. A value chain generally comprises of Upstream (Demand Planning & forecasting and Purchasing & collection) and Downstream (warehousing, outbound logistics, Marketing & Sales, Customer Service). The VC finally ends with Reverse Logistics.

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The Value chain map above depicts following flows of a typical supply chain: Value Chain activities Physical flow of goods Supply chain services at different stages of the value chain IT solutions Different supply chain consulting practices and Revenue potential at different stages of the value chain

The services provided by an integrated logistics service provider would start from collection (collection of goods from different sources) and extend till reverse logistics of the value chain. It wont provide upstream services like demand planning and forecasting and sourcing and procurement. A 3PL is generally strong in the area of collection, warehousing and outbound logistics. Thus the opportunity available for a 3PL varies from @ 35 % (without VAS) to maximum of @ 60 % (with VAS). A 4PL would try and capture entire value chain of the customers supply chain. IT solutions plays major role in 4PL services as it provides information about three Vs of the supply chain i.e Visibility, variance and velocity.

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1.1

Defining products and service mixs for proposed Gatia 4PL Materials Management Transportation Management Warehousing Management Inventory Management Value Added Services Reverse Logistics WMS(Warehouse Management System) TMS(Transportation Management System) OMS (Order Management System) Warranty Management System CRM (Customer Relationship Management) Workforce Management System Activity Based Billing & Costing Electronic Data Transfer (EDI), AIDC (RFID, Bar Code), etc. Business Process Reengineering Supply chain strategy Industry best practices (SCOR, Balance Score cards)

Supply chain services

Supply Chain Technology solutions

Supply Chain Management Consulting

Why this product mix

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1.11.

Designing service and technology map for Gati 4PLService Technology Primary Distribution & Secondary Distribution TMS (Transportation Management System) Multi modal transportation Optimized Network Web-based Transportation network design & optimization Shipment planning Shipment tracking Cellular GPS Visibility Receiving Put away Storage Picking Dispatch Web-based AIDC integration Inventory control Order entry Quality control Storage location management Automated replenishment Cycle counting Web-based Automated order generation De-kitting & kitting Packaging /repackaging Labeling Sr. No. tracking

2.

Service

Warehousing

Technology

WMS (Warehouse Management System)

Technology

OMS (Order Management System) Value Added Services

3.

Service

4.

Service Technology

Supply Chain BPO CRM (Customer Relationship Management)

24 X 7 Call center Centralized customer support center Web-based Account Management Sales force management Business intelligence/ Analytics Page 10 of 69

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Marketing Automation 5. Service Reverse Logistics Returns management Warranty Management Tracking Returns inspection Disposition

6.

Service

Supply Chain Consulting

Supply Chain Consulting Business Process Reengineering Industry best practices SCM strategy Hosted application No need to maintain & upgrade Hardware and software Lower TCO Network based access (internet & intranet) Subscription service with less setup time and risk Dynamically updated data

7.

S-a-a-S for all technologies

Software as-a Service

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1.1.1

Go to market sales tool for the Gatia 4PL sales forceDevelopingfining Sales Cycle for a 4PL

After a detailed study of the existing sales cycle at Gati used for its 3PL services and research of sales cycle models followed across the world for 4 PL services the following saled cycle was developed for the proposed Gati 4PL. The sales cycle shown below is aimed at defining the following; The sales process Important activities involved in the sales cycle Roles and responsibilities

Typical sales cycle for a 4PL would be around 6 months. This is because unlike 3PL sales where warehousing (sq. ft basis) and distribution (per kg basis) forms the major portion of customer requirement, the 4PL project involves supply chain consulting, customized IT solutions and larger scale operations. In 3PL enquiries the warehousing required and distribution locations are well defined whereas in 4PL sales almost entire value chain is to be considered and it may also involve services in more than on country.

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BDMs visit to ation on logistics service requirement (BD cold call / call by customer) the customer for Requirement gathering Scope(Transportation, Warehousing, Technology solution, SC reengineering ) 1.1 Existing set up Pain areas Presentation of GATI SCM capabilities

Designing a

atheringustomer requirement gquestionnaire

for ctemplate for the Business Requirement document

Most important aspect of 4PL sales is that it is a consultative selling and customer requirement gathering forms a crucial part of the same.

