AIMAN AAMIR SYED 2013033

MEHAK MUMTAZ 2013187

MISBAH ABBASS 2013195

BUSINESS LOGISTICS
STRATEGY
Industrial Chrome Chemicals (ICCL)

Contents
Executive Summary .2
1
Introduction..................................................................................................................3
2. Role of Supply chain management:.......................................................................4
3. Supply chain issues...................................................................................................6
4. Role of logistics in supply chain management.......................................................6
5. Relationship type and intensity...............................................................................7
6. Third party logistics.................................................................................................8
7. SMEs in Pakistan 9
8. Distribution............................................................................................................10
9. Supply Chain Technology 12
10. Transportation 13
11. Transport Management Planning Activities 15
12. Conclusion.............................................................................................................16
References...................................................................................................................17

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Executive Summary
This report depicts an analysis of a manufacturing based company Industrial Chrome
Chemicals (ICCL) implementing all the concepts under the umbrella of Business
Logistics Strategy course. A theoretical model is also explained to show the relationship
between the suppliers and buyers. Moreover, the concepts like Role of Logistics in
Supply chain, Supply chain relationships, technology etc. are being covered where
applicable for the companys daily operations with reference to logistics. A conclusion is
given at the end of the report which concludes the idea that how efficient is the company
is in applying such operations to expand its scope. Moreover, the report sheds light on
the idea that how SMEs in Pakistan work. Finally, a set of recommendations and
suggestions are given to the manufacturing company based on our analysis of its daily
routine activities with reference to logistics.

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1. Introduction:
Industrial Chrome Chemicals (ICCL) is a chemical manufacturer located in Gadoon
Amazai, near Topi, KPK. It produces Basic Chromium Sulphate, a greenish powder, is a
very important chemical used in leather tanning. ICCL was founded in early 1990s, and
is therefore one of the earliest produces of Basic Chromium Sulphate. Since very few
companies operating in Pakistan produce this chemical, ICCL serves in a very
opportunistic industry.
The firm uses the same production technique since it was formed more than 20 years
ago. The process involves 4 raw materials to produce Basic Chromium Sulphate where
each raw material is procured from 4 different suppliers.
Following figure shows the type of suppliers and places from where ICCL procures its
raw materials.

Suppliers

Local

ChinaSodium
Sulphate

Foreign

TajikistanSodium
Dichromate

Amber
ChemicalsSulphuric Acid

Fig. i. supplier selection; local and foreign industry

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Raffan Maze
ProductsDextrose

ICCL has no contract with any of these 4 suppliers and orders in bulk. From its local
suppliers, it orders 20 tonnes which are delivered via trucks to them while its foreign
suppliers process and deliver the necessary raw materials via ships through the practice
of Letter of Credit which is a form of a guarantee between banks for the payment.

2. Role of Supply chain management:

Supply chain focuses on the management of raw materials, information or data and
capital flows as well as the cooperation amongst the companies along the supply chain
while taking goals from all three dimensions of sustainable development, i.e., economic,
environmental and social perspectives, into account which are based on the needs and
requirements of the customers and stakeholders. (Seuring and Mller, 2008)
The introduction of efficient and effective supply chain increases the productivity of any
organization and increases a chance for a successful growth considering that the
organization is a small medium enterprise. The probability of it growing is more if taken
into consideration of improving the general practices of the different departments
combined together and working in an efficient way.

Fig.ii view of integrated supply chain

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There are certain things that can be controlled which are within the bounds of the
organization which are the internal factors on the contrary there are five major external
forces which seem to drive the rate of change and shape our economic and political
landscape which has a direct effect on the performance of any organization.
1. Globalization
2. Technology
3. Organizational consolidation
4. The empowered consumer
5. Government policy and regulation
Industrial Chrome Chemicals is small to medium organization located in the province of
KPK in Pakistan and one of the very few companies in the chemical industry. The
external forces have a direct effect on the functioning of the organization as day by day
the pattern of the consumer behaviour is changing. This depends on the shifting trends of
the world in context of technology. ICCL is facing troubles in coping with the trend as it
is working mostly on the traditional machines that started off in the early 90s now it is
losing the essence of it since it is hard to opt for new machines due to them being very
expensive. The workers do not feel comfortable in adapting a new system and for the
organization it is difficult to train their staff which is already working in remote
conditions.
There are few companies in the area of Gadoon which are functioning in a similar
manner as ICCL therefore there are less chances of a collaboration or partnerships. The
factor of organizational consolidation used to enhance the operational efficiency by
reducing redundant personnel and processes but in the case of ICCL there are not many
options to share the burden with in the first place so the company suffers with working
on its own and managing the operations on its own.
The empowered customers refer to the power of customers which means that the success
of the product depends on the usage of the customers and their response towards the
product. The companys main attraction is towards the furniture industry which uses the
chemical for leather tanning and thus, the trend of using furniture is changing day by
day. Smart furniture and environmental friendly products are being encourage thus
reducing the usage of leather and wood. This reduces the overall usage of the chemical
produced as the trend does not allow it. The day by day awareness of social

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responsibility amongst the consumers to shift the demand drastically resulting in the
usage of different products.
The government of Pakistan changes over time thus creating a national problem for
industries to function. Although, the KPK government is quite supportive of the
companies working in the area of Gadoon and encourages the companies to flourish and
make name for the government in power. That somewhat pressurises the owners to
invest more to produce high quality product to export and make profits not only for the
organization but the government itself.

