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Vision of MyNExpress
To be a market leader and industry role model providing high quality, value for money, technology driven express delivery service. MyNExpress has described its approach of the organisation it will adopt to achieve its mission in its Vision statement. They have specified their ideal of each major area of the organisation in which they must strive to fulfil to achieve the mission in the Vision Statement. They have defined their Goals also in which it defines the desired future positions of the organisation
- Key Inputs of Value Chain
The key inputs for MyNExpress are the Suppliers of Fuel, Aircrafts, transportation vehicles, manpower etc. It is using these inputs MyNExpress gain the customer confidence and built customer relationship. Without these MyNExpress cannot get along with the customers. Suppliers of fuel, aircraft, transportation vehicles and manpower are very high in this industry due to the limited number service providers.
- Key Outputs of Value Chain
The key out put given by MyNExpress is its Service to the customers. Since MyNExpress is operating in the industry of logistics they don’t have much output to give to the external environment. The key output as said before is their service. With their service they say that they provide service like door to door collection and delivery facilities, international customs clearance, full track and trace visibility, round the clock support
- Industry Analysis using 5 Forces Model
Porters 5 Forces Model Introduction
This section will be talking about the Porters 5 Forces Model which is used to analyze the Industry structure. The Porters 5 Forces model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Michael E. Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.
Industry Description
The airfreight industry concentrates on the highest value, most time-sensitive manufactured goods moving long distances. Historically, this has been documents, small packages, and cargo that require overnight delivery. As costs have fallen, this has opened the doors for an increase in lower value and heavier manufactured goods to be shipped by airfreight. The air freight industry consists of carriers that are known as integrators, who logistically manage a network of air and ground transportation (e.g. trucks and airplanes) in order to deliver items door-to-door.
- Threat of New Entrant
- Barriers to Entry
The barriers to entry are very high in this industry. If an organization needs to start a business in this industry they have to have a good financial capacity to begin. They will need this financial capacity if they want to have their own logistics and want to compete with the existing rivals. They should also need the right people with the right kind of education can enjoy a good profits structure in this industry
- Economies of Scale
According to (Rodrigue, J. P., & Hesse, M., 2003) they said that the logistics services are becoming complex and time-sensitive to the point that many firms are now sub-contracting parts of their supply chain management to third-party logistics providers. These providers benefit from economies of scale and scope by offering integrated solutions to many freight distribution problems. Since the entry level is high and those with good capital investment, they have Economies of scale. Only firm with large volumes can be manufactured at cheaper cost of products.
- Threat of Substitutes
According to (Iwanowycz, Kaylo, Lee, Sekine, & Wells, 1999) the threat of substitute in this industry has been grown according to the chart given below.
Type of Opportunity Timeframe Expected Growth Reference
Business to Business 1998 – 2003 $43 B – 1.3 Trillion
Business to Consumer 1998 – 2003 $ 8 – 108 Billion
Total electronic commerce1998 $ 13 Billion BCG Consulting
Total electronic commerce1998 $ 5 Billion Market
Corp
Total electronic commerce1998 $ 7.8 Billion Forrester Res.
According to the researcher it is a perception that the competitors for MyNExpress are an expensive way to send low value items. Most of the expansion in internet selling has been in the form of low price products such as books, CDs, computer accessories and software. Customers are opting for 2 to 3 day deliveries weighing the cost of the article as a benchmark against the price of the shipment. MyNExpress has benefited the most from this since they are positioned as the leader in the ground transportation segment.
Another threat of substitutes in this type of industry is the logistics of Legal documents, such as real estate contracts, and business documents require signatory and notary functions to certify the legality of the instruments. These documents are still transmitted physically, however, as security and encryption functions are improved and gain confidence and are widely accepted, this will also serve as a threat to existing. So to make a big leap in this security and encryption technology and to get away from the competitors threat of substitutes MyNExpress has incorporated a chip based encryption technology on the bag in which the security documents will be carried.
