BUSINESS PLAN ON PROPOSEDJOINT VENTURE BETWEEN EXPRESS LOGISTICS PTE. SINGAPORE & SUKAM INDIA LTD. Submitted to PROF. O. P. WALI CONTRIBUTED BY: SAMIR SURI – ROLL NO.12 URVASHI SHAH – ROLL NO.49 KAUSHIK DEY – ROLL NO.53 AJIT MANCHANDA– ROLL NO.24 MANU CHOPRA – ROLL NO.40 Indian Institute of Foreign Trade New Delhi USAGE This document is designed to serve as an introduction and briefing guide for top management and may therefore be treated only as a guideline. It contains a broad illustration of the business intentions of the Joint Venture, provides a concise insight into the basis upon which this project has been judged to be viable and concludes with an overview of the implementation and business plans. By virtue of the simplified nature of this documents, detailed financial data is beyond the scope of this synopsis and has thus, been made available separately in another section. EXECUTIVE SUMMARY – SUKAM INDIA LTD. The idea for SUKAM India Ltd. blossomed out of the fortuitous meeting of Samir Suri, a Senior Manager with a Freight Forwarding firm and Manu Chopra, Director-Owner of a Courier Service, in a Seminar on "Outlook of International Trade". This seminar had highlighted the business opportunities arising out of removal of Quantitative Restrictions. The second reason? Market opportunity." The exports from India had increased by 20.4% in 2000-01 over the previous year. Growth of world trade volume in goods and services recovered from 4.3% in 1998 to 5.1% in 1999 and it is estimated to have almost doubled to 10% in 2000. World merchandise exports ,in value terms, increased by 3% in 1999 as against a decline of 1.6% in 1998. The recovery from developing countries was even stronger with exports rising by 5.7% as compared to a decline of 6.2% in 1998. This showed and confirmed that there would be a lot of movement required for goods , both from India and out of India. With the Government's intention to set up Special Economic Zones and product specific Agri Export Zones, the production of goods for exports would increase substantially. Moreover, India's export to its major destinations like OECD, Asia & OPEC regions showed significant increase. Exports in $ value grew by 12.8% to OECD,20.1% to Asia & 12.3% to OEPC. Both felt that removal of barriers amongst the WTO members would result in boom in trading in goods. Foreign Direct Investment of US$ 1916 million in the previous year April - December period showed an increase of US$ 427 million over the same period. With the recent announcement of further liberalisation in the FDI , it became clear that the opportunity had arrived to spread their wings and enhance their area of business which would expand very fast. FDIs would require the movement of goods and raw materials into the country for setting up of either the wholly owned subsidiaries or joint ventures which would result in production of goods for the export market or domestic consumption. Both the markets would require the services of specialised freight forwarding and delivery of goods to various destinations at the designated time at a competitive price. In the context of the above envisaged developments, consequential expected increase in volume of movement of goods and documents and the common business activity, they agreed to meet in the next few days. In their next meeting they analysed the future of international trade. Four meetings later, they agreed to set up a common business in the field of Couriering, Freight forwarding and Consolidation. SETTING UP OF NEW BUSINESS Manu believed that the window of opportunity had arrived with the domestic market getting smaller. It was becoming clear that only the big and the most competitive would survive. There was a need to become global and to achieve this they should bring some strength in their business process by improving upon the existing value chain. Everything is changing so fast that there would never be the perfect strategy with the perfect technology with the perfect marketing opportunity with the perfect product. So you need to back a team that's facile enough, and experienced enough, to make the inevitable adjustments in strategy. Samir felt that their venture project required a professional management team. They realised that to be competitive they must use IT savvy business processes which would bring them at par with the other major players in the market. This process required the assistance in synergising the Enterprise Marketing Automation (EMA). In came the technology-savvy Kaushik Dey who had substantial ecommerce experience and Ajit Manchanda with years of experience with an International chain of hotels and Airlines. For more than 22 years, Ajit Manchanda had been immersed in the world of business 4. Mr. Ms. intermodal transportation of goods and export of goods. Kaushik Dey. warehousing and consolidating. His domestic and international business in couriering works on the basis of tie-ups with major players in the market. Urvashi Shah. Urvashi Shah an outstanding financial controller in a Multinational Company agreed to join them and offered to share her expertise in sourcing of funds for the new firm. Manu Chopra.development and customer loyalty programmes. Manu Chopra. the trade within and outside India will grow. Ajit Manchanda and Mr.. This would result in major in-flow of goods. The arrangement amongst partners is internal. a tie-up has been . Sukam India Limited is strengthening its value chain by providing the services of freight forwarding. The new company SUKAM INDIA LIMITED. The salient points in the setting up of SUKAM INDIA LIMITED is given below: 1. On the basis of the in-depth analysis done by the partners on the impact of dismantling of QRs. opening of sectors for 100% Foreign Direct Investments and increase in world trade due to the impact of the positive WTO measures. staff and assets in Delhi. The share in the profit and losses will be on the basis of agreement drawn amongst them. The most important aspect which needed to be covered was to arrange funds and the person to manage it. has been formed by five partners namely Mr Samir Suri. To add on to the USP of SUKAM INDIA LIMITED. He is providing his offices. 2. owner of the courier firm is the major share holder. Mr. 3. Mr. This foreign company has made a name in the last ten years of operation in the field of couriering. list of branches of the . Chopra's office in Delhi.Rs.10. Access to this site would provide the on-line status of the document of freight sent by the customer.19.000/-.