Requirement analysis (HO) r visit and Presentation of the first level solution from GATI SCM (Regional Sales Person) The level of questions asked may vary from broad questions like what is the process flow to a Scoping customer firm up the RFQ very First level of solution preparation with areas of improvement single party enquiry) detailed one of what IT package is used for supplier integration. Benefit analysis ( tangible and intangible, indicative costing and pricing)

The templatequestionnaire below is aimed at equipping supply chain sales person to capture complete customer requirements. This could will be used as a standard sales tool for customer requirement gathering with the knowledge that each customer requirement becomes very specific after a point. enquiry details (Customer Name, Zone, BDM inof the RFQ to all the concerned etc into CRM/ db) and generatetheir proposaland comments (solutions, c Submit the copies charge, offer submission date, departments 3PL parties for the review reference no.Receipt of RFQ 1.1.1

Broad questionsnaire

Q) What is the existing product and information flow? Q) Product transaction details at different levels of distribution / warehousing? No. of products shipped from Plant to Warehouse / DC to retailer / end user Weight of the product per unit questionnaire slide)?

Proposal manager to analyze the RFQ and make a draft response, technical and commercial bo n off of by BD Head/CSCM onare the existingand pricing pain/ costing insame in supplycosting, incorporating all the cost components including R Get comments proposal, the departmentsProposal areasthe your to make chain (refer following detailed from all costing issues / incorporate manager the proposal and costing. and Q) What Make a Price Proposal.

Q) What SCM services are you looking for from GATI SCM (refer following detailed questionnaire slide)? Q) Any SC reengineering services required? SC process analysis and performance benchmarking to the customer in the prescribed format by the respective zonal SCM BD / sales manager SC performance improvement of the project in enquiry database Update the status SC reengineering Specific process improvement Q) What are your expectations from GATI SCM? Service levels (ABSL =? DSL=? Etc...) Transit days TAT (Days) Inventory at different levels Supply chain flexibility (urgent deliveries / scale up)

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1.1.1

Detailed requirement gatheringWhat Sub Activities? IT Solution Current service provider Demand forecasting Forecasting tool Order Management -

What SCM Activities?Demand planning Purchasing & Collection Import Transportation Warehousing VAS Technology Reverse Logistics

Procurement (packing material, etc)Import of goods (Air / Ocean freight) Freight forwarding Customs Clearance Primary (Air / surface) Secondary (Air / surface) Tertiary (Air / surface) WH Locations Required WH area in these locations Inventory Management Racked / palletized WH Kitting/ De-kitting Packaging /repackaging Labeling Sr. No. Tracking Inventory management / VMI Customer support Existing IT system/s Warranty Management Returns inspection Disposal

Transportation Management System Warehouse Management System

CRM

EDI, AIDC (Bar Code, RFID),(S-a-a-S) Returns & Warranty

Management System

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1.1.1

Capturing existing issues / pain areas in the customer your supply chain

Following are the typical pain areas that companies face in there supply chain;

Pain Areas Delivery service level Urgent deliveries High Transit time In transit goods safety and security Goods safety during stock keeping Operational issues Goods movement visibility Transparency across the supply chain Returns handling Unable to achieve efficient VMI Unable to reach all the markets / regions Seamless management Supply chain integration &

Pain Areas High transportation cost per unit High warehousing cost High total cost of ownership of SCM Difficulty in achieving integrated SCM Managing many parties / vendors IT integration and information exchange Unable to benchmark and improve

performance High inventory cost High cost of procurement Inaccurate demand forecasting Warranty management Any other ..

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2. Designing a comprehensive survey questionnaire for capturing customer perception on 4PLIndia is a nascent market for 4PL services . The customer perception about 4PL services is not very clear and varies from customer to customer. It id essential that a detailed study of customer perception be done before Gati jumps in to 4PL bandwagon. The questionnaire below aims to capture the Voice of the customer which would help Gati 4 PL fine tune its service offerings.