- Buyer Power
Bargaining Power of Buyers: Diversion of Cargo from air to ground, there will be a continued “squeeze” on profit margins as buyers (companies and individual consumers) switch to ground transportation services for less time sensitive deliveries. It is the buyers who drive the prices down and make unreasonable demands for services, quality and payment terms. Byers for the service provided by MyNExpress has concentrated on certain other firms for its logistics and this cause the Concentration of buyers and volumes purchased, the buyers will cause threat of backward vertical integration for the firm.
- Supplier Power
The major suppliers for this Industry are the fuel service supplier for Airline service, external logistics suppliers in the rural areas etc.
Supplier power is very high in the logistics industry due to the limited number of suppliers. There are very few manufacturers of commercial aircraft and planes have a limited lifespan, so they cannot be resold indefinitely. As mentioned in the above paragraph the major suppliers industries are Airlines, external logistics suppliers in the rural areas. The supplier power here is determined by the government. If the government subsidies, the fare will be low similarly the fuel price, if it is subsidized by the government the fare will be low.
- Rivalry among Competitor
- Main Competitors.
Main competitors for MyNExpress are Federal Express which is the largest incorporated airfreight carrier, with revenues of $10.3 billion in 1997 (FedEx Annual Report 2000). UPS, which is the largest transportation after FedEx company, derives some $6.3 billion from air freight/express services. While this industry has been taken over by these two major players, other important competitors constituting the competitive in the international border are: Airborne Express, DHL Worldwide, Emery Worldwide, GD Express Sdn Bhd and GeoLogistics Sdn Bhd.
- Forwarders.
There are approximately 2000 plus competitors, which are classified as forwarders. They do not own or lease aircraft and many do not own ground transportation either, but they use other big player’s logistics facility. Due to this MyNExpress is having a very difficult situation in concentrating on forwarding alone.
- Super-regional LTLs.
Also, the local LTL’s (less than truck load carriers) are banding together to form super regional partnerships that extend their ground delivery over larger areas with more efficient cargo utilization and better coordination.
According to (Iwanowycz, Kaylo, Lee, Sekine, & Wells, 1999) With trucking routes extending 600 miles in a day and improved information systems and logistics management, UPS service is extending its ability to provide shorter service. Additionally, truckers are forming super regional alliances extending their organized delivery effort. There is additional competition from UPS, who is guaranteeing ground transportation service that rivals MyNexpress.
According to (Iwanowycz, Kaylo, Lee, Sekine, & Wells, 1999) in the international arena, since there is expected to be more growth, domestic competitors are also implementing global and multi-national strategies. UPS announced in 1999 that they plan to build a network, obtain airline authority to operate in Asia and build its market presence in Latin America. UPS is already in more than 200 countries and territories.
The rivalry among the competitors is intense in this industry. They have a very high degree of concentration of competitors, high rate of industry growth, they have high fixed costs which lead to focus on volumes and create strong price competition, another cause for the intense rivalry among the competitors are due to the Exit barrier – high (high investment) the higher the competition. Since this industry has a very high financial and labour investment they have a high exit barrier.
- Supply Network
- Participants in Network
For MyNExpress the network includes people such as their own deployment department, outsourced deployment people who will deploy the logistics to the concerned areas where MyNExpress cannot reach. These are the main trading partners in the network for MyNExpress. According to Read, J. (2000), participants on the logistics network include all the parties involved in the supply chain: major enterprises (shippers of goods and their customers) such as the company known as “Product Returns” where they Generate Return Authorizations via least cost carriers, generate bar coded return Bills of Lading and facilitate the receiving and accounts payable/receivable processes, freight forwarders such as the company known as “TRaIDS.net & Routing Guides” where they Extend visibility & gain accountability to the desktop by tracking shipments, goods & Communicate routing guides rules of engagement and carrier selection, customs brokers will be the agents who will be dealing with the customs people in the port of entry and exit. These people are usually the one who are employed with the company itself, transportation providers will be the ones who are usually the one who are employed by the company or outsourced from a third company, third-party logistics providers, transportation e-marketplaces such as the company known as “BLGEN who Generate, Distribute and Manage Bills of Lading on the Web, Freight Training who helps in Tracing and Tracking information in a central location to all authorized users, InsourceAudit.com who will manage the Freight Bill Management, Shipment Information, Cost Control Portal” and other logistics intermediaries.
