Kuehne and Nagel in Asia-Pacific: by Amrit (05) Pratiksha (22) Sandeep (30) Sneha (33) Tandrima

Kuehne And
Nagel In
Asia-Pacific
By
Amrit (05)
Pratiksha (22)
Sandeep (30)
Sneha (33)
Tandrima (37)
Freight Forwarding
• An intermediary between a consignor or consignee of goods
& the transport carriers, wharfingers, custom authorities &
other parties in customs brokerage, shipbrokeage& export car
loading.
• Also offers logistics management advice & consulting
Basic Services Integrated

services package services
●
Local, national, ●
Warehousing ●
Material flow
international distribution management
distribution & ●
Tracking ●
Logistics consulting
transportation ●
Tracing ●
IT services provision
Global Environmental changes affecting freight forwarding industry in 1990s.
• Global integration of world market
• Rapid advancements in Information Technologies
• Changing demand & supply for product & services
• Emergence of new markets
All demanded for global flow of goods & transportation

network.
Changes of expectations from FF due to
global environmental changes
• Greater emphasis on managing supply chains & detailed
product flow information to secure & sustain competitive
advantage.
• Seek transportation & distribution suppliers with worldwide

capabilities
• Must possess trained & educated professionals with superior IT

& information system capabilities.
• Logistics advice & consulting

Difficulties faced by Freight forwarding Cos.
• Entrant of new players like integrators (DHL, UPS) 3rd party

outsourcing agents, IT service providers, consultants etc
played for market share.
• Credibility Issue of not meeting the said promises (Delivered

little or promised too much).
• Distrust made switchover of customers to specialist logistic

service providers or express courier firms in case of physical
distribution.
Trends in freight forwarding industry in the
Asia-Pacific region in 1990s
• Hong Kong: Largest and Busiest Container Port
– Efficient trade and transportation hub
– Sophisticated transportation networks
– Efficient infrastructure, support systems and legal and
finance systems
• Physical Goods Distribution Market

– Huge population size and geographical area
– Relatively undeveloped market
– Viewed as major growth providers
Trends in freight forwarding industry in the Asia-
Pacific region in 1990s Contd..
• Four Categories of countries:
– Wealthy democracies: low duties, mature customs processes,
advanced infrastructures, e,g Japan
– Trading Tigers: free custom processes, low duty levels, mature

infrastructure, e.g Singapore
– Burgeoning Industrialists: complex customs processes, high duty

levels, immature infrastructures, eg Korea
– Future Powerhouses: informal customs processes, high duty levels,

backward infrastructure, eg India
Difficulties faced by freight forwarders
• Differences among the competing players and various countries of the

region in terms of infrastructure, duties, processes making integration
difficult
• Declining profits necessitated development of such integrated facilities
• SCM integrated logistics critical to development of door-to-door

distribution network in Asia-Pacific
• So firms generated high volume business that had moderate returns
• Traditional FF business margins was less than 2% but this was easier to
practice
Nature of competition in the Asia-Pacific
region
Competition across the region had increased due to
• Local FF providers-concentrated on lower end of physical
goods distribution market as they had very little or no IT and
SCM capabilities
• Integrators- embarks on door-to -door physical distribution of

goods , effectively cutting into traditional FF market
• Third-party outsourcing agents-in late 1980s and early 1990s,
some industries(FMCG, chemical, automotive, etc.)had
outsourced their SCM logistics function giving the
opportunities to third party professional.
• IT service providers-integrated downstream by purchasing

forwarding or distribution business
• Consultants-often with IT service providers acquired FF

companies
• Other FF competitors-enhance core FF deliverables through a

“one stop-shop” concept
5. ‘Over the years Kuehne and Nagel has adapted its supply chain to
maintain a strong position in all regions and across all core business
activities’. Explain.
• Among the first to introduce modern EuroLogistics, recognised as one of the most
important products in the transport market.
• Recognized the opportunity in “United Europe” and expanded rapidly into Europe
and the Americas creating a worldwide network.
• Took the first step towards building up the airfreight sector by setting up its own Far
East operation.
• It became the first German forwarder to acquire an Electronic Data Processing (EDP)
system.
• Became a leading forwarder in project forwarding by Increasing shareholdings in the
larger forwarding companies in Europe and setting up industrial plants worldwide.
• Electronic data interchange (EDI) services were continually upgraded and offered
electronic links between KN and customer sites
Contd..
• Expanding core business activities across all spheres of SCM ranging from ocean-
freight to project forwarding services.
• Airfreight, road, rail, and logistics, together with a range of specialist services.
• Project forwarding activities covering the delivery of shipments to port by rail, road
or inland waterway, export packing, port handling, storage and FOB deliveries, in
addition to a host of other services.
• Airfreight services included maintaining a worldwide network, providing high-
frequency services to key destinations, combined sea-air services, and the
provision of aircraft and ship spare parts and charter services.
• Logistic centres of competence were developed across four key sectors: consumer
electronics and high-tech products; the automotive industry; chemical and
industrial goods and consumer durables, and a range of logistics services.
• KN also supplied some IT solutions to customers in continental Europe and made
extensive use of modern information and communications technology, which led
to developing SCM capabilities for potential export to other regions serviced by
KN.
‘Kuehne and Nagel’s Asia-Pacific operation was not comprehensive
enough to give complete geographical coverage within the region’.
Do you agree with the statement? Explain.
• Meager about 1% attributed towards overall business.
• Operation was limited to sea and airfreight distribution only(port-to-port