Questionnaire for 4PL services (VOC - Voice of Customer)Customer Information 1. You are working as (Please choose the ONE that apply) Logistics Head/ VP Logistics manager An executive in logistics department Business executive involved in logistics decision making

1. Which vertical does your organization belong to? (Please choose the ONE that apply) Consumer Durables & Hi-Tech Retail & FMCG Telecommunications Pharmaceuticals Healthcare & Hospitality Automotive Manufacturing Chemicals Cement Others . (Please specify)

Questionnaire 1. Currently, how is SCM/ logistics managed in your organization? (Please choose the ONE that apply) special

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In-house By 3PL service provider By 4PL service provider Discrete contract based

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1. Currently what SCM/ Logistics IT solution / Technologies are used by you? (Please choose ALL that apply) WMS (Warehouse Management System) TMS (Transportation Management System) CRM ERP RFID Work force management Order management Yard management Cargo and terminal management Activity Based Billing Warranty Management Corporate Performance Management Others... (please specify)

1. Please rate the value your company is currently getting from the existing logistics management. (Please choose the ONE that apply) Very dissatisfied Dissatisfied Satisfied Very satisfied

1. How do you see the trend in Logistics Management changing in the next 2 years in India? (Please choose the ONE that apply) Move towards 3PL Move towards 4PL In-house / discrete contractor based

1. What type of Logistics management service do you prefer? (Please choose the ONE that apply) In-house 3PL service provider 4PL service provider Discrete contract based

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1. Which of the following best describes your organizations approach towards adopting 4PL services? (Please choose the ONE that apply) Currently using Not fully aware of 4PL services and capabilities, would like to know more Interested and looking for a pilot implementation Aware but not interested and no immediate plans for the same Aware and interested but no immediate plans for the same

1. What are the key drivers for you to choose 4PL services? (Please rate ALL the options on the scale of 1 5, 1 being -Very Important, 3 -Important & 5 - Not Important) Reduced logistics cost and less/no capital expenditure, increased competitiveness Improved service levels and offerings More time to focus on core competency Expert and comprehensive service offering (consulting, business process reengineering, better IT solutions, more value) Presence in different markets and scalability Single point of contact for all the logistics activities

1. What are the critical criteria for you to choose 4PL service provider? (Please rate ALL the options on the scale of 1 5, 1 being -Very Important, 3 -Important & 5 Not Important) Knows your business (domain expertise) Strong reputation of the company Economic benefits Price Proven Track record Consulting capabilities Scalability IT solutions capability

1. If not interested in 4PL, what is reason for the same? (Please rate ALL the options on the scale of 1 5, 1 being -Very Important, 3 -Important & 5 - Not Important) To develop logistics as a core business (in-house expertise) Risk of choosing the wrong partner (savings not significant & not realized, service level failure, cultural fit) Difficult to trust or rely on an external party for success IT systems- would create too much dependency GATI Confidential Page 20 of 69

Preliminary analysis on 4PL business and design of go to market tools for the same & Sales and support for 3PL business

4PL works with competitors (security issues)

1. What all services do you expect from a 4PL service provider? (Please rate ALL the options on the scale of 1 5, 1 being -Very Important, 3 -Important & 5 - Not Important) Procurement management Transportation management Warehousing management Reverse logistics Warranty management Inventory management Product assembly SCM/Logistics Information technology Supply chain consulting & Business process reengineering Order fulfillment and management Customs clearance Freight forwarding Customer management Supplier management Others(Please specify)

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1. What pricing model would you prefer for 4PL services? (Please choose the ONE that apply) Transaction based Cost plus Fixed Gain share

1.

Go to market sales tool for a 4PL

Following important aspects of the 4PL were covered in the sales presentation; Infrastructure capabilities IT solutions capabilities SCM Products and services SCM Solution Map Verticals catered to Successful case studies NOTE: Details on this project cannot be divulged due to its confidential nature.

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1.