( PrincipalRs. South Africa and Brazil.350/. United Kingdom. Korea. The advantage of their networking will benefit the new joint venture company which has been named as SUKAM XPRESS INDIA LIMITED. EXPRESS SINGAPORE will bring in technology to the new company as well as provide 50% equity.19.30. This arrangement allows the repayment of principal of one third at the end of each year. 5.55.+ Interest . 29. 6. They will maintain this site. Japan. Russia. The loan requirement for investment in Chennai and Mumbai of Rs.97. XPRESS LOGISTICS PTE.10. Investment of Rs. 1. The financial equity of 50% coming from Xpress Logostics would be Rs. Balance 50% equity has to be provided by SUKAM India. XPRESS SINGAPORE will set up a website in the name of the joint venture company SUKAM EXPRESS. 1. The total repayment at the end of the first year works out to be Rs. European Union. warehousing and consolidating) in the United States.3.350/-).65. freight-forwarding.000/. This site will provide on-line tracking and tracing system for all documents and freight.. SINGAPORE.85. It has tie-up freight-forwarding.000/.78.12. This site would also provide eCRM concepts.59.arranged with M/s. warehousing and consolidating. The total Investment including the assets of Mr. China. Chopra's office set up in Delhi would be Rs.The rest of the repayment schedule has been shown in the Forecast and Investment Analysis.has already been made in terms of Mr.has been arranged and being sourced from a Bank at a rate of 17% to be repaid in 3 years.57.000/. arrangements with Express companies (couriering.000/-. .company. Mumbai and Chennai and work through franchisee based offices in Bangalore. Sukam Express. It will also give information of the type of warehouse facilities available with the company. and names of the Express companies with which it has a tie-up. 7. The Sales Offices would function through broker agents. This site would also provide facility to Retailers for online selling and delivery of the goods. the logistics sevice provider will have to cater to complete supply chain management underlining the demand for a ONE STOP SHOP facility to the customer. Hyderabad. Cochin. The joint venture company would set up its own offices in Delhi. It has immense potential and the site can grow from here. Kolkata and Ahmedabad. In short. SINGAPORE NETWORK HIGH COST OF ESTABLISHING OWN SALES OFFICE 4. ii. PROPOSED STATIONS TO BE ADDED TO SUKAM XPRESS . MAA. • DEVELOPMENT OF SERVICE INFRASTRUCTURE i. • • CATEGORY OF COURIER COMPANIES UNIQUE SELLING PROPOSITION OF COMPETITIORS PAGE PAGE 3 2.CONTENTS EXECUTIVE SUMMARY 1. REQUIREMENTS ……………………………………………. • • • ESTABLISH 24 HRS HUB AT BOM. DEL SALES OFFICE AND FRANCHISE OFFICE PAGE 5 DEVELOPMENT OF MANAGEMENT INTRODUCE NEW SERVICES & PRODUCTS MARKET POSITION & BRANDING PROJECTION 3. PRESENT EXPRESS INDUSTRY SCENARIO ……………. • • • • • • • SETTING UP 24 HRS HUB & SALES OFFICES QUANTUM OF DOMESTIC & INTERNATIONAL BUSINESS NATURE OF SHIPMENTS NATURE OF CLIENTS LOCAL CONDITION FOR HIRING STAFF PAGE 6 IMPORTS FROM XPRESS LOGITICS. PLAN/INTENTIONS ……………………………………………. PAGE 38 . COST ANALYSIS AND INITIAL INVESTMENT …………. MANAGEMENT STRUCTURE & STYLE ………………… • STRUCTURE OF NEW ORGANISATION PAGE 11 6. CONCLUSION …………………………………………………. • • • • • PAGE 14 PRESENT INVESTMENT AT SUKAM DEL INVESTMENT FORECAST AT SUKAM MAA &DEL COST OF COMPUTERISATION MONTHLY RUNNING COST BOM/MAA/DEL COMPUTED INCOME FOR THE 1ST YEAR SUMMARY VENTURE CAPITAL WORKING CAPITAL NOTES • • • • 7.NETWORK …………………………………………… • • PAGE 10 TOWNS & CITIES WE INTEND TO SET UP OUR SALES OFFICES CATEGORY OF CITIES ON THE BASIS OF THEIR SALES POTENTIAL 5. INTRODUCTION OF NEW SERVICES AND PRODUCTS/MARKET POSITIONING & IMAGE PROJECTION – IMPROVEMENT IN SERVICE LEVELS IN THE SUKAM XPRESS NETWORK ……………………………………………………… PAGE 36 8. But of course for this to happen the changes are not only likely in India but overall globally in the SUKAM XPRESS Network. Such brokers select particular networks for particular destinations depending upon price.. presently. India-U. India-SIN.. most of these are broker agents who feed into the networks of other large Express companies. specialising in service between India-U.A. India’s courier market. their main earnings from specialised regional routes which they operate themselves e.1.g. The unique selling point or in other words why . (ii) TYPE B: Broker agents who market their services independently and source/route their shipments though a number of countrywide networks depending upon the prices and services levels offered to them. India-HKG and the rest of the world routing through other larger networks. Such networks are basically existing in the domestic sector of the market.A. speed and reliability. India-U.K. is serviced by approximately more than 5.000 courier companies.S.E. PRESENT EXPRESS INDUSTRY SCENARIO IN INDIA: If SUKAM XPRESS plans out its entry wisely and our expectations from the joint venture are pragmatic and logical we are convinced that over a period of few years SUKAM XPRESS can capture a major share of the Indian Express Industry Market. However. The total courier market in India can be divided into 3 type of categories: (i) TYPE A: The franchise networks who work entirely on a free to free basis and each station is owned by a separate individual or company and are entirely financially responsible for themselves.. NYC. Airborne Express. DHL. MAA etc. DTDC. The revenue levels per package which the various companies are generating and the market categories in which these companies can be categorized are as follows: i) The Higher End: These are the companies which have their own networks and their investment levels in terms of computers. The philosophy that guides these companies is that their sustained income is generated from Imports and Exports and all the Domestic sales merely compliment their income. deliveries by 9.g. vehicles. (iii) TYPE C: Countrywide networks owned by a single company. BOM. etc. First Flight. Corporate Couriers. Aramax. Elbee (UPS). Such networks are very few probably only 1 or 2 who have been able to achieve their financial goals and have been able to sustain the high levels of investments and can totally rely on revenue from international or domestic sales.customers would like to use such companies is because they are able to provide custom tailored packages in terms of prices and deliveries e.m. Such companies are basically either International or Domestic Courier Companies and they charge anything . Skynet etc. The companies which can be placed in this category are Blue Dar (Fed Ex). come under this category.00 a. which the larger networks would not be able to do because of the larger volumes handled and keeping a strict schedule of cut-offs for deliveries.. in DEL. ii) The Middle Group: Most of the