Industrial Marketing - Term Report - APL Pakistan - Ashfaque - Masood - Farhan

0

11

RReeppoorrtt oonn AAPPLL GGrroouupp MMeemmbbeerrss MMuuhhaammmmaadd FFaarrhhaann ((BBDD –– 3355//22000077)) MMaassoooodd HHaassssaann ((BBDD –– 3322//22000088)) AAsshhffaaqquuee AAhhmmeedd ((BBDD –– 1111//22000077)) IInndduussttrriiaall MMaarrkkeettiinngg SSuubbmmiitttteedd ttoo:: MMrr.. DDaanniisshh AAnnssaarrii

Page |

JJaannuuaarryy 1188,, 220011

IBA, Karachi APL Pakistan Industrial Marketing

Contents Acknowledgement ........................................................................................................................... 3

Executive Summary ......................................................................................................................... 4

Introduction ..................................................................................................................................... 5

Market Situation .............................................................................................................................. 6

Competitors for Export out of Pakistan........................................................................................... 9

Customer Analysis ..........................................................................................................................13

Customer Buying Behavior.............................................................................................................13

Competitive product positioning & Perceptual Mapping..............................................................14

Explanation of the perceptual map ................................................................................................15

Assumptions used in making this perceptual map ........................................................................15

Competitive product pricing...........................................................................................................16

Pricing the various services ............................................................................................................16

1. Corridor............................................................................................................................16

2. Service Requirements ......................................................................................................16

3. Space Guarantee ..............................................................................................................16

2. Transit Time....................................................................................................................16

5. Commodity ......................................................................................................................17

6. Hedging against key risks ...............................................................................................17

Pricing Policy/Philosophy, Discounting Policy & Added Incentives .......................................... 20

Ocean Freight ........................................................................................................................ 20

FCL......................................................................................................................................... 20

LCL ........................................................................................................................................ 20

Airfreight ................................................................................................................................ 20

Expedited Freight .................................................................................................................. 20

Customer Services and Support ............................................................................................. 20

40 years of managing at the source .........................................................................................21

Consolidation ..........................................................................................................................21

Vendor Education & Management.........................................................................................21

Quality Assurance/Quality Control ........................................................................................21

Packing & Labeling ................................................................................................................21

Kitting..................................................................................................................................... 22

Sequencing ............................................................................................................................. 22

Sub-Assembly......................................................................................................................... 22

Just-in-Time (JIT) Delivery ................................................................................................... 22

Quality Assurance / Quality Control ..................................................................................... 22

Competitive Position of APL with respect to Customer Service & after sales service .................. 22

1


Product Promotion & Sales Management ..................................................................................... 23

Effectiveness of the Promotional tools & Customers’ Responese ................................................ 24

Global Solutions Implementation.................................................................................................. 24

The Solutions Team....................................................................................................................... 25

APL’s Organizational Chart........................................................................................................... 27

Sales Distribution Channel ............................................................................................................ 27

Synopsis ......................................................................................................................................... 28

Recommendations ......................................................................................................................... 29

Appendix A .................................................................................................................................... 30

Appendix B .....................................................................................................................................31

Appendix C .................................................................................................................................... 32

2


Acknowledgement This acknowledgement gives the opportunity to express our gratitude to Mr. Danish Ansari without whose teaching and enlightened guidance, we may not have been able to understand the subject of Industrial marketing. It was an exhilarating and conversant experience to learn operational principles of B2B marketing and the industrial jargons. We are also highly indebted to Mr. Syed Zafar Imam, the Sales Manager APL Pakistan, who was of considerable help and served as a point of contact between us and APL. We would have not been successful in our report if we do not thank our respondents who gave their precious time and answered the questions with tremendous patience and understanding.

Sincerely Yours

Ashfaque Ahmed

Muhammad Farhan

Masood Hassan

3


Executive Summary

This report will highlight a critical study and analyze the industrial marketing activities in APL (Formerly called American President Companies Ltd), in shipping & Logistics industry. A complex relationship exists between the principal and partners. Industrial marketing deals with a relatively new concept in marketing of goods and services. We as business graduates need to deal with consumer products and our pre‐established notions related to the product placement, marketing, promotion and pricing may have been tailored towards consumer rather than business. APL formerly called the American President Lines is a global shipping & logistics service provider with 140 offices in 55 countries. Singapore-based Neptune Orient Lines (one of the five largest corporations in the areas of container shipping, global logistics and supply chain management) in 1997 acquired the America's oldest shipping company, the U.S. American President Lines now known as APL. Today, APL Logistics operates as a global supply chain management services within the group. The company is considered to be one of the most efficiently operated shipping companies in the world. The major customers of APL are the garments and textile exporters, followed by raw food businesses, chemicals and surgical equipments. APL Logistics has commenced operations at a new container freight station (CFS) facility at KICT Karachi. It is one of the first logistics providers in Pakistan to offer container transport and handling capabilities. Most of the promotional activities conducted by APL involve one-to-one interaction with the key account holder or potential prospect. Other promotional activities involve advertising the schedules of the vessels in business and trade journals of the information for the interested customers. We have discussed in this report about what problems the company is facing in getting business in Pakistan as the exports of the country are going down the major reason of this is the poor condition of textile sector, the energy crisis, increasing cost of doing business, law & order situation, & political instability in the country. We also have proposed some recommendations on how to improve the sales of the company despite the above mentioned factors.