capability).
• Services from port-to-interior were highly limited.
• SCM capabilities were limited by the nature of the physical FF services offered.
• Pan-Asia-Pacific provision of SCM logistics services was, on the whole, somewhat

superficial.
• Unable to provide “one-stop-shop” SCM logistics services to companies which

require a pan-regional solution.
Q.7 ‘The future strategic direction of Kuehne and Nagel’s Asia-Pacific operation presented several problems and
opportunities to Dolder’.
What do you think were these problems and opportunities?
• Problems
– limited nature of KN’s services beyond ports was inadequate to meet growing demand
from MNCs for full FF services
– Demand for SCM services was likely to increase as many MNCs had identified Asia-
Pacific as a lucrative future region post-Asian economic crisis reforms & the increasing
number of successful indigenous Asia-Pacific MNCs which could have become a
Missed Opportunity to KN
– Vast differences between countries in the region made it inherently difficult
for KN and other competitors to develop integrated SCM logistics
capabilities: “Wealthy Democracies” of Japan, Australia and New Zealand,
the “Trading Tigers” of Singapore and Hong Kong, the “Burgeoning
Industrialist” nations of Taiwan, Korea, Malaysia, Thailand, Philippines & the
“Future Powerhouses” of China, India and Indonesia
– SCM capabilities were critical to the advancement of door-to-door
distribution services throughout the Asia-Pacific, as profit margins across the
FF industry were in decline
– Competition across the region had increased to include local FF providers,
integrators, third-party out-sourcing agents, IT service providers, consultants
and other FF competitors
Opportunities in Asia-Pacific
• Entry of more & more MNC s & creating demand for logistics
services.
• Huge size of the Asia-Pacific both in terms of population and

geographical distance, long-term upward economic growth
potential and the relatively underdeveloped nature of physical
goods distribution industries - major growth opportunities for KN.
In line with global trends, increased
• Customer sophistication and greater emphasis on SCM and IT/IS-

related business solutions in the physical goods distribution
market
Possible Alternative strategies for KN
• Strategic Alliance with effective & efficient 3rd party
integrators for providing complete SCM logistics services to
the clients.
• Development of ‘one-stop-shop’ logistics services by using

ocean freight, project forwarding, rail, road & airfreight.
• Providing region specific Supply chain solutions.

Our recommendation
• Combination of strategy 2 & strategy 3.
• Reasons
- For greater control
- For maximum utilization of opportunities in Asia Pacific
market.

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Kuehne And

Basic Services Integrated

• Global integration of world market

• Rapid advancements in Information Technologies

• Changing demand & supply for product & services

• Emergence of new markets

All demanded for global flow of goods & transportation

• Seek transportation & distribution suppliers with worldwide

• Must possess trained & educated professionals with superior IT

• Logistics advice & consulting

• Entrant of new players like integrators (DHL, UPS) 3rd party

• Credibility Issue of not meeting the said promises (Delivered

• Distrust made switchover of customers to specialist logistic

• Physical Goods Distribution Market

– Trading Tigers: free custom processes, low duty levels, mature

– Burgeoning Industrialists: complex customs processes, high duty

– Future Powerhouses: informal customs processes, high duty levels,

• Differences among the competing players and various countries of the

• Declining profits necessitated development of such integrated facilities

• SCM integrated logistics critical to development of door-to-door

• So firms generated high volume business that had moderate returns

• Integrators- embarks on door-to -door physical distribution of

• IT service providers-integrated downstream by purchasing

• Consultants-often with IT service providers acquired FF

• Other FF competitors-enhance core FF deliverables through a

• Operation was limited to sea and airfreight distribution only(port-to-port

• Services from port-to-interior were highly limited.

• Pan-Asia-Pacific provision of SCM logistics services was, on the whole, somewhat

• Unable to provide “one-stop-shop” SCM logistics services to companies which

• Huge size of the Asia-Pacific both in terms of population and

• Customer sophistication and greater emphasis on SCM and IT/IS-

• Development of ‘one-stop-shop’ logistics services by using

• Providing region specific Supply chain solutions.

• Combination of strategy 2 & strategy 3.

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