visible courier companies like Overnite. Prakash Air Freight. offer next day delivery in LON. office infrastructure are very high and therefore they are charging the highest amount. They operate by forming alliances between themselves. In return these companies provide the I & II Companies access to small and remote stations within particular states.400.75.from Rs.00 to Rs. .300.35. iii) The Lower End Group: These are the various local companies operating within particular state/states and are majority Domestic Courier Companies. They deliver the shipments on the CWB of the larger courier companies.00 to Rs. depending upon the existing market condition. Whatever International shipments they generate are routed through any of the category I & II Companies.00 for Domestic shipments. Such companies account for less then 40% of the total market. They basically depend upon each other to provide the service which they cannot handle. and Rs.00 for international shipments. • • • • • • Reliability FEATURES Step by step tracking information Services by air and surface High value logistic services Cargo services. Very low prices for International shipments • • • 3. First Flight DOMESTIC AND CARGO COURIER • • Small cargo service Custom designed solutions Both Domestic & International service through their own network Services by air & surface High value logistic services Courier & cargo services Both Domestic & International service through their own network Both Domestic courier and cargo service Service by air & surface to large . 1.) OF VARIOUS COURIER COMPANIES S.S. Small & Large Both Domestic & International 2. NAME OF COMPANY Blue Dart (FEDEX) EXPRESS IND.P.UNIQUE SELLING PROPOSITION (U. DHL EXPRESS INDUSTRY • service through their own network. NO. Elbee (UPS) EXPRESS INDUSTRY • • • • 4 Overnite. number of Domestic destinations • Specialist services to neighboring countries like Bhutan. Nepal. International service through their own network Customer small cargo • • Low prices for specialised area Custom designed solutions to certain large clients The above information clearly indicates the enormous competition and thus implies that it is absolutely necessary that we enter the market to expand our business with a new product and not enter as just another courier company. PLANS/INTENTIONS: The long terms plan for expansion of SUKAM XPRESS Network/services in India would be to become a leading logistics service and support organization in Asia Pacific Region. Andaman & Nicobar Islands etc. In order to achieve this goal it would require us to undertake the following activities in a phased manner: i) Development of service infrastructure: • Setting up of 24 hrs Hub facilities . designed solutions for 2. TNT COURIER & FREIGHT ON CUSTOMER REQUEST • • • Very low prices. 5 OCS. not just as another express company to and from Far East. BOM. domestic courier (tracking facility with India).e.• Setting up of Sales Offices (self-owned offices/franchise offices) ii) Development of management (induct professionals and placement at strategic locations) iii) Introduce new services and products: freight forwarding. newspaper distribution. • • On par with service standard of existing competition On par with competitiveness (pricing) of existing competition. iv) Market positioning and branding projection: i. to functioning 24 hrs a day with all custom clearance and related facilities. MAA. In order to achieve a level to satisfy the requirements of the Worldwide Network the first step should be to elevate the level of regional hubs at DEL. Service levels outside India. competitive service within India. warehousing and consolidation. but as a worldwide network providing customised solutions at competitive price. food service. Regional hubs would have a dual function as follows: . door to door cargo handling (Domestic & International). REQUIREMENTS: Development of Service Infrastructure: Regional Hubs: Any future increase in outbound business (India to other countries) is directly dependent on our ability to provide a reliable. subscription. v) Forecast 3. the exports operations staff/vans must be equipped with some sort of two way communication i. In order to facilitate on a 24 hour basis at both Domestic and International Regional hubs. two way radio communications etc. the existing infrastructure at self-owned/operated hubs would have to be enhanced substantially. telephones. generator. BOM. (iii) Computer Hardware: The hub must be equipped with the necessary computer hardware in order to record all transactions like imports/sorting. CCU.e.000. scanners etc.(i) Regional level international import/export hubs at DEL.00. The vehicles for the hub operations should not be confused with the vehicles for delivery requirements and shuttle between Hub to city offices. Minimum cost Rs. COK. OBC companies & Hub. mobile telephones.00. In order for the hub to operate round the clock the following would be required: (i) Vans/Mini trucks: The function of these vans would be to provide shuttle services between airport & hub. Fax. (Selfowned by JVC) (ii) Upgrade tie-ups for outsourcing from express companies only at BLR. (iv) Office automation: Xerox machine.000.00 – Rs.30.00 per office Sales Office: .50. The up-gradation of facilities to the level to operate as a 24 hour hub (refer to Investment Forecast & Cost Analysis). weighing scales strapping machines etc. exports (reshipping). (ii) Two way communication: As most of the areas at the airports and customs are not readily accessible to telephones. etc. HYD AND AMD having 24 hrs hub facilities. MAA. if the premises are rented and Rs.10.000. CCU. The main equipment cost for a single sales office would be in the region of Rs.In addition to the 24 hr hubs the immediate requirement to satisfy the needs of the SUKAM XPRESS Network would be to set up our branches at various locations across the country. However.2. fax. in order to do this we have two options: (i) (ii) Set up our own branch offices Set up Franchisee based operations We are not setting up self-owned branch offices in BLR. setup of countrywide offices.00. Elbee (UPS) have suffered big financial losses due to ill advised expansion planning.00. telex.5.000.00.e.00 – Rs. The sales office whether self-owned or Franchise would exclusively work as SUKAM XPRESS and have primary responsibility to generate domestic sales. these objectives cannot be acquired in the traditional method of expansion/market capture i.000.00. Even on the countrywide Networks Blue Dart (FEDEX). companies etc. .00. It is not advisable to open sales offices purely on the assumption that there is untapped market waiting for SUKAM XPRESS to