4


Introduction

The company

The American President Companies Ltd, the business unit of the Pacific Mail Steamship Company., was founded in 1848. In 1867 it began the first regular shipping service between the United States and Asia, carrying passengers, cargo, and mail between the western United States, China, and Japan. The wooden ships of APL, weighing 2,500 gross tons, used steam power to drive paddle wheels.

In 1921, the Lumberman Robert Dollar’s company Dollar Steamship Lines acquired the Pacific Mail Steamship Company.

On November 1, 1938, Dollar Steamship Lines' new board of directors changed its name to American President Lines Ltd.

Ralph K. Davies, a former executive of Standard Oil of California acquired APL in 1952 and he merged the APL Associates with Natomas Company.

APL was spun off from Natomas as an independent, publicly held company on September 1, 1983, in part as a result of a hostile takeover attempt on the company by Diamond Shamrock.

In 1984 and 1985 APL introduced innovations such as lightweight rail cars that could accommodate two shipping containers stacked one on top of the other; a "double-stack" system for its LinerTrain;

APL in 1988 launched a door-to-door truck load transportation service for domestic freight in the United States. The "Red Eagle" service was started to compete with over-the-road truckload carriers.

In 1997, at the company's 150th year-anniversary, APL merged with Neptune Orient Lines (NOL), a shipping company from Singapore.

Services offered

APL primary business is sea transport of containerized cargo. Apart from that the company is also involved in breakbulk cargo movement like automobiles etc. Finally, its sister concern APL logistics is providing logistical & supply chain support to global customers.

5


Market Situation

Market Overview

The year 2009 witnessed the worst global recession in over seven decades and the sharpest decline in the volume of global merchandise trade. No shipping segment was spared; minor dry bulks and containerized trades suffered the most severe contractions. This reflected the weak consumer confidence which depressed the retail sector, and the low level of capital investment, as well as a slowdown in the real estate and housing sectors, especially in advanced economies.

By early 2010, the global recovery led by fast-growing developing economies was under way, although it was uneven and fragile. The sustainability of the recovery is challenged, among other things, by the fragile conditions in most advanced economies and the risk of a premature winding-up of the stimulus packages. From the shipping perspective, uncertain demand outlook is only part of the picture. Prospects for shipping remain difficult and uncertain, due in particular to the significant size of the ship supply capacity and the impact of the demand/supply mismatch on shipping markets. An added challenge relates to the evolving global regulatory framework, driven by emerging global challenges including energy security, a potential seafaring crisis, and supply chain security, as well as environmental sustainability and, more specifically, the climate change challenge and the related mitigation and adaptation imperatives. Assuming the recovery takes holds and there are no new upheavals on the global scene, the shipping industry and seaborne trade are expected to recover in 2010, although with more of the ground lost in 2009 likely to be recovered in 2011 and beyond.

In 2010, the volumes of shipping companies grew & all shipping companies recovered. The cargo movement around the world increased by 40%. APL also achieved significant growth in sales & profitability in 2010 & expecting to continue it in 2011.

6


Market structure and players

The shipping industry globally is characterized by small number of large players. The top 10 ocean carrier companies have captured more than 60% of the market share in terms of operating capacity. The Logistics industry is divided into three major areas of business:

1. Shipping 2. Inland transport 3. Aviation (e.g DHL, FedEx, UPS etc)

Top Ten Container Operators

Source: AXS-Alphaliner Top 100 Shipping Lines 2010

The shipping industry can be further divided into two segments i.e. Break bulk carriers and the Container carriers.

Market Outlook

The container ship operating sector is increasingly concentrated. Internationally, overall, the TEU capacity operated by the top 20 companies in 2009 increased by 135,000 TEU to reach 10.1 million TEU, corresponding to 67.5 per cent of the world total TEU capacity. Among the top 20 operators, Maersk Line maintained its lead position, closely followed by MSC and by CMA CGM, in second and third places respectively.

The gap between second and third place narrowed during 2009. The top 20 liner companies remained unchanged from the previous year, with 11 companies from developing economies and 9 from developed economies. Asian economies dominated the list, with 14 companies from that region. One of the top 20 carriers is from Latin America. Five are from Europe, including the top three liner companies, which are headquartered in Denmark, Switzerland and France.