Live case for integrated logistic services

Following leads were generated through customer interaction and a customized solution has been proposed to the customer; Enquiries Scope of services Axiom Energy Warehouse space requirement at 16 locations Conversion Ltd. (100 Sq. ft each) and primary and secondary Hyderabad distribution. PL Shipping & Requirement of about 2000 Sq. ft in Hyderabad. Status Proposal submitted. for at 10 Negotiations warehousing

Logistics Pvt. Ltd. Hyderabad BHS Sonthofen, Additional warehousing space of @ 500 sq. ft is required for construction equipment (contract Hyderabad would be reviewed in June 2009) and for their chemical & filtration business (spare parts). This would be required by June.

locations are on. RFQ would be floated in June. Got confirmation from the customer that GATI receives the RFQ. The additional warehousing requirement would be raised in June. New warehousing requirement for customers Chemical & Filtration business also discussed.

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Sample Case : (Capturing requirements and developing the solution) Axiom Energy Conversion Limited was identified for building a live case for 3PL services. Overall requirement: 3PL solution for distributing Adaptors from Axiom Hyderabad plant to different retail customers in India. Minimum of 100 sq. ft. at 16 locations in India, 10 locations in Phase I and rest 6 locations in Phase - II. Other requirements: Consultation for getting sales tax registration Packing and repacking, on required basis POD Insurance at GATI warehouse Transit insurance Periodic MIS Industry: Consumer Electronics Geography: India Products: Mobile adaptors Volume: 10,000 20,000 units per month from plant Warehousing locations: 10 in different states on India Value of goods: Rs. 10 Lacs (at all 10 locations)

Solution proposed: GATI provided a comprehensive pan India distribution and warehousing solution for mobile adaptors The services include: Primary distribution from Hyderabad plant to regional warehouses Warehousing facilities at 10 Locations Secondary distribution to retail outlets/ distributors Sales registration and Taxation assistance (Octroi, Sales Tax) COD facilities POD services MIS reports: Periodic inventory report Good receipt note Monthly Service Performance Report

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Activities covered in the solution: Sr. No.1. 2.

Main ActivitiesPrimary Distribution Warehousing

Sub ActivitiesFrom Axiom Hyderabad plant to regional warehouses. 100 sq. ft. space in warehouses at 10 locations in Phase I and at 6 locations in Phase - II Warehousing activities Picking Packing Invoicing Dispatching From regional warehouses to retailers in respective metros or within state. e-POD, Transit insurance, monthly Stock report, Packing & repacking

ModeSurface -

3. 4.

Secondary Distribution Value adds

Surface -

Overall benefits to the customer Reduction in direct cost Proposed physical flow of the goods: Rent, Manpower, transportation Better inventory control and improved planning Improved Service levels Single window solution

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1.1.1

Additional responsibilitiesIntegrated logistics enquiryScope of services and Supply chain services for managing forward and reverse movement of retail cards for Apollo health care centers across India. Supply Chain Services for managing forward and reverse movement of the internet access device along with a key board in AP state.

Enquiries Apollo Health Lifestyle LimitedIchip India

Lenovo

Logistics Service for managing reverse logistics of defective parts from Lenovo Authorized Service Providers across India to Lenovo Bangalore Warehouse. Logistics Services for distribution of finished goods across India. Logistics Services for distribution and warehousing

HP Fly Mobile

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1.2

Designing different business flows for a new ventureProduct Flow Information Flow and Financial Flows

Worked on following flows for a strategic tie-up:

NOTE: Details on this project cannot be divulged due to its confidential nature.

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1.