capture. All offices will be required to function at a certain basic level of technology and system.000.00. This would include procure of basic facilities e. investment thereof sales campaigns etc. In order to avoid the failure and huge financial losses of other networks.g. telephone. COK AND HYD since it would not be cost effective for the following reasons: The cost of establishing a sales office in any part of India today is in the region of Rs.00 if the premises are purchased.3. PNQ-BOM. (i) QUANTUM & QUALITY OF BUSINESS (DOMESTIC & INTERNATIONAL) Depending upon the strategic location of certain cities. There are courier companies operating between such .00.The decision to set up our own offices and franchisee based offices would depend upon the following factors: (i) (ii) (iii) (iv) (v) Quantum of business (International) available.000.00 per month as subsidy.000. Nature of shipments {heavy volume. the revenue per piece would be very low. SPX (non document) . For example. Import into such location High cost of establishing sales office. DOX (document)} Nature of clients as paymasters Local condition of hiring staff • • Strong union (of labour) Efficiency of labour (vi) (vii) A. due to the enormous number of lower end courier companies operating out of these stations. CHG-DEL.000.15.00 – Rs.05.20. TVMCOK. LUD-DEL etc.00. Establishing of sales office if self owned Minimum cost Rs. CJB-MAA. However. Quantum of business (Domestic) available.00 Establishment of Franchisee sales office Minimum cost Rs. the quantum of business available from such centers could be very high in terms of volume (number of pieces). USA. Europe etc. warehousing.g. Pune. Tirupathi. SUKAM EXPRESS with self-owned regional hubs and strong financial backing will be in a very strong position to provide customised packages at competitive prices to clients in cities like Moradabad. Which we.00/ pc. (i) (ii) (iii) (iv) SPX or DOX Heavy SPS or Light SPS or Both Heavy DOX or Bank DOX (light) or Both Most frequent destinations e..locations @ Rs. . Ludhiana etc. A franchise based option at these places would work positively in the long term interests of SUKAM EXPRESS as customers at these places are dependent upon local companies an exhorbitant amount in order to provide facilities like consolidation. with our costs and investments (overheads). This criteria is of great significance as SUKAM INDIA presently is not in a position to offer competitive service in Heavy SPS/Light SPS/Heavy DOX/ category. Aurangabad. The quantum and quality of business available for freight forwarding/ consolidation/warehousing would also be very high in terms of volumes particularly for cities like Moradabad. where shipments are sent.05. will never be able to match. Panipat. Panipat etc. (ii) NATURE OF SHIPMENTS: Another important factor to decide whether to have self owned or franchise office is the nature of the customers’ business or nature of courier shipments business available. E. FRA/Germany.A. family companies etc. These customers are able to shift from one Express company to another and are able to avail the services they need. next day service to LON.. Coimbatore.K.g. Such locations have. KTM. (iii) NATURE OF CUSTOMERS: One of the major viruses the Express Industry is plagued by is the bad nature of the customers as paymasters. HKG.. SUKAM cannot offer. which the main line courier companies like DHL. SIN. FEDEX. Such behaviour is generally found in customers such as individual companies.A. The market in such locations also demands service to selected destinations. which demand rock bottom prices (well below the market rates). Jallandar. however collections from such customers generally run bad or run into 4-6 month credit.g. UPS OCS. SIN for specific market segments and are also able to sustain themselves despite the extraordinarily low charge (approx. 5% on line haul). Varanasi. TNT. Tirupur.There are certain locations such as Moradabad. . Such companies are offering services ex India to major locations e. Ludhiana. These lower end courier companies have successfully designed special products/services e.. The volume of business of such companies is very large and is very attractive for the Express companies. Panipat. NYC/U.S. DXB/U. NYC. LON/U. CMB/Sri Lanka. As a result the companies are offering rock bottom prices to these clients. basically export manufacturing units. Such a situation arises because of the industry being disorganized. Such demand is fulfilled by the “lower end” courier companies. where the market demands very competitive tariff for heavy weight shipments. etc. (iv) LOCAL CONDITIONS OF HIRING STAFF: Certain locations within the country are very strong in regards to labour unrest. the efficiency of staff is low & cost of running high. This way the large Express company Networks are able to pass the risk onto the franchisee. Such franchisees are local people. lockout etc. West Bengal. Due to such reason. At such locations due to strong labour unions.g. SINGAPORE station in the region as follows: STATION NR. Uttar Pradesh etc. OF DELIVERIES AT XPRESS LOGISTICS NR. well aware of the local environment & stability of the customers.without being disturbed even if the company they utilise stops to provide services to them. many of the express companies have opted out of certain locations and appointed franchisees. strike. (v) IMPORTS OF VARIOUS STATIONS INTO INDIA: The current number of packages per day received for delivery from each primary XPRESS LOGISTICS. e. OF DELIVERED AT NEW STATIONS 30 05 02 02 02 TYO LON FRA NYC EUB STATIONS 200 20 05 05 05 . PROPOSED STATIONS TO BE ADDED TO THE NETWORK AND ESTIMATED SALES FIGURES FROM THE STATIONS: The towns and cities. As a result. SIN. merely from decreased revenue on account of deliveries. Providing some subsidies to the franchisee which will lead to certain fixed cost for the initial period. we may not be able to pass on any benefits of lower transfer charges to the members of the XPRESS LOGISTICS Network for several years.DXB SIN CMB 20 20 05 10 10 02 As is evident from the above table. MAA. LON is negligible in terms of revenue which may have helped to offset the high cost of operating new sales offices (improvement of service infrastructure). 