7


The largest percentage decreases in operated fleets were recorded for OOCL, Zim, MOL and Evergreen, while CSAV, PIL, UASC, APL and Hamburg Süd saw the highest positive growth. In all, the top 20 liner shipping companies began 2010 with a combined capacity 1.4 per cent larger than at the start of 2009,

compared to an overall growth rate of the global container-carrying fleet of 3.6 per cent.

8


Competitors for Export out of Pakistan Volume (teus) end of year 2009

The industry experienced remarkable growth in the years 2005 and 2006 but according to analysts, 2009 was a real test for the economy and the not only shipping industry of Pakistan but of the world. The sea freight rates went into a tailspin due to the worldwide sharp volume decline, and rates hit rock bottom due to huge overcapacity of loading space. As a result of this extreme rate breakdown, carriers across the board made huge losses during the first half of the year 2009.

Major Challenges Faced

1. In terms of industrial growth and trade the year 2009 was the worst year ever experienced. 2. The supply / demand balance continued to worsen the next year. 3. The ships/Carriers focused on profitability, not market share keeping in view the economic

conditions. 4. The strategies followed by the companies proved to be suicidal, but most carriers denied the

facts. 5. The freight rates for the operational regions East/West fell by 30% for the next year. 6. Standards of service started suffering due to losses and trade gaps.

Economic Overview

The recovery on the demand side is a welcome development for shipping. Global GDP and international seaborne trade are expected to recover and grow in 2011. The world container traffic is expected to fall where as the fleet capacity will grow consistently. For shipping, economic recovery and trade expansion are only part of the picture and do not tell the full story.

9


By experiencing the world recovery from the economic disaster in the year 2010, the prospects for 2011 are positive, and point to a potential recovery in the course of the year. GDP growth in developing Asia in 2011 is forecast to almost double, to 7.8 per cent. Growth is expected in all sub regions, with relatively high growth rates both in East Asia (8.9 per cent) (with China in the leading position with 10.0 per cent), and also in South Asia (6.6 per cent) largely on account of robust growth in India (7.9 per cent) Pakistan (4.5 percent).

The APL management believes things will be recover and the economy will be in better condition due to the following reasons:

a. The recovery in trade volumes, which raises the production and export levels of many export-oriented economies;

b. The substantial reduction of inventories domestically and of major trading partners, which raises demand for exports;

c. The resurgence of capital inflows into the region, generating liquidity, and d. The strong domestic demand.

10


11


12


Customer Analysis

on services to the exporter and importers of the country. The main customers who avail the services of APL can be divided into following major segments on the base is of their nature

textiles 2. Semi-finished textiles/Raw Cotton products

and Forwarders:

The Importers

Market Segments

APL provides transportati

of business segment.

1. Garments and

3. Food exporters 4. Sea Food exporters 5. Clearing agents

of the customers of APL.

Beverages companies.

ustomer Buying Behavior

the industry

a general trend of increases in total trade volume. Increasing industrialization and the liberalization of national economies have fuelled free trade

two categories, i.e.,

extensive transportation system of their own to transport the goods/cargo to the destination

(ii) nd on the shipping lines/companies to arrange the transportation of their cargos to and from the shipping port

The smaller i iner from APL, pack their good/products in the container and return it to APL. APL obtains transport charges from these customers. However the customers

This is a smaller segment • The Automotive Assemblers. •• FMCG Companies • Tiles and Ceramics etc

C

Buying practices of customers in

Throughout the last century the shipping industry has seen

and a growing demand for consumer products. Advances in technology have also made shipping an increasingly efficient and swift method of transportation.

The customers and the industry can be further divided into

(i) the customers having high volumes of goods/products and have

the customers, who are the relatively small ones who depe

to or from the destination point.

mporters/exporters hire the conta

having their own means of transportation and containers only book containers slots at the services of APL to transport those containers overseas to the importer destination.

13


There are certain customers who enter into long negotiation over the freight charges with the company; they want amortized break-up of the various costs involved in the freight charges. Normally they argue on the amount of bunker adjustment factor, currency adjustment factor, peak season surcharge etc. and they

ether or not they actually export any products, they will still have guaranteed space on the vessel and they will have to pay for that space.

The three sea-ports of Pakistan, namely Port Qasim (QICT) under the flag of DP world, Karachi Port

KICT (part of HPH group), & PICT and the most recent Gawader Port are serving the business

The vessels of certain shipping lines are required to stop at certain designated ports on their journey

e if a consigner/exporter in Pakistan wants to ship his goods to USA

The arrival and departure schedule of the vessels are announced/drawn up by the shipping line company.

Those availing the services of the shipping line manage their supply chain in accordance with the schedule

Those who produce and export in a large amount in one go would like to have 20 and 40 feet containers

exporters who produce and export perishable products and

demand a price concession in category, they think they can get the room for the concession. While the customers, who are not detail-oriented, they simply demand for quotation, which includes all of the charges and after that they negotiate on that final quotation basis.