Findings & recommendations

On the basis of research and findings following recommendations could be made for forming a for 4PL company; 1. If a 3PL company is contemplating on operating as a 4PL it would make sense in forming a separate 4PL company than being both, a 3PL and a 4PL. Separate company would be neutral towards 3PL service providers and aim at providing best and cost effective supply chain solution to the customer. A separate company also helps in building customer confidence. Remark: Penske Logistics LLP was formed as a separate entity from Penske 3PL for the reasons cited above (Ref: Penske case study: whirlpool) 2. A 4PL company targeting Indian market should work on its domain expertise and target high growth verticals like Hi-Tech (Telecom, computers, etc), Consumer Goods, Retail, and Pharmaceutical. Remark: GATI has already provided integrated solutions to players in these sectors and thus has domain expertise. Apart from this internal strength following sector specific external factors make these sectors as targets for 4PL services. Retail: Organized retail is seeing entry from big players like Bharti- WalMart, Aditya Birla Group, ITC, Reliance, etc. These big players achieve cost effectiveness through an efficient supply chain and tie up with SCM partners who uses advanced SCM practices and technology. According to the retail and fashion research firm, Images Multimedia, Indias organized retail market has the potential to reach USD 45 billion by 2010. Hi- Tech (telecom, computers, etc): India continues to witness high demand in its mobile- phone segment at an increasing rate in financial year 2009. It is being estimated that Indias total wireless subscribers base will grow at compound annual growth rate (CAGR) of 25.1 per cent from period 2007 to 2012 to reach 715 million by end of 2012. Consumer Goods: The consumer goods sector will again register an impressive growth for the quarter ended December, indicates a Mint survey of five brokerages. The sector is expected to post an average growth of 19% in sales and 10.5% in profits in 2009. Pharmaceuticals: India, a US$ 8.2 Billion pharmaceutical market, represents one of the most emerging pharmaceutical markets in the world. Between 2007-08 and 2011-12, the Indian domestic pharmaceutical market is expected to grow at a CAGR of nearly 16%. 3. A 4PL will have to act as a consultant for the customer and also get involved in the real implementation. All three important aspects of the 4PL solution map i.e consulting;

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Technology and services would have to be enhanced to meet increasing and dynamic demands of the customer. 4. For an Indian 3PL it would make sense in finding a strategic partner who has technology and consulting expertise for forming a 4PL with compelling value proposition to the customers. 5. A website giving comprehensive information about the 4PL and its capabilities is very important to reach a broad prospect base. A minimum of the following aspects should be covered on the website; Main services Detailed services Vertical specific case studies IT & technology capabilities Domain / vertical expertise Capabilities of the partners

Remark: Reference to following 4PL websites could be made for designing. UPS Supply Chain Solutions: http://www.ups-scs.com/ DHL: http://www.dhl.com/splash.html

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1. Conclusion3PL has found its place in the Indian logistics market and has been widely accepted by many players in different verticals. The concept of 4PL is quite new to the Indian market and there is no true Indian 4PL till date. Western multinational 4PLs like APL Logistics and Kuhne + Nagal have successfully established themselves in India. Other 4PLs like Moduslink have aggressive plans to launch themselves in the Indian market to cater to their worldwide clients like Cisco who are entering India. The trend of accepting 4PL was started by MNCs like IBM, Dell, Nike and Philips. This trend would be continued by MNC like Cisco, Microsoft etc. Thus the emergence and acceptance of 4PL in India, though slow, is imminent. This situation offers an opportunity to Indian 3PLs to either acquire and act as a 4PL (along with being 3PL) or form a new 4PL company like Penske LLP (a separate entity from Penske 3PL). The advantages for forming a separate 4PL company are many- neutral entity, more options for choosing 3PL services, Separate and streamlined accounting, existing 3PL being able to bid for other 4PLs, etc. Having identified the opportunity and decided on the way a4PL would be formed (separate entity or not) the 4PL has to provide a compelling and distinct value proposition to the customers. These 4PLs would be facing many challenges like highly fragmented and unorganized logistics industries, low acceptance of 4PL, lack of good distribution and warehousing infrastructure. GATIs expertise in express distribution, experience in distribution & supply chain management solutions in India since 1989, largest truck fleet in India (1200+) and comprehensive network covering 603 of 611 district provides a