4. DXB. our opening of new stations will not necessarily lead to reduction in cost of transfer. HYD. Once the volume of import deliveries from the network increases the cost of handling per CWB would be lower as well. BLR. in respect of this project. the figures show that exports to India by XPRESS LOGISTICS worldwide Network other than TYO. CCU is too small to enable an office to break even on its fixed costs. where we intend to set up franchise based offices have been divided into the following categories: . The volumes are so low that they will lead to higher rate per CWB at BOM. Considering the lack of any financial support from the network. Chandigarh. Calcutta.50 thousand per month with the share of the domestic sector being 98% and that of international being 02%. Baroda.CATEGORY A: Cities where the sales are expected to be above Rs.1 lakh per month with the share of the domestic sector being 90% and that of international being 10%. Allahabad. Coimbatore. CATEGORY B: Cities where the sales are expected to be more than Rs. CATEGORY B: Lucknow. Faridabad. Jaipur. CATEGORY C: . Tirupur. CATEGORY C: Cities where the sales are expected to be more than Rs. Calicut. Madras. Kanpur. with the share of the domestic sector being 80% and that of international being 20%. with a 50-50 share between the international and domestic market. Trivandrum.2 lakhs per month. Moradabad. CATEGORIES OF CITIES ON THE BASIS OF THEIR SALES POTENTIAL: CATEGORY A: Ludhiana.5 lakhs per month. Hyderabad. CATEGORY E: Cities where the sales are expected to be up to Rs. Ahmedabad. Salem. Bombay. Delhi. Surat. Pune. Agra. Jallandhar. Guwahati. Bangalore. Panipat. Indore. Ghaziabad. with the share of the domestic being 60% and for international sector 40%.3 lakhs per month. CATEGORY D: Cities where the sales are expected to be up to Rs. national level executives will be induced one each in the primary disciplines – marketing. Bhubaneshwar. MANAGEMENT STRUCTURE & STYLE: It is much too early to identify a single person who will be solely accountable for this task. Mysore. 5. Meerut. Aurangabad. Madurai. Bareilly. Dehradun. Cuttack. Hissar. Palghat. Gandhinagar. Pathankot. Mathura. Their main task will be to define the objectives. DEL.e. operations and finance. Coonoor. Patiala. Roorkee. Ambala. Gorakhpur. . Shimla. execution and monitoring of Stage I i. In view of the size of the project and the long term implication we feel that it would be necessary that our present country management team at SUKAM DEL will be actively involved with the project.Gurgaon. Bhillai. Gwalior. Raichur. CATEGORY D: Ahmednagar. Trichy. Jammu. Shillong. MAA. CATEGORY E: Ajmer. Nasik. Rohtak. Kota. Jodhpur. Sholapur. Rajkot. Ooty. Amritsar. Haridwar. They would be directly reporting to the country manager. Nagpur. Trichur. Whether it be in the capacity of accountability or assisting the project manager. Bhopal. Bhatinda. Mangalore. Guntur. Karur. Patna. Noida. Visakhapatnam. Aligarh. Sonipat. detailed planning and scheduling. Porbandar. At the very beginning. Jamshedpur. Karnal. Raipur. Kolhapur. setting up of the joint venture company at BOM. Erode. Udaipur. Varanasi. Nainital. Ranchi. Goa. i) The country will be divided into 4 to 5 zones for ease of management and control. We propose that SUKAM EXPRESS India headquarters concentrate its efforts on strategic management and planning. we still feel that the transition to such a structure should be gradual and dependent on the success of the new organisation. with complete responsibility within his region for marketing and sales. administration. Northern. These are geographically demarcated (Southern. ii) We are strongly of the opinion that. Management Decontrol to this level may be achieved after a period of 1-3 years. II) Management Structure: The following is a broad description of the intended management structure and may please be treated as a guideline only. while leaving the tactical and front-line management involvement entirely at Regional and Branch Office level. there has to be a combination of our own (SUKAM India) and agents offices in India. This would naturally be aided and guided by pre-set operating parameters. Central. finance and accounts and personnel.I) MANAGEMENT STRUCTURE & STYLE: While we concur that in order to manage a large organization a drastic change in style and attitudes would be required. We would naturally require to induct professionals with experience in this line of work in order to see the above goals fulfilled. It is assumed that whether it is an . operations. Western & Eastern Zones) and each would be headed by a regional head who would run his region as a profit center. it will fulfill all requirements of a full-fledged SUKAM XPRESS Station. would leave the Head Office free to concentrate its efforts on policy.agent or a branch office. Such a structure we believe. These branch managers would then report to their Regional Heads who in turn will report to the Country Manager. planning and strategy. responsible for the overall smooth functioning of his branch. . iii) All branches/agents will have a branch manager appointed. In case the concentration of branches in any one region is high. it is a branch office for reasons that have been outlined in the preceding paragraphs. the regional Head may group together a number of branches under the charge of an Area Manager. In similar locations. STRUCTURE OF NEW ORGANIZATION DIRECTOR FINANCE COUNTRY HEAD DIRECTOR OPERATIONS DIRECTOR MARKETING REGIONAL HEAD FRANCHISE AREA SALES MANAGER AREA OPERATIONS MANAGER AREA AREA OPERATIONS MANAGER MANAGER BRANCH OPERATION CUSTOMER SALES MANAGER MANAGER MANAGER SERVICE MANAGER OPERATION CUSTOMER SALES EXECUTIVES EXECUTIVE SERVICE EXECUTIVES . 00.000.00.45. and city office approx.00 Operations Hub approx.30.00 – Rs.000.000.00.00 2. 3.00. 600 sp. ITEMS A WITH REAL ESTATE B WITHOUT REAL ESTATE PRICE (INR) Estimated cost at market value of present SUKAM DEL Airport PRICE (INR) 4. The above estimate is based on the assumption that the office space is on rental.ft.00.90. 2500 sq.000.00. (I) Present Investments at SUKAM DEL office: SR. 2 X Rs.000.40. This figure has been arrived at by a simple calculation of Rs.A INITIAL INVESTMENT FORECAST & COST ANALYSIS: Breakdown of cost estimate for purchase/rental of offices at Mumbai and Chennai to Regional Hubs operational 24 hours.00 .00 27.00 2.00.000.00 = Rs. 8 Telephone lines (@ Rs.40. 1. ft.00 per office (2 offices need to be purchased/rented out) therefore. Furniture/Air Conditioning/Interiors etc.000 27. NO.45.000.00.40. 2.00.000.000. 000.000. per line) Telephone exchange/EPABX (3 lines & 6 extensions) 2 Fax machine 1 Telex machine 2 Photocopier machine Delivery vans (4.00 4.00 1.00.00 8.00. 7. 10.00.000.00 9. 8.000.00 51.00 15.00 60.00 11.000.000.00 25. 5.000.000.40.000.4. operations) Communications system (pagers.00 8. 2 for delivery/pickup 25.000. 2 for Hub operations.00 1.00. mobile phones.000. 6.00. 2 way radios) Computer system (as per details enclosed) TOTAL 20.00 .000.51.00.000.00 15.40.000.000.00 11.00 60.000.00 20. 13. No.