While the customers having huge volumes of cargos follow the normal routine practice of booking space in advance on ships departing on certain days of the week, wh

Basis of evaluation of a logistics company, buying criteria used by the customers and the critical success factors:

Any logistics or shipping company is evaluated by its customers on the following criteria:

1. Port of Service:

community. Depending on the destination of customer the good/cargo would be transported from that

port which will be near to him, but currently APL operates from Port Qasim and Karachi Port (KICT).

2. Routing of the vessel:

around the world. So for exampl

urgently he would prefer to hire the services of that shipping line which has fewer stops on its way to

USA from Pakistan. Similarly, the exporter of perishable items would want his goods to reach the

destination port as quickly as possible before their quality deteriorates.

3. Punctuality

of arrival and departure of these vessels. If the vessels of the shipping line continuously deviate

substantially from the scheduled time, this will drive the customers away and will bring down the ratings

of that particular shipping line considerably in the eyes of its clients.

4. The type of containers available

available from the shipping line. Still, other

food items need refrigerated containers in order to transport their products from one place to the other.

14


Moreover there are certain categories of foods that are labeled as dangerous goods or dangerous cargos

like oil, fuel and chemicals. The containers should be well-suited to carry and transport these goods.

5. International Presence

If the shipping company has got offices in different parts of the word, then it becomes easier for the

6. Ability to get the cutoff point extended

The client who wants to get his cargo exported needs to deposit his cargo at the port before a cutoff

7. Polite, well-trained and humble sales force.

In any business in the B2B category there is a direct interaction between the seller and the customer.

importers and exporters sitting in two different regions of the word to synchronize their supply chains.

Such big shipping companies can offer their customers better delivery terms, more economical freight

charges and quicker service. Moreover shipping companies with worldwide presence have much greater

brand equity than that of their rival companies.

point assigned to him by the shipping line. If the client fails to deliver at the port before the cut-off point,

then it becomes very difficult for him to get his product onboard the ship. In such a situation the client

asks the shipping line to extend the cutoff point if possible. That’s where the negotiation skills of the

shipping lines with the Port Authorities coming into play because extending the cutoff point requires the

permission and authorization off the port.

Hence customer demands that the sales force which is given the task to deal with them is well-behaved,

polite, able to listen to the needs of the customer and should be courteous enough to handle the angry

complains and inquire which the customer might come up with. The clients dread such rude and blunt

salespersons that are harsh in the negotiations and do not carry out any after-sales service and follow-up.

According to some clients, sometimes sales people tend to change their statements regarding what was

committed previously once the transaction has taken place. This creates a lot of resentment and anger on

the part of the customer.

15


Competitive product positioning & Perceptual Mapping

Keeping in view the buying criteria used by the customers to evaluate and select a shipping company to export their products, we can come up with the following perceptual map. The perceptual map evaluates various shipping companies in Pakistan on two key criteria considered to be most important by the clients:

1. Freight charges 2. Consistency of service

The perceptual map is as follows:

Freight

.Maersk

.APL

.Safmarine .APL

.Hapagloid

Consistency

.IRISL

16


Explanation of the perceptual map

Maersk is considered to be a premium shipping line. Its freight charges are high, but at the same time is known for delivering consistent and reliable services to its customers. In other words all of its vessels arrive and depart very close to the scheduled time and that there is no significance variation. Due to its high freight charges small exporters and freight-forwarders are unable to afford the services of Maersk shipping line.

As far as APL is concerned, it is more affordable than Maersk due to its relatively low freight charges for some connections. However some customers perceive it to be slightly inconsistent because there is a higher incidence of vessels arriving and departing a lot earlier/ later than the scheduled time. Hence it is slightly unpredictable.

Iranian International Shipping Line (IRISL) ranks the lowest both in terms of freight charges and consistency of service. This is because Iranian products and services are banned in the European countries and the USA due to political reasons. Hence it can reach only a limited number of destinations around the word which mostly include Muslim countries. Therefore clients looking to export or import their products into Muslim countries may find Iranian international shipping line to be very cost-effective and economic.

Hapagloid is believed to offer the cheapest freight charges after Iranian International Shipping Line but at the same time its service is very consistent. Hence it aims to be the low-cost leader of the industry.

Assumptions used in making this perceptual map

It should be kept in mind that the above perceptual map may not be hundred percent reliable because firstly the number of clients interviewed (who we use the services of various shipping lines) was very small therefore their opinions and perceptions may not be representative of the population as a whole.

Moreover many of the clients have used their judgments and knowledge while assigning positions to these companies but their knowledge may have been faulty.

Also the representatives of Maersk and APL who were interviewed for the purpose of may have been subjective when rating their own company. The subjectivity factor was kept in mind while drawing up this perceptual map.

Due to the aforementioned reasons, the resulting perceptual map drawn may or may not be very accurate.