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2. ReferencesLink: http://www.lti2009.com/home.html Article: LTI 2009 Link: http://thehindubusinessline.com/2003/06/23/stories/2003062300500600.htm Article: 4PL logistics providers Scaling up supply-chain efficiency, Raja Simhan T. E. Link: http://www.dessenceconsulting.com/pdf/Study%20of%20Logistics%20in%20India.pdf Article: Study of Logistics in India (The survey by MDI & TCI) Link:http://www.zdnetasia.com/insight/specialreports/logistics-andmanufacturing/0,3800019415,62049525,00.htm Article: India's logistics sector to up IT spend, By Victoria Ho, ZDNet Asia, Wednesday, December 24, 2008 Link: www.emeraldinsight.com/0960-0035.htm Article: The value a 4PL provider can contribute to an organization, Alan Win, Institute of Transport & Logistics Studies, University of Sydney, Sydney, Australia and Institute of Food Nutrition & Human Health, College of Science, Massey University, Auckland, New Zealand Link:http://www.sdcexec.com/online/article.jsp?id=9213&siteSection=15 Article: India Logistics Industry: $125 Billion Goldmine, By Editorial Staff Link: www.penskelogistics.com/casestudies Article: Penske case study - Whirlpool Corporation: Evolution of a supply chain Link: http://www.intracen.org/wedf//ef2005/montreux/Resource-Person-

Presentations/Breakout-Session-5/Loh_Wah_Sing_Transport_and_Logistics_Services.pdf Article: Exporting Transport & Logistics Services a moving target, Introductory Remarks by Moderator: Dr. LOH Wah Sing, International Trade Institute of Singapore Link: http://www.bishamconsulting.com/logistics/news/documents/3PLor4PLGefco.pdf Article: 3PL, 4PL, LLP - is there a real difference and what is the future Martin Williams - Director, Bisham Consulting, Coventry March 2006 Link: C:\Documents and Settings\Administrator\Desktop\Ivan Incov

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Article: Impact of firm resources on the performance of 4PL Bulgarian companies on the international transportation and freight forwarding service market, by Ivan Invoc Link: www.capgemini.com Article: New Model for the Future Supply Chain Highlights Sustainability Benefits Link: http://www.merinews.com/catFull.jsp?articleID=154867 Article: Top 5 sectors to be bullish in 2009 Link: http://www.emerald-library.com/ft Article: UPS Logistics: Practical approaches to the e-supply chain Remko I. van Hoek, Cranfield School of Management, UK and Corporate Executive Board, Washington DC, USA, and Ian Chong, Business Development Director, UPS Logistics, UK Link:http://www.researchandmarkets.com/reports/612431 Article: Logistics- Warehouses and Cold Chains, Netscribes (India) Pvt. Ltd. Link: http://www.mjlsl.com/A%20s%20royu.pdf Article: A closer look at logistics, The Economic Times, 29 April, 2009 Link: http://business.outlookindia.com/inner.aspx?

articleid=819&editionid=5&catgid=23&subcatgid=331 Article: Logistics of growth - Competition, cost worries and strict delivery schedules are forcing companies to outsource their logistics to third-party vendors by Prashant Mahesh. Link: http://www.marketresearch.com/product/display.asp?productid=1846048 Article: Booming Pharma Sector in India, RNCOS, August 1, 2008, 100 Pages - Pub ID: CICQ1846048 Link:http://www.livemint.com/2009/01/18225253/Consumer-goods-industry-to-pos.html Article: Consumer goods industry to post impressive growth: survey, Vijaya Rathore

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Company website: UPS Supply Chain Solutions: http://www.ups-scs.com/ DHL: http://www.dhl.com/splash.html Ryder:www.ryder.com Menlo Worldwide Logistics: www.menloworldwide.com Mavianto: http://www.movianto.com/ APL Logistics:www.apllogistics.com Geodis: www.geodis.com/

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Websites: http://www.google.com http://www.freightfox.com/eng/freight_directory/logistics_3pl_and_4pl http://www.centralstation.ch/en/implants.asp http://www.globallogistics.com/profiles/blogs/global-logistics-manufacturers http://logisticsmanagementandsupplychainmanagement.wordpress.com/2007/04/22/india-thelogistics-boom-continues/ http://www.outsourcing-supply-chain-management.com/supplychain.html http://www.freightfox.com/eng/freight_directory/logistics_3pl_and_4pl http://www.schenker.se/upload/attachments/182/18284/SDS_4PL_2008.pdf http://www.outsourcing-supply-chain-management.com/supplychain.html http://www.ceritar.com/EN/Products/3PL.htm http://logisticsmanagementandsupplychainmanagement.wordpress.com/2007/03/22/indialogistics-industry-125-billion-goldmine/

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