(II) Cost for Minimum configuration of Computer System S.000. office space.000.00 30.00 30.00 10.00 90. equipment.000.00 1.000.00 75.00 30.00 1.000.00 15.00 15.00 TOTAL PRICE (INR) 1.000.00 80.000.000. at MAA and BOM. ITEMS Server Pentium Nodes Nodes with 16 MB Hard Disk External Tape Drive Dot Matrix Printers Laser Printer 625 VA UPS for Server 1 KVA UPS for Nodes Bar Code Readers Hand held POD Retriever Electronic Weighing Scales Data Communication Modem Dedicated Telephone Line TOTAL QTY.00 Breakdown of minimum cost of up-gradation of SUKAM India’s existing infrastructure to cater to increased work load.000.00 30.00 30.000. 2.000.000. 1.00 30.000.00 10.000. ** The above estimate is for one station only.00.00 45. 9.000.000.00 15. 3. 5 6. 1 4 2 1 4 1 1 3 3 2 2 1 1 PRICE EACH (INR) 1.00 20. 7.0000.000. . 4.25.000.000.000.00 25. 11. 12. etc.000.00 10.000.00 15.000.00 15.50.00 30. 10.000.000.20.00 8.25. In terms of additional staff.000.00 75. 8. 000. with furniture/ fixtures/ Airconditioning etc.00.000 Estimated Security deposit payable for 1000 sq. ITEMS Estimated cost of purchasing suitable premises to locate Regional Operations Hub approx.00.00 RENT PRICE (INR) 2.ft.00 2. NO.000. 5.00.30.000 2.000 per line) 3 lines for day to day function. 1 line for fax.00.6. for suitable premises to locate Regional Operations Hub.000 PURCHASE PRICE (INR) 2. BOM – 1.00.000-7.00 50.000 2. (Rent per month Rs. MAA – 1.000.000 Telephone Exchange/ EPABX (3 lines & 6 extensions) 1 Fax machine MAA – 25.III) Forecast investment for SUKAM XPRESS MAA & BOM Hub Office: SR.00.000.00. 1. 1000 sq.000 X 12) depends upon land owner to demand 1 yr.40.00 4.000.00.00.00 2.00 3.000.20. BOM – 1. or 3 yr deposit MAA – 24.500 (depending on location). BOM – 24.000 4 Telephone lines (@ Rs. @ Rs.1. premises on ground floor.20.00.40.00. ft. 2 yr.000 48.00.00 . MAA – 1.00 50.000.000. 00.2.000 2.00.000 2.000.000.000 1 Telex Machine (optional) MAA – 15.20.000. 2 for delivery/pickup operations) @ Rs.00. BOM – 8.00.00.00 30.000 BOM – 50.000 Computer system (as per details enclosed) MAA – 6.00 12.00 16.000.00 2.00.000 TOTAL 1.000 Photocopier machine MAA – 1.00.00.000 MAA – 8.000 Staff Uniforms MAA – 50.000.00 8.20.00 2.000.000 Delivery vans (4.00.000.000.000 16.000.00 1.000.00. BOM – 15.00.00 7.000.00.2 for Hub operations.6.00.00 10.00.000. BOM – 6.00.00 2. mobile phones.000. BOM – 1.00 86.00.000.00.00 9.00 11. DEL – 25.000 12.00.38.00.00 .000 30. BOM – 6. 2 way radios) MAA – 6.000 Communications System (pagers. 00 6. ITEMS INCOME 10.00.F. 1. etc.00. Communication charges (Telephone/ Fax /Telex) Electricity/ Water/ Municipal Taxes Legal Expenses (professional services obtained from Chartered Accountant./ Medical Insurance/ Overtime 6.00.00 35.00 . LOGISTICS. 8.000.000.00 80. 5. advisors etc.00 EXPENSES PROFIT & LOSS No. 10.SUKAM DELHI CURRENT DELHI MONTHLY RUNNING COST/PROFIT & LOSS COURIER SERVICE S.000.000. SIN) Imports ex LHR/SIN/DXB/TYO Franchise Sales Salaries including Bonus / P.00 2.00 10.000. Courier Sales (Domestic & 2.000.40.000.00 10.000. International) Imports – Inward Commission (NET) (After deduction of Inter Agent Delivery and 50% commission to XPRESS 3. 4.000.00 4. 7.000.00 30. legal 9.) Computer Hardware Maintenance Vehicle maintenance (includes 2.35. 00 12. Computer Stationary etc.00 22.50.000.SIN.00 .00 13.00.00 10.40. Envelopes. (EUB. Petrol & Repairs etc.11.000. Mother Bags.000.000.00.00 3.40. DEL.) Freight Domestic International (70% for MAA. BOM) 1.LON. Packing Lists.000.00 12.DXB.TYO) Customs/ dispatch clerks/ miscellaneous charges (without 75.000.000.FRA. Plastic covers.) TOTAL 75. receipts) Stationary/ Packing Materials (CWB’s. 000 Inward remittances (NET) After deduction of Inter Agent Delivery and 50% Commission 3. No.50.50. 1. SIN Average Monthly Expenditure (includes Domestic & Intl Freight & Running Cost of offices & reflects the total expenditure incurred for the whole of India) DEL – 42.C SUKAM XPRESS FORECAST MONTHLY PROFIT & LOSS SUMMARY FOR THE FIRST YEAR LOGISTICS (COURIER.000 12.12. to XPRESS LOGISTICS.000 MAA2.25.00 Franchisee – 15.00 EXPENSES PROFIT & LOSS DEL – 25.000 60.00. FREIGHT FORWARDING.00.000.500. 10.60.000 BOM .000. SALES ITEMS INCOME 62.23.00. WAREHOUSING AND CONSOLIDATION) S.00 . 10.000. 60.500 X 12 = Rs.23.00 Rs.86.20.500.BOM – 1 7. 29.78.000.00 Rs.82.00 Interest Rs.00 60.70. 9. 75.86.01. 7.500. 1.10.97.00 Rs. 1.22.500 X 12 = Rs.000.38.23.28.20.650.00 .00 Rs. 10.000.19.000 TOTAL 75.00 SUMMARY FOR THE FIRST YEAR: Income per month : Less Expenses Gross Profit : : Rs.350. 14.40.000.500 MAA.350.48.00 Less Repayment of Loan :PRINCIPAL Rs.00 14.12.000X 12 = Rs.85. 000. 15.00 Franchisee – 20.000 Inward remittances (NET) After deduction of Inter Agent Delivery and 50% Commission 3.00.000 MAA DEL 2.00 EXPENSES PROFIT & LOSS BOM – 20.00.000 30.00 . 1.00.00.000. No. FREIGHT FORWARDING. to XPRESS LOGISTICS.00.00.D SUKAM XPRESS FORECAST MONTHLY PROFIT & LOSS SUMMARY FOR THE SECOND YEAR LOGISTICS (COURIER.00.000 16.00. SIN Average Monthly Expenditure (includes Domestic & Intl Freight & Running Cost of offices & reflects the total expenditure BOM – 27. WAREHOUSING AND CONSOLIDATION) S. SALES ITEMS INCOME 85.000 75.000. 01.00.00.00 SUMMARY FOR THE SECOND YEAR: Gross Profit : Rs. 26.000.900.000/Interest .00.59.Rs. 3.00.000 X 12 = Rs.00 . 6. 26.100.30.85.00.40.00 Rs.000 97.00.000 DEL .MAA – 18.00 26.00 Less Loan: Principal-Rs.19.000. 2.000 TOTAL 1.900/=Rs.000.12.74.85.00. MAA.00. FREIGHT FORWARDING.000 EXPENSES PROFIT & LOSS (For BOM. 2. WAREHOUSING AND CONSOLIDATION) S. to XPRESS LOGISTICS. Franchisee) Inward remittances (NET) After deduction of Inter Agent Delivery and 50% Commission 3. No.400 .000 20. 1.02. SALES ITEMS INCOME 1.00. DEL.50.E SUKAM XPRESS FORECAST MONTHLY PROFIT & LOSS SUMMARY FOR THE THIRD YEAR LOGISTICS (COURIER. SIN Average Monthly Expenditure (includes Domestic & Intl Freight & Running Cost of offices & 86. 91.00 Less Loan: Principal-Rs. 4.37.reflects the total expenditure BOM – MAA – DEL .000/Interest .22.85. 23.Rs.52. 3.52.800.20.00.19.00.06.450/Rs.350.000 34.400 SUMMARY FOR THE THIRD YEAR: Gross Profit : Rs.28. 34.14.00 Rs.000/TOTAL 1. 