17


Competitive product pricing

Pricing the various services

APL is a B2B Company. Moreover it is a company that provides services and not tangible products. Therefore it does not have a portfolio of brands under its name. However there are certain factors which have to be kept in mind when charging the customers for the services provided. These factors are as follows:

1. Corridor

The corridor refers to the route of the vessel (i.e. from Karachi to New York or from Karachi to East Asia etc). While determining the rates, the commercial planner would carefully analyze all the operating costs associated with the voyage. This refers to the fact that every voyage will tend to have different costs, based on the distance and the costs incurred in the different ports on the way.

Moreover, Demand for a particular route is a key determinant of pricing. The higher the demand and lower the supply, the higher the prices will tend to be. If there is competition on a certain route, then the prices will tend to fall as competition undercuts each other.

Furthermore, the clients which bring in a greater volume of shipments are usually offered certain quantity discounts. This could be done as the company sees profit in securing long term business with a client. Minimum Quantity Commitment is a common phenomenon in this line of business. This is a minimum one year contract where rates are agreed upon and the client specifies a minimum order quantity. This is usually agreed upon in TEUs per year.

2. Service Requirements

A client’s price will also be determined by the type of service that is required. Given below are some of the special types of services that a client may require.

3. Space Guarantee Large buyers like Wal-mart and Nike require that on any vessel leaving from a specified port, they should have a guaranteed space on it. Even if they do not give any shipment, the space will go empty while the client will have to pay for it.

4. Transit T me i This refers to the amount of time it takes for the shipment to reach its destination from the date of departure. Two very common terms used in this industry are Mother Vessel and Feeder Vessel. A Feeder Vessel collects all shipments from nearby regions and brings it over to a central port, where a Mother Vessel connects to the cross continent destination

A mother vessel, which is primarily used for long haul destinations, is usually slower as it takes a larger volume of cargo to fill it up and subsequently has a longer waiting time at port of origin. However the costs associated with a mother vessel are significantly lower. Having a shorter transit time requirement for a shipment would mean use of the more expensive feeder vessels, and hence the higher the rate will be charged.

18


5. Commodity

The rate offered by the commercial planners also depends of the commodity being shipped. Different commodities have different requirements that need to be catered to differently, which directly influence the prices. Some of those requirements are:

The volume to weight characteristics

i

i

High density cargo usually has less volume but more weight. Such cargo cannot only damage the containers if loaded without care. (e.g. Rice cannot be loaded in a 40Ft container because its weight will bend the container) but also that a heavier ship consumes more fuel than a lighter one. Hence a higher rate is charged for high density cargo.

Reefer Conta ner These are containers which maintain a specific cold temperature and are attached with a freezer and an independent electricity generator backup system. Moreover, certain goods can have requirements not having more than a certain amount of moisture in them. This means that they may have to be placed on a certain location on the ship so that they are not affected by moisture.

DG Goods Dangerous Goods, such as inflammable or explosive chemicals usually require special handling and its costs also tend to be higher. The insurance cost is also high and the documentation charges are also high.

6. Hedging against key risks APL usually operates on long term service contracts with its key clients. The rates and prices are negotiated in advance for several years, however in order to protect itself, the service agreements generally have certain variable components to mitigate the key risk elements.

Currency Risk To hedge against this risk, it is common practice within the shipping industry to have a separate head in the name of CAF (Currency Adjustment Factor) in the bill sent to the customer. This charge tends to fluctuate in tandem with currency fluctuations and allows the company to completely secure itself against currency risk whereby all the changes are passed on to the customer

Oil Price R sk Oil prices directly affect the most prominent cost of APL – Fuel. The mechanism for hedging against this risk is also designed in a fashion similar to Currency Risk. BAF (Bunker Adjustment Factor) is a variable cost head that refers to fuel charges, which varies with the international oil prices. This is also a pass on cost and the company completely passes it on to the customer.

19


Pricing Policy/Philosophy, Discounting Policy and

Added Incentives

Ocean Freight

APL Logistics provides time definite, innovative ocean freight services for both Full Container Loads (FCL) and Less Than Container Loads (LCL) shipments between more than 100 markets worldwide.

FCL

It mean full container load. APL provides FCL services to its key customers as well as to the freight forwarders who consolidates the cargo of many shippers of same destinations & gets it booked with APL as a FCL cargo.

LCL

APL Logistics offers superior groupage services providing regular, reliable, fast and cost effective weekly sailings from the world's largest manufacturing hotspots to the consumer markets.

APL Logistics experience in handling and packing LCL at CFS stations around the world is proven and used by many of the leading global companies.

Airfreight

Airfreight Shipments are handled through APL’s extensive network of carefully selected strategic air partners to provide worldwide coverage for shipments that need to meet tight deadlines focusing on speed, flexibility, creativity and sensitivity to ensure that customers’ priority shipments is there when and where the cuctomer need it the first time, every time.

Expedited Freight

For products that require faster transits than traditional ocean freight, APL Logistics offers a suite of time-definite services.

