CASE STUDY:

Managing linkages in the Value

Chain System-TNT Logistics
Presented by,
ANCY K STEPHEN
ASWANI VISWAN
The case study deals with the strategic partnership of TNTs
logistics operation with BMW, Eaton , and Michelin.

80% of big European and North American companies
outsource parts of their logistics operation to outside
contractors.
Outsourced function-freight transport & warehouse
management
supply chain expenditure paid to outside contractors
(3PLS) increase from 44% to 49%- US survey
TNT is the worlds 2
nd
largest logistics contractor after
EXCEL




TNT and BMW is undergoing strategic partnership rather
than contractors
TNT manages BMWS North American supply chain
from the moment a part is dispatched by a supplier until
its installation
TNT promise to use their expertise and access to global
freight networks to reduce their customers costs & bring
greater efficiency to their supply chains.
Companies have tended to see 3PLS primarily as a way
to reduce costs but a more efficient supply chain can
create value throughout business.
TNT also conducts basic sub-assembly work for Eaton , a
truck components maker.
When TNT took control of Michelins North American
distribution network, it also bought 18 warehouses in the
USA & Canada and hired 600 logistics staff for its
operation.
However , not all companies have embraced 3PL as fully
as BMW, EATON & Michelin. Many such as WAL-
MART believe logistics is too important to outsource and
thereby uses in-house logistics.
In Europe outsorcing is well developed but powerful unions
limit its scope.
Ex: it is difficult for TNT to work as closely with BMW in
Europe as it does in Spartanburg because the car maker has an
agreement with Germen unions that 3PL cannot be involved in
assembly-line network
Greatest potential is in China where logistics services are
urgently needed to support manufacturing growth.

Analyst forcast annual growth of about 8-10% in the 3PL
sector but the competition is intensifying.

When you compete on price there is always someone willing
to do a job cheaper. So we have to differentiate ourselves by
adding more values-David Kulik, MD TNT
Questions:

1.Evaluate the German automaker BMWs decision to
outsource part of its North American value chain system?????


In the absence of TNT:
Wrong part delivery of raw materials and time delay for the
correction.
TNT:
Supporting the BMWs operations starting from raw material
collection upto installation of z4 sports car.
Micro monitors the operation
Greater reliability in the supply chain has allowed BMW to
reduce the inventory in its spartanburg warehouse.
Usage rate of inbound delivery trucks has increased from 61%
to79% and on-time delivery rate has exceeded TNTs target of
99.2%

TNT used lean operation strategy in the beginning and hence
production halted for 33mts.
So TNT paid $19000 penalty for the mistake.
Later they corrected the discrepancies and adopted strategy of
checking for defects at every stage of the supply chain.
Hence TNT retained the partnership with BMW
2. Why is BMW willing to relinquish these value
chain activities while the US retail giant Wal-
Mart consider these activities too important to
trust to a third party
Comparison between 3pl & in-house logistics.
Advantages of 3pl

Sometimes company is not able of having its
own logistics activities because of the potential
financial conditions logistics activities such as
transportation, warehousing are not able of
managing them.

Save time and money

Gain expertise

Scalability


BMW can reduce the number of labors by
outsourcing the logistics activities

Flexibility in their operations

Quality Control

Resource network




The third party logistics provider will have
sufficient facilities and space to perform all
the required tasks such as heavy transport
facility and warehousing
Better control over activities



Disadvanteges

Supplier failure can cause major interruption
to the operations of the company

logistics activities in some cases become too
much costly


Distance from Clients increase cost of
logistics

Discontinuation of Services due to lack of raw
material.

Loss of Control Over the Logistics Function

3. To what extend might Wal-Mart be losing out
on value create by not employing third party
logistics
Reduced Quality for the products

Focus on operations leads to reduced
customer satisfaction

increased logistics costs in the absence of
3PL

Thank
you