Fig 4.1 Participants in Network
According to Read, J. (2000), due to the sheer number of parties involved in the supply chain, the information pipeline has traditionally been very long and disjointed. The Internet now offers a solution for efficient information sharing via a public infrastructure available to all companies. Now that the major IT challenge has essentially been overcome with the Internet, partners in the supply chain are now seeking an opportunity for relationship building.
According to Read, J. (2000), there are many reasons for participating in the network and which have effects also. The authors’ said that the network is designed to produce network effects and global economies of scale for all participants. These network effects include: Real-time supply/demand balancing, Volume aggregation for lower transportation costs, Co-mingling and merge in transit, Improved capacity utilization across global, multimodal networks, Single point of connection to other community participants, Public, private and semiprivate networks, Rapid construction of new fulfillment hubs, Increased fulfillment velocity via collaborative logistics activities, Ability to tap into wide array of present and future services.
- Supply Chain Replenishment
- Optimized Production & Improved Customer Responsiveness
- Supply Chain is a Competitive Weapon
According to Lee (2001), he said that "You need to have a networked system, so that any supply disruption information can be transmitted to the right parties as soon as possible”. "By trading off the economics of stock-outs, inventory, special handling, expediting and other costs, one can figure out the most optimal response to a supply disruption problem."
- Supply Chain Performance improvements Opportunities are Big
According to Lee & Amaral (2002), in a landmark study by the Performance Measurement Group (PMG), the gap between best-in-class and median supply chain performance was measured. In Computers and Electronics, PMG found a substantial gap in supply chain performance that affects fundamental competitiveness in revenue growth, cash flow and total asset intensity. In short, shareholder value is tied to supply chain effectiveness.
- Collaborative Planning
- Areas of Collaboration
The main areas of collaboration in which MyNExpress operates will be Transportation management collaboration - merge in transit; cross docking; consolidation, and diversion. Shipping optimization via real-time integration with transportation exchanges, Planning collaboration - high-level supply chain design and warehouse positioning, Purchase profiles collaboration - Historical purchase data; convenient reorder, Order entry collaboration - order capture with applicable discounts and substitute products, Order fulfillment collaboration - transaction settlement, track and trace, Reverse logistics collaboration - Returns processing and rebates; exception handling and customer support; return authorization, Interactive online selling collaboration - Product configuration; validate viable configuration of options for each order; tie in availability and substitutes from multiple vendors; comparative product analysis, Fulfillment modeling collaboration - across customer, seller, and product hierarchy to forecast impact of pricing changes and product configuration changes.
- Benefits
The main benefit for the usage of collaboration is to ensure compliance to approved vendors. Internet backbone is a central repository for contracts that can specify preferred tiers of carriers based on customer-specific criteria, performance and cost. Another benefits caused by the collaboration is the automate freight tendering. The system application provided by Worldwide Logistics Solutions eliminates the traditional, labor-intensive method process of creating and managing shipments with all types of carriers and forwarders. MyNExpress can capture order information using file transfer methodology; virtually eliminates the manual processes for tendering shipments. The other Benefits are Lower transportation spend by closely managing preferred carriers, Better negotiate services by leveraging volumes and referencing performance, Lower supply chain costs. Better manage expedite costs and lower inventory requirements with faster fulfillment cycles.
- Collaborative Product Development
- Collaborative Product Development using Value Chain Integration
According to Bowels, J. (2002), said by Karen Peterson director of research and advisory services at GartnerGroup's Integrated Logistics Strategies research center in Dallas "C-commerce is designing products collaboratively, planning across the enterprise, managing capacity constraints and interacting with partners. It's much more than buying something over the Internet". "By 2004, enterprises that fail to reengineer rigid supply chain structures and employ collaborative commerce-enabling technologies will suffer from lower profitability and decreased competitiveness."