For time-sensitive shipments, APLL’s Expedited Surface provides guaranteed, date-definite, door-to-door delivery from Asia to North America at significant savings compared to traditional airfreight.

Expedited Air — For time-critical shipments, APL Logistics provides priority airfreight services from anywhere to anywhere though a global network of strategic partners.

Customer Services and Support

Customs Brokerage Service

For importers requiring customized, bundled solutions, or those requiring simply an integrated transportation and customs solution, APL Logistics Customs Brokerage Services operated by Carmichael International Service offers a wide range of cost effective basic and value added customs related services.

20


With thorough understanding of the legal and regulatory complications facing today's import community, APLL is dedicated to moving customers inventories in transit efficiently and without delay with consistent, superior performance.

From automotive and industrial assembly to consumer durables and electronics, APL Logistics integrated manufacturing support services keep lead times short and inventories at a minimum throughout the supply chain. By integrating freight management with specialized facilities, operations and technologies, APL Logistics provides efficient, highly reliable manufacturing support. APL’s processes assure on-time delivery of quality-controlled parts and components and allow manufacturers to reap the benefits of just-in-time (JIT) inventory management.

40 years of managing at the source To help customers create economies of scale and accountability across fragmented worldwide sourcing networks, APL Logistics consolidates merchandise, information and documents in every major market. Trust us to take the headache out of international forwarding, documentation and compliance.

Consolidation

With more than 200 facilities worldwide, APL consolidates and manages the movement of merchandise to distribution centers and retail outlets around the globe. APL also arrange the delivery of documents and electronic information to manage customers’ inventory. APL Logistics consolidation services improve reliability and reduce supply chain costs.

Vendor Education & Management

APL Logistics can act as customers’ eyes and ears overseas. Local experts work with customers’ vendors to ensure products are loaded, packaged and delivered precisely how, when and where customers’ customers need them. APL’s vendor education program results in a clear definition of requirements and processes for customers’ vendor, as well as a smooth flow of information, products and documentation.

Quality Assurance/Quality Control

APL Logistics customizes inspections to examine vendor shipments based on customers’ needs, including random, sequential or 100 percent audits. APL monitor carton and product markings, labels, and carton conditions and provide digital images so customers can accept or reject each shipment. APL also provides quality assurance facilities where customers’ own teams can conduct inspections.

Packing & Labeling

Using APL Logistics' technologies and facilities, customers can outsource packing and labeling operations to APLL’s locally based vendor service teams to reduce third-party delays and quality problems. APL helps configure products in any form, whether it is bundling, shrink-wrapping, barcode label creation or other custom packaging or labeling. APL also provide special protective packaging for large component shipments containing glass or fragile accessories.

21


Kitting

This process simplifies handling by configuring individual high-activity parts into consolidated user packages prior to final delivery.

Sequencing

Nothing is more costly than shutting down an assembly line because of a lack of production-ready materials. APLL’s process sequences items for the assembly line, so the right part arrives in the right order at the right time according to the production schedule.

Sub‐Assembly

By pre-assembling parts and components, APL Logistics helps reduce the number of assembly steps required at the factory. This simplifies the manufacturing process while reducing costs.

Just‐in‐Time (JIT) Delivery

Minimizing the inventory of parts and supplies on a factory floor can produce significant bottom-line results. With JIT delivery, APL Logistics designs the integrated systems necessary to move materials — within strict parameters — from points of procurement directly to the production line.

Quality Assurance / Quality Control

Throughout the range of manufacturing support services, APL Logistics provides highly trained quality assurance and quality control professionals to ensure the highest quality parts and components for customers’ manufacturing process

Competitive position of APL with respect to after sales service

From our research and the interviews which we conducted of the customers of various shipping lines and the persons employed at APL and Maersk shipping line, we can come up with the following shipping lines of different shipping lines in Pakistan with respect to the provision of after sales service:

1. Maersk 2. SafMarine 3. APL 4. Hapagloid 5. Iranian international shipping line (IRISL).

22


Product promotion & Sales Management

Promotion practices being used and the promotion mix

The following promotion practices and promotion mix are being used at APL to promote its brand:

1. Personal Visits to customers

The sales team of APL actively seeks out customers in the industry. These customers may have been using a shipping line of the competitors and they have to be convinced to switch over to the services of APL. Such direct promotion forms a major chunk of APL’s marketing strategy

2. APL’s logo on containers Since a B2B firm like APL cannot promote itself by advertising on the billboards etc, therefore the only choice it has to remind the customer of its presence is to brand its containers which are used to carry cargo from the factory of the customer to the port. All the containers owned by APL have an emblem of APL painted on them. 3. APL website Maintaining website is considered to be an important part of business these days and it has also become an important tool to promote customers’ company. Since B2B businesses do not go for mass ATL advertisements, therefore they maintain their websites where the interested customer can obtain the desired information about its goods and services. The URL of APL’s website is: http://www.apl.com/pakistan/ 4. Advertising in various trade and shipping journals and magazines APL advertises in various B2B journals and magazines which are targeted at those businessmen interested in looking for a logistics partner to transport their products worldwide. 5. Brochures and calendars given out to customers APL also promotes itself by handing out brochure and calendars to its current and prospective clients in order to create a positive image about the company. These items usually have the following wordings imprinted on them:

Be respectful and considerate to your customers and colleagues. Stay warm, cordial, courteous, and caring. Continually think of new ideas for improvement, even when conditions appear satisfactory & remain open to betterment. Carry through with and accomplish your tasks. Never give up. Overcome challenges. Remain Motivated.