3.400 86.86.52.400 X 12 = Rs.00 .450. we can expect a increase of almost 100% in sales at Delhi and franchisees and a modest increase at Chennai and Mumbai.SUMMARY It is evident from the attached Profit & Loss Summary that SUKAM XPRESS is healthy and contributes an annual Gross Profit of approx.000 per month.000 – bringing the total sales to Rs. Chennai.50. we expect the Net Inward Remittance from XPRESS LOGISTICS.74. The expected sales from this region per month during the first year would thus be – Mumbai Rs. The reason being the provision of customised logistics packages to clients at a competitive price.000 per month reason being the opening up of QRs and increase in the FDIs.700.4.25.60.23. Delhi. In addition to this.00.50.000. Rs. we arrive at: INCOME (ANNUAL) . With the formation of the joint venture.000 + Franchisees. in the first year.00 PER ANNUM. SIN for India to increase substantially from the current level of Rs. Rs.00 per month.000 per month to Rs. Rs.15. Rs.62. Using the above forecast Income & Expenditure figures for the first year.12. it can be expected that the expenses will rise to about Rs. The major increase being due to Renting of offices at MAA and BOM and recruitment of professionals in freight forwarding and Consolidation Industries. During the first year of the joint ventures’ operations.60.00.10.00.000.2.12.00.500.95. 500 X 12) = Rs.50.60.23. In the second and subsequent years. EXPENSES (ANNUAL) For the entire region (Rs.62. Chennai and Delhi.g. Chennai. it drastically reduces the investment capital and the running expenses.50. Other stations must be managed entirely by Franchisee (as is the policy currently).78.000 at the end of the first year of operations. we expect an annual increase in Sales by 25%.01.000 Rs.20.Sales (Rs.00.60. Delhi). the place regarding Franchisee locations e.22.000 Rs. Secondly. In the short term.20.51. it enables us to concentrate our efforts in increasing and consolidating our market positions in the three major metro areas (Mumbai.12. Net Inward Remittances by 20% and a 20 increase in expenses across the region.7. safely expect the Joint Venture to expect a Gross Profit of Rs. Firstly. Tirupur etc.9.000.7.000 X 12) Total = = = Rs.000 We can thus.1.82.1.000 X 12) Net Inward Remittance (Rs. . Cochin. Once this is achieved. Mangalore..38. This strategy offers two major advantages to the Joint Venture. can be safely reviewed and where necessary a decision to open our office can be taken. it is essential to employ a strategy of having the Joint venture Management only at Mumbai. clients and the network at the required level. SIN network outside India to provide similar services and facilities to SUKAM XPRESS India. The new services which the company could look into to generate additional sales would be like delivery service of food items. The forwarder is an indispensable agent for an export firm that cannot afford an in-house specialist to handle paper work and other export . INTRODUCTION OF NEW SERVICES AND PRODUCTS – MARKET POSITIONING AND IMAGE PROJECTION – IMPROVEMENTS IN SERVICE LEVELS IN THE XPRESS LOGISTICS NETWORK: In order to sustain the competition the joint venture company would have to look at new avenues to generate revenue so that the company maintains its probability and is able to provide the services to both its customers. The freight forwarder arranges for the shipment of goods as an agent for an exporter.6. we must realize that such expansion and improvement in such services can not only be achieved by investments in improvements in our infrastructure and service within India but also is directly dependent on the fact that the XPRESS LOGISTICS. freight forwarding and consolidation and at the same time look into expansion of its core business which is providing Domestic and International courier and logistics service. For the courier business to expand in India. collection of newspaper subscription. Though new services may be added the capital required to invest in new products and service would have to come from the profits generated from the core business which is the courier business. door to door cargo handling (Domestic and International). reduced costs. The process of developing COSMAT began in 2000. consular and licensing requirements. Even in large companies. To start with.trade mechanics. One estimate is that logistics account for between 19 and 23% of the total cost of the finished product sold internationally. more economical quantities. reduction in losses from pilferage and damage and simplified handling of international shipments. labouring requirements and export restrictions. rates and related charges. along with SUKAM XPRESS in house technology professional created an empty shell . ware-housing. Besides arranging for complete shipping documentation. This is one of the major way of saving freight charges and the customer is the ultimate beneficiary. Consolidators: are people who consolidate shippings into larger. the information technology consultant Kaushik on this project. The agent also offers shipping insurance. with active export departments capable of handling documentation. a forwarder is useful as the shipment coordinator at the port of export or at the destination point. the full service freight forwarder provides information and advice on routing and scheduling. One of the most important innovation in ocean shipping and air-freight in reducing and controlling high costs of transportation is the use of containerization. packing and containerisation and ocean cargo or air freight space. Shipping and air-freight costs are an important factors in a product price in export market and the transportation mode must be selected in terms of the total impact on cost. Containerized shipments in place of traditional bulk handling of full loads have resulted in intermodal transport between in-land points. explored the options and created a solution. The objectives drawn were to inter-connect LAN and EDP and subsequently all remote offices. postimplementation and course corrections and tuning was done to ensure that technology installed was giving the desired outputs. was operating out of one office. COSMAT. giving the customer a complete solution. to extend international COSMAT connectivity to all locations for faster and reliable data transfer. thereby. The result was that Sukam Xpress got the solution to its needs in terms of wide area network technology coupled with the requirement of local area network technology. The background was that SUKAM's regional offices were having independent LAN and none of the other offices were computerised. Delhihead-office and data transfers were on STD and local dial-ups. The PC's were limited in number and inter-LAN connectivity was not available. The implementation of the technology was analysed. The network was analysed on a periodical basis to determine whether the needs of SUKAM EPRESS were being met by .encompassing all the locations that SUKAM serviced. The Consultants analysed and studied the requirements and integrated solutions that would fit the needs. The users feedback was sought and the solution was tuned to the needs of the user to ensure all user requirements were met. Slowly