According to Bowels, J. (2002), he said that logistics is one area of e-commerce where collaboration can reduce costs and increase efficiency for all participants. For online merchants, logistics is the key to survival. For companies that do it well, it is the next pathway to unprecedented productivity improvement.
- E-Logistics
- Vendor-Managed Inventory
Vendor Management Inventory Concept was designed to transfer the customer’s replenishment responsibility to the vendor in order to enhance the market performance of the vendor’s products.
- Lower Customer Inventories
By using Vendor Managed Inventory (VMI) in E-Logistics of MyNexpress the benefit is customer inventory turns frequently double under a VMI relationship. According to Bayles (2002), Under VMI, the supplier is able to control the lead time component of order point better than a customer with thousands of suppliers can ever hope. Additionally, the supplier takes on a greater responsibility to have the product available when needed, thereby lowering the need for safety stock. Finally, the supplier reviews the information on a more frequent basis, lowering the safety stock component. These three factors combine to significantly lower inventories.
- Lower supplier inventory
According to Bowels (2002), by using Vendor Managed Inventory (VMI) in E-Logistics of MyNexpress has better lower supplier inventory from better forecasts are achievable, but there are two warning. The first caution that better forecasts do not result from sharing information about normal turn business. Better forecasts result from having a more forecastable demand. Under VMI, the orders created for the customer more closely match the true demand in the marketplace. The demand is reflected in more frequent orders for the same parts and therefore lower variability of demand on normal turn business. The second caution is that better forecasts are only attainable if a substantial percentage of the business is handled via VMI.
- Lower Administrative Costs
By using Vendor Managed Inventory (VMI) in E-Logistics of MyNexpress can accrue to both parties. The benefit to the customer is easy to see. The customer spends less time ordering. In addition to this, both parties spend less time following up on bad order information correcting orders for non-shippable parts or quantities, and reconciling differences between orders and shipments. This benefit can be traced to a better, more frequent flow of information. Lower administrative costs can be a substantial benefit for both parties.
- Increased sales
By using Vendor Managed Inventory (VMI) in E-Logistics of MyNexpress the most exciting VMI benefit is the Increased Sales. Both suppliers and customers see their sales increase from VMI. The most obvious cause of increased sales is better inventory placement resulting in fewer out-of-stock situations. The supplier has information about the use of their products, the overall marketplace, as well as coming industry-wide events that allow them to direct the inventory investment to the right products. This knowledge, when combined with frequent communication about specific geographic marketplace issues communicated by the customer, results in higher sales per dollar of inventory investment. In addition to the sales increase from having the right part at the right place at the right time, many customers reinvest some of the savings from inventory reduction and administrative savings into building their business. This investment can fund lower end user prices or a broader selection of product. This investment increases business for both parties.
- Outsourcing
According to Bayles (2002), Logistics businesses have three options for handling e-logistics and e-fulfillment: they can perform the functions themselves in-house, they can outsource the functions to a third-party, or they can use drop-shipping. Outsourcing also alleviates the need to hire internal logistics and fulfillment staff, and to build and equip expensive warehouses. The quality of information must be much better than that of traditional outsourcers, so that companies can have visibility into their supply chains. Better information also reduces inventory throughout the supply chain, enabling companies to react quickly to market changes. Assuming a business does not have the time, money, and expertise or desire to carry out e-logistics and e-fulfillment in-house, it can evaluate the types of outsourcing. Categories of outsourcers include third-party logistics (3PL) providers, fourth-party logistics providers (4PLs), fulfillment service providers (FSPs), lead logistics providers (LLPs), logistics exchanges (LXs), and logistics visibility providers (LVPs).
- Benefits of Outsourcing
According to Deise, Nowikow, King, & Wright, (1999), e-Logistics will allow distribution to couple routing optimization with track and trace capabilities. When outsourcing has been taken place MyNexpress can reduce their cost, focus on core, value adding activities, reduce IT/IS investment, increase organizational flexibility, reduce infrastructural investment. It can also control its inventory level which can be woven into overall collaborative planning efforts by focusing supply chain efforts around customer service levels. Final assembly or packaging can be performed at the distribution center to reduce finished goods inventory levels. They said that e-logistics can also provide electronic links to government agencies for import or export documentation, expediting the travel time and allowing companies to participate in a global supply chain.