6. Trade fairs and seminars

Recently a seminar of logistics companies of Pakistan was arranged in Sheraton Karachi. APL ensured its presence in that seminar in order to seek out leads and prospective customers and to promote its product.

23

http://www.apl.com/pakistan/


The proportion of each promotional element used with respect to the budgetary allocation is as follows:

Personal Selling 75%

Print Ads 15%

Calendars/brochures 5%

Trade Fairs 5%

NOTE: The other tools like the logo of APL on the containers and the maintenance of website are carried out at the head office in Singapore hence no budget for them is allocated in the Pakistan office.

The logistics and shipping industry promote their services using only selective medium. It would be futile and expensive for them to advertise on TV or newspapers aimed at general public. Hence only 7-8% of their revenue is generally allocated towards promotional activities. The bulk of their focus is on the operations and services.

A rough idea of the budget allocated by APL towards promotion would be in the vicinity of 4-6% percent of the revenue. They aim to spend lesser than the industrial norm since their office has only been recently established and more budget is going towards improving the infrastructure if the office.

Effectiveness of the promotional tools and customers’ responses

By far the most effective tool being used at APL and the industry as a whole are the personal selling. The personal selling not only creates awareness about the brand but is very effective in obtaining guaranteed business, provided the negotiations are successful. A lot of competitive edges have to be sorted out and presented to the customer. The customer also gives his undivided attention to the sales people, a luxury which would not be available through other means.

The next most effective tools are the print ads in trade journals. Many a times various importers and exporters are looking for a shipping line which would help them move their products around the globe. They then consult such trade journals which include the schedule arriving and departing in the upcoming period along with their destination. The businessman then selects the shipping line whose schedule best matches his production cycle.

Global Solutions Implementation The launch of any new operation or system and the opportunity to enhance a global supply chain require expert resources and best practice tools to ensure success. That’s why leading companies choose to work with APL Logistics’ Global Solutions Implementation Group.

24


APL’s global team combines world-class supply chain knowledge with disciplined project management methodology to meet the current and long-term strategic objectives of company’s clients. The team is deployed to:

• establish dedicated project leaders • assess business scenarios • identify resource requirements • collaborate with customers to deliver effective solutions

So whether it’s tracking customers’ shipments to Boston or getting a complex scanning and labeling system on track in Bangladesh, APL team works locally and globally to get customers’ system up and running - end to end.

The Solutions Team

The Global Solutions Implementation Group is a director-led, fully allocated project management team. Each project manager has core expertise complemented by individual specialties ranging from industry verticals to extensive functional experience.

Projects are guided by a single point of contact project manager who is responsible for delivering success. The project manager works with client counterparts to identify, align and manage global, cross-functional resources required to deliver solutions.

Company’s Scope: The team is available to implement virtually any process offered by APL Logistics’ international service suite that is part of the supply chain including:

• Customer service • Documentation • Engineering • Finance • Information technology/visibility • Legal • New service development • Operations • Supply chain analysis • Third-party integration

Take Advantage of APL’s Best Practice Experience: APL team draws on an indispensable range of best practice case studies developed though company’s work with the world’s leading manufacturers. The global implementation teams have honed their skills by:

• Geographic Reach: With more than 300 offices serving over 55 countries, APL Logistics can offer a team with global and local knowledge and cultural awareness. • Best Practice: Leveraging best practice tips from supply chains moving footwear, apparel, chemical, electronics and more.

25


How Implementation Works: APL’s implementation teams follow a PMI-inspired, four-phased implementation model. APL approach is differentiated by company’s product leadership and investment in understanding customers’ business. Specific areas of expertise include:

• Supply chain network analysis: focus on international inbound networks with IT integration and visibility requirements

• New service solution development • Multi-line of business integrations including 3rd parties • Deployment of PMI-based documentation and management processes • Change and risk management • Large scale system deployment and conversion

The Four-Phase Model

The team follows a four-phased implementation model from Business Development through Post Implementation Review. Each project phase has corresponding resource requirements and deliverables. The goal of the multi-phased model is to ensure shared understanding of commercial objectives, to align global resources and to mitigate risk/cost:

26


APL’s Organizational Chart

Sales/Distribution Channels:

APL as a matter of fact does not use any sales/distribution channel. They may rely on freight forwarders for consolidation of LCL cargo customers but from marketing perspective they do not have any authorized freight forwarder or distributor apart from APL logistics which is a sister concern of APL. This is due to the very nature of business & a sensitive business characteristics & size of business. Also the customers are very big in terms of purchase size so APL uses its own sales force exclusively.

