In the logistics industry, traditional logistics companies usually have a functional service focus, such as transportation, warehousing, etc., and they gradually extend to more functional service areas due to the needs of customers or market forces. Those firms that have successfully met their customers’ and markets’ constantly changing needs have developed much better customization and innovation capabilities than their counterparts who could not make the transition. Traditional logistics firms are often called third-party logistics service providers, or 3PLs. The logistics firms who make the success- ful transformation to multiple functional service providers usually perform operationally and financially much better than those who cannot switch gears. These firms can be called advanced 3PLs (Hertz and Alfredsson, 2003; Su 2011).

In the 1990s and 2000s, manufacturing and service outsourcing has been growing dramatically for western industrial firms and has caused landscape changes in many product supply chains, moving from a regional scope to a global scale. Many U.S. corporations need to face the problem of managing a much longer and more complex global supply chain. This is an area that many firms are not familiar with but now have to deal with on a daily basis

Introduction of the Case Companies

Justified timely Solutions

Founded in 1971 by Richard Johanson, JTS (Johanson Trans- portation Service) has grown from a local transportation brokerage company to an advanced family-owned third-party logistics service provider helping client companies manage supply chains with “Justi- fied Timely Solutions” that exceed their unique business challenges. Providing unmatched service at a fair price, JTS offers customized freight solutions, including dry and temperature-controlled truck- load, less-than-truckload, ocean freight and air; rail/intermodal; and comprehensive importing/exporting solutions with one point of con- tact. JTS adds value with logistics management, consulting and state- of-the-art technology systems with real-time online tools to facilitate seamless supply-chain communications for its customers. JTS is head- quartered in Fresno, CA, and has six regional offices in North Amer- ica: Sacramento, CA; Tigard, OR; Salem, OR; Madison, WI; Denville, NJ; and, Orange Park, FL (Johanson 2011).

Dimerco Expreao Group

Established in 1971, DEG (Dimerco Express Group) has been a proactive player in the evolving world of international transporta- tion and logistics. Over the course of 40 years, DEG has progressively expanded its service network on a global scale, especially in Greater China. DEG is publicly listed in the Taiwan Stock market and posi- tions itself as “Your China Logistics Specialist.” It is continually expanding marketing and service outlets in strategic locations. DEG’s intimate understanding of the ever-changing Chinese logistics market enables its service system to respond expeditiously to clients’ requests for effective supply chain management solutions. More recently, the East Asian and Southeast Asian markets are undergoing a major con- solidation due to the integration of major free trade agreements and new free trade initiatives in the regions. DEG is expanding aggres- sively into the Southeast Asian market to provide comprehensive sup- port to customers’ growth strategies in Asia.

At the same tiine, DEG continues to invest and upgrade its e-com- merce platform, Dimerco Value Plus System, to meet the needs of global customers. The new system can help customers bolster their competitiveness by providing external data integration and real-time information visibility for ef‘fective supply chain management. A bet- ter consolidation of the internal data and information also helps to enhance DEG's worldwide management performance (Dimerco

2011).

Search for an International Partner

Since 2000, more and more customers have inquired about inter- national logistics service at JTS. Its management knew that it was the time to seriously consider the development of its international business.

Under the urging of a third-generation family member, a feasibil- ity study on JTS international logistics services was conducted in early 2006 with the support of the Craig Business School of California State University at Fresno. The feasibility study had given a strong recom- mendation to develop an international logistics capability through an overseas partnership. JTS has since established an international divi- sion for international business development and acquired a freight forwarder and NVOCC licenses. Through an extensive search, DEG, an advanced Asian-based 3PL, emerged and was sought after in mid- 2006 as an international partner to develop the business cooperation that can complement the strengths of both firms (Negueloua 2011).

Joint Business Development and Complementary Service Offering

Since late 2006, DEG has played the silent role as JTS’s interna- tional logistics partner to support the ocean and air shipments with the United States as the origin or destination; that is, businesses secured by the JTS International Division. JTS and DEG (SFO branch) often make business calls together and assist each other in bids for both domestic and international logistics demands (Negueloua 2011).

Because JTS and DEG are all advanced 3PL firms, when joined together, they can complement each other and integrate their service networks and service offerings in their focused regions, providing the clients a more comprehensive international logistics service options such as the following (Negueloua 2011):

• Ocean Freight Import: FCL (full container load) & LCL (less than container load)
• Ocean Freight Export: FCL & LCL including Reefer, D.G. Cargo & Project Cargo
• Air Freight Export including D.G. Cargo (dangerous cargo)
• Air Freight Import

JTS Client 1 – Serving over four years

Client 1 needed to deal with growing overseas operations. How- ever, this client had encountered communication challenges in its global supply chain pipeline. JTS has worked with DEG’s overseas offices to help the client solve its communication and visibility prob- lems and build a stronger relationship with the customer. The busi- ness has been stabilized since then with one to two ocean containers shipping monthly from China to the U.S.

JTS Client 2 – New Client

Client 2 needed to use ocean shipping to import oversized/ expensive machinery from Europe to the U.S. This client was wor- ried about whether the shipment would arrive on time due to its difficulty in international transportation. JTS communicated closely with the client’s requirements on the one hand and used the DEG internationallogistics network and knowledge to accomplish this proj- ect on the other hand. The client had complete visibility of the ship- ment throughout the whole process, and the shipment even arrived at destination in advance. DEG handled the shipping from the start to the end on behalf of JTS. After the equipment had arrived at the

U.S. East coast, it was transferred to a warehouse. DEG contracted a trucking firm using a flatbed trailer to ship the equipment directly to the destination in only two days, rather than the traditional rail ship- ping arrangement that costs less but has a less controllable time to destination and a higher handling damage risk. The superior service performance gained high recognition alongwith gift bags and a thank- you letter from the client

JTS Client 3—Lost and Recovered

Client 3 is a wholesale firm in a low price/low margin market. It used to be a JTS customer but was lost to a large competitor due to lower bidding price. However, due to the service issue on inter- national shipments, JTS was able to re-secure the customer several years later through the joint network and services with DEG. The business represents a regular monthly volume of 15 ocean containers from China to the US

Mutual Benefits from International Logistics Partnership

Without substantial mutual benefits, it is hard to make two 3PLs geographically distant from each other dance together harmoniously in an alliance setup. In the JTS and DEG partnership case, strong mutual benefits are observed and summarized here:

• More customers’ needs are satisfied.
• Customer and market coverage are expanded through a virtu- ally integrated international logistics network.
• Business philosophies and best practices of the partners can be exchanged and learned from each other in a constructive way.

Revenues and profits are increased for both partners

Answer in 350 words each

How did JTS and DEG develop their partnership relationships?

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Regarding your second question logistics service providers can employ the concept of flexibility to reduce the impact of macro risks Flexibility in logistics refers to the ability to quickly adapt and ... View the full answer