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Affects of Changes Affecting 5 Forces )
- Threat of New Entrants
The threat of new entry affects MyNExpress within its own industry, if new rivals can easily get in, then it will be more competitive, thus MyNExpress must put up barriers to stop others from entering. MyNExpress has put up a barrier through customer satisfaction and brand identification. Many firms trying to enter the industry will know that MyNExpress, the parent company to MyNExpress subsidiaries, has been around for a long time and knows the logistics industry very well. New entrants know that they will have to try to take satisfied brand loyal customers away from MyNExpress. Due to the change in MyNExpress’s strategy and the way they have put up the bridge against Threat of New Entrants they can block all the new entrants with very little capacity and all these done due to the values chain integration. To block them on the same track they have come they are using the Brand Image and their utmost Customer Service & Satisfaction synergy.
- Power of Suppliers
The power of suppliers is important to look at concerning the attractiveness for MyNExpress and the industry she is in, because if the suppliers to one certain industry have enough power, they may be able to extract higher prices for critical components, thus reducing average industry profitability. Since there are a only a limited suppliers in the logistics industry, those suppliers have higher bargaining power. In the logistics industry one supplier holds a critical component for that particular sector. In the case of MyNExpress the suppliers are Fuel suppliers, aircraft suppliers and maintenance manpower, transportation vehicle suppliers etc. by using the value chain integration MyNExpress don’t have much advantage over the Suppliers. This is because the suppliers who are supplying the commodity for the daily usage for MyNExpress are provided by limited suppliers.
- Power of Buyers
Having a clear micromarket strategy has the ancillary benefits of making an e-fulfillment infrastructure easier to develop or outsource. The more homogenous the customer base and the product set, the more logistically efficient the company’s operations can be. By taking the power of buyers into consideration when analyzing the attractiveness of the industry in which MyNExpress is operating, powerful buyers extract price concessions for products, thus reducing industry profitability. Since only a few buyers in the online logistics industry exist, they will have greater bargaining power, but the input is relatively standardized and has lots of substitutes, even though they have substitutes they keep the substitute away by differentiating their service and products by focusing core on the customers needs and wants. MyNExpress has huge buying leverage because "At the end of the day MyNExpress’s and their subsidiaries can put their buying power together to get units". When new entrants come in to the market they have to look at the powerful buyers in deciding whether or not to enter the industry and this gives MyNExpress a greater competitive advantage. Using the value chain integration channel MyNExpress can make better service for their customers.
- Rivalry among Competitor
Finally, the fifth of the five forces has to do with the extent of rivalry among existing firms. Greater rivalry reduces profitability because rivalry will either drive down prices or increase the cost of doing business. By using the value chain integration MyNExpress has these following advantages such as MyNExpress has its own secular brand, they have created a superb service: 99%-Plus on-time service level, they used the online service for tracking products in transit to provide the customer with better knowledge of in which location their products are at the moment. Since this is an emerging industry, firms are working together to gain consumer acceptance and establish distribution channels. As it has seen MyNExpress is still working on their distribution channels and trying to keep consumer acceptance for this upcoming season by not replicating the weakness what they did previously.
By using the value chain integration MyNExpress has lots of opportunities in which they can prosper their business. They can use the value chain integration for Increasing ground freight activities in the B2B business, air freight to grow 2x-3x in the next twenty years, Growth of global business economic and enterprise service, they can compete with the logistics giant like the FedEx, TNT, DHL in the global market to have global supply chain services
- Threat of Substitutes
Substitutes for MyNExpress are very less and play a very light role. The firms target a local market should do their best to capitalize on their local knowledge to compete effectively against other distant virtual stores. Local merchants will know local stores, customs, tastes, and product preferences of which virtual sellers may be unaware. While it is difficult for globally oriented web business to capture the same degree of local relevance at this time, they will address that challenge over for the next couple of years.
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