27


Synopsis

After interviews with Syed Zafar Iman Sales Manager APL Pakistan & Alistair Gillon Manager Trade & Network, the review of ads, the history, services of the companies, we have deduced that the company has great services & logistics solutions for its customers & its has global presence. However the problem lies in its sales as the APL Pakistan locally is facing stagnant sales. Sales are not growing in Pakistan with the same pace as APL is enjoying globally after the recovery of economic downturn. In the second half of FY 2009, company has started having sales growth globally. But APL Pakistan’s sales are not growing. The other shipping companies like Maersk & Safmarine (Safmarine being flanker product of Maersk) are having sales growth in Pakistan which is not the case with APL on which APL’s management seems concerned. We have analyzed critically the sales & marketing efforts of the company & the strategy they are pursuing in Pakistan & have proposed several recommendations which are in the recommendation part.

28


Recommendations

To improve sales in Pakistan, we propose the following suggestions to the management of the company:

We have interviewed the sales force of the company as well. The sales force needs to be trained both for better understanding of the services & background of the company as well as for their selling skills as they seems to lack both. As a B2B company, APL needs to rely heavily on personal selling but their sales force seems to be weak in their selling & negotiations skills. So the company should arrange proper training seminars for their sales staffs for their professional improvement.

Another major point that we came to know during our discussion with company personnel is the fact that the sales force is not paid on the basis of commission on the sales they earn to company. Like all other employees company has a policy of fixed salaries for its sales force. Now-a-days most of the companies have basic plus commission remunerations for their sales force to better motivate them which is not the case at APL. So we propose APL’s management a commission based remuneration system for its sales force so that they are motivated to get new businesses & to reach more customer with a feel that the more business they earn for the company the more they will be paid in terms of commissions.

Another point is the market segmentation. We propose that management of Pakistan needs to redo a market segmentation of the Pakistan market after the revamp of Pakistan’s economy after the economic downturn ended in 2009 & some industries emerged & others went down. So the priorities need be changes accordingly.

Lastly, we observed that for some connections, APL’s rates are very high as compared to what Maersk have for the same connections. Although the pricing & freight rates are set on a corporate level at APL. However as a matter of fact the freight rates are very high from Pakistan’s perspective where cost of business is already very high. So we propose that APL’s Pakistan management make a case to their corporate office to get a reduction in rates to make APL’s services more competitive compared to other shipping players operating in Pakistan.

The concept of Key account although already in place needs reinforcements. We recommend that the study of most profitable customers should be conducted and key account managers should be given the task of maintaining these customers on the basis of 80/20 rule.

29


Appendix A

We had discussions with two persons in APL office:

Syed Zafar Imam Manager Sales APL Pakistan

Alistair Gillon Manager Trade & Network Management APL Pakistan

We had first visit on October 20, 2010 in which we had interview with Mr. Zafar & we talked about the company’s history, its services, & its presence around the globe.

We had second visit on December 13, 2010 in which we had interview with Mr. Alistair & we talked about the problems they are facing in capturing business in Pakistan.

30


Appendix B

List of publications reviewed and web sites visited

http://www.apl.com

http://www.apllogistics.com

APL intranet portal

http://www.maersk.com/Pages/default.aspx

http://www.maerskline.com

http://www.linescape.com

http://www.alphaliner.com

http://www.transportweekly.com

http://www.drewry.co.uk/

31

http://www.apl.com/

http://www.apllogistics.com/

http://www.maersk.com/Pages/default.aspx

http://www.maerskline.com/appmanager/

http://www.linescape.com/

http://www.alphaliner.com/

http://www.transportweekly.com/

http://www.drewry.co.uk/


Appendix C

Assumptions used in making this perceptual map

It should be kept in mind that the above perceptual map may not be hundred percent reliable because firstly the number of clients interviewed (who we use the services of various shipping lines) was very small therefore their opinions and perceptions may not be representative of the population as a whole.

Moreover many of the clients have used their judgments and knowledge while assigning positions to these companies but their knowledge may have been faulty.

Also the representatives of Maersk and APL who were interviewed for the purpose of may have been subjective when rating their own company. The subjectivity factor was kept in mind while drawing up this perceptual map.

Due to the aforementioned reasons, the resulting perceptual map drawn may or may not be very accurate.

32

Industrial Marketing - Term Report - APL Pakistan - Ashfaque - Masood - Farhan

Documents

bunker adjustment

american president

currency adjustment

phased implementation

hundred percent

maersk shipping

supply chain

shipping lines