the shell began to fill out and a system began to take shape. It was shown to each of the teams. They in turn brainstormed and sent suggestion back. the international track and trace system. The management looked at the suggestions. to inter-connect all locations on e-mail and to support SUKAM's vision to utilising to servicing its business needs. Its also makes the arrangement to the next destination even before it reaches the intermediate destinations. Cosmat allows Custom formalities to be completed even as the consignment is on its way. one of the first e-commerce companies in India. .installed technology and steps were initiated to revise the needs as when as the opportunity arose. Calcutta. According to the top management it has enabled them to introduce new products As a step towards this. Such heavy investment in Technology actually paid off . where packages were sorted and reloaded for their destinations. SUKAM tied up with Rediff on the Net. Bangalore. This led to a process of determining future needs and a plan was worked out to resize and demand of applications and user. Apart from Cosmat another factor has been excellent in house communication. voice date multiplexers. Hyderabad & Erode which had the largest number of flight connections were chosen as Hubs. Madras. Most of the employees in the Co are connected by electronic mail allowing for communication along cities but more importantly across layers . SUKAM forged alliances with e-commerce company. Before COSMAT could be put in place the company first developed standardised routes for consignments covering its 242 locations all over the country. This plan was supported by both the consultant and SUKAM's system personnel which involved hi speed lines (ISDN) VSATs. Delhi. Mumbai. Seven large cities. For instance. and associated communication equipment to ensure SUKAM's future needs to resources were met.keeping top management in touch with the employees in the field. there are a number of points/service related issues which the new company. Billing is also computerised there by saving. SUKUM XPRESS would have to concentrate upon: . where customers are put on line to SUKAM offices and have instance access to flight and shipment schedules. The company has also introduced the SUKAM Collect which allows the consignee to pay for the consignment. . City Bank's credit card division is one such client. etc. the company recently introduced Power Xpress. The two major points which the Overseas XPRESS LOGISTICS stations must look into are: a) Services on par with the service standard of existing competition b) Pricing structures on par with the competitors. both SUKAM as well as the client's valuable time. allowing the customers to in turn plan their consignments. But apart from the ability to introduce new products. This image needs to be altered to one befitting a market leader represented by a worldwide network. Currently the market in India with the exception of Far-East based multinationals consider the worldwide XPRESS LOGISTICS network to represent a small to medium sized courier company specializing in services to and from SIN. To become a market leader represented by a worldwide network. price . HKG & TYO.For instance. the biggest pay off will come in when the customer starts seeing couriers as more than just against to deliver his goods. This will enable SUKAM XPRESS to capture a major share of the courier market in India. (iii) SUKAM XPRESS will stress upon the need to have better and more cost-effective transfer charges within the network. also have a direct financial impact on the image of EXPRESS LOGISTICS. timely delivery to the doorstep of the customer.SUKAM XPRESS would have to push the Overseas stations of Express Logistics to improve upon the service levels. Tokyo. (ii) SUKAM XPRESS in coordination and with the support of the Overseas stations of EXPRESS LOGISTICS will have to work upon the operations systems of the network. cost-effective. prepare global corporate policies in regard to inter agent custom clearance. custom clearances. Hong Kong. Dubai. New York. (i) SUKAM XPRESS would have to ensure on a consistent basis a 24-48 hours delivery ex-Delhi and Bombay to London. These operating systems would mean better. Infact. delivery and local courier charges. Singapore. invest in infrastructure. trouble-free. SUKAM XPRESS. in the longrun it would be advisable for the network to function and operate on a free-to-free basis and thereby simplifying the accounting procedures. We would like to highlight a few of these issues which if not taken care of could jeopardise not only the future of the new company. but. faster. . correct and safe dellvery of small and big consignments. proper storage/warehousing facilities and final prompt. Surat. it is important the SUKAM XPRESS taps the untapped market potential of cities like Panipat. Pune.(iv) SUKAM XPRESS in arrangement with EXPRESS LOGISTICS. CONCLUSION: From the above Points – for – consideration we may safely conclude that: (i) As is evident. Cochin. SUKAM XPRESS India initially will have to rely heavily. Jaipur. Aurangabad. there will be no dearth of business coming in. Tirupur. . 7. To prevent. it is important that proper security systems are devised and evolved. Firozabad. As a new entrant in the freight forwarding/warehousing/consolidating market. Agra. once the logistics specialisation of SUKAM XPRESS has been established and recognised by the industry and the customer. it will take time to gain the confidence of the customers. if not entirely on domestic sales as far as the courier market is concerned. Moradabad. for revenues to pay for the operating costs and incomes. However. (ii) For freight forwarding and logistics business. Singapore will work upon providing an insurance package to the customers for their valuable shipments. Coimbatore. loss/pilferage/damage/theft to the shipments. a rationalisation of transfer and local courier charges. This will require the investments in the form of Regional hubs. in terms of a ' ONE-STOP SHOP FACILITY'. dedicated hub vehicles and other infrastructure. . in the form of a USP which no one else is currently offering i. and a minimum mandatory level of exports from all agents. a national computer network. feed back (status information)..(iii) We would have to introduce value added service. (v) Until substantial progress is made in terms of the EXPRESS LOGISTICS worldwide policies governing matters. if not exceed the completion vis-à-vis delivery time.e. (iv) Service levels will have to be upgraded to match. we do not feel it feasible to expand our international business. as diverse as operational responsibilities.