3. Supply chain issues

During the data collection there were some issues identified that affects the supply chain
of ICCL. Some of the issues are as follows:
Supply Chain Networks:
The network facilities and supporting transportation is important factor in the supply
chain management. The location of the factory is in KPK so sometimes the delay occurs
in the confinement due to external factors. Creating a massive delay in the production of
the chemicals because they acquire the core elements from different suppliers.
Inventory Deployments:
The inventory sometimes is more than the demand needed, which showed the lack of
check and balance and low performance of the inventory management.
Cost/Value:
Core elements are comparatively expensive considering that the demand is changing
through time. The company needs to focus on choosing efficient suppliers and focus on
optimization techniques. The most popular one is linear programming which allows the
company to use its resources in a good budget and in an efficient manner.
Performance Measurement:
ICCL lacks in keeping track of the employees performance as there is no automated
system and also, lack of departments as it is a small company.
Supply chains are an important determinant of capital consumption since they have a
direct impact on the working capital, inventory levels, and other assets such as
warehouses and many more. Efficient and effective supply chains can free up valuable
resources and improve customer fulfillment systems so as to increase return on
investment or assets and improve shareholder value.
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4. Role of logistics in supply chain management

According to the Council of SCM Professionals regarding the term logistics is that it
is that part of the supply chain management process which plans, and then later on
implements, and reins the efficient, effective flow and storage of goods, services, and
related information from the starting point to the point of consumption in order to meet
customer necessities. Logistics management responsibility is to add place, time, and
quantity utilities to products and enhances the form and possession utilities added by
manufacturing and marketing.
Logistics has an important relationship to manufacturing, marketing, finance, and other
areas of the organization. Logistics managers are responsible for a number of important
activities, including transportation, inventory, warehousing, materials handling,
industrial packaging, customer service, forecasting, and others.
In terms of ICCL the establishment of a proper logistic department is lacking and
therefore the practices of the transportation and logistics are not very prominent. The
logistics activities that were observed in the organization are as follows:
1. Transportation: suppliers send of the raw materials to Gadoon mainly on trucks.
2. Industrial packaging: the packaging of the finished goods is essential so that the
product is delivered safely.
3. Materials handling: the inventory management from the point of receiving the
materials or the core components till the finished product.
4. Procurement: buying off of the raw materials and day to day expenses.

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Fig.iii. logistics plan

5. Relationship type and intensity:

Industrial Chrome Chemicals has a logical, traditional and a more natural kind of
relationship typically known as a vertical relationship between its suppliers, distributors
etc. this vertical relationship Industrial Chrome Chemicals has with its suppliers,
customers etc is the most recurrent way for innovation in SMEs and leads to high
performance in those SMEs where it is focused upon (Brunswicker and Vanhaverbeke,
2011)
The intensity of the relationship Industrial Chrome Chemicals has with its four suppliers
is at arms length that is the firm and the vendors have a transactional relationship. In
this kind of relationship, both the parties are in it for themselves and are not
collaborative or strategically allied.
The following figure gives a clearer picture of the transactional relationship along with
three other types of relationship intensity categories.

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Fig. iv. (Langley Jr., C., 2001)

6. Third party logistics

3PL or Third Party Logistics are defined as those suppliers that are external to the firm
and perform either a part of the logistics functions or all of it for that firm. These 3PL
help to provide solutions to the problems faced by a firm where they lack a competitive
advantage.
In order to remain a strong candidate in the competition, changes need to be made by
improving various business processes and organisational structures. Therefore the need
to outsource to a capable company, 3PL, becomes necessary. This not only helps to
reduce costs but also aids in increasing customer satisfaction.
Third Party Logistics are also evolved from the notion of long term mutual benefits by
partnering to strengthen core competencies (Rabinovich et al., 1999)

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There are five different categories of Third Party Logistics:

1.
2.
3.
4.
5.

Transportation based
Warehousing/distribution based
Forwarder based
Financial based
Information based

Amongst the above mentioned 5 categories, Industrial Chrome Chemicals outsources its
transportation to 3PL providers since the task of transporting chemical is not the
competency of the firm. This way a more repetitive, recurring, operational activity can
be focused by another firm and Industrial Chrome Chemicals can keep its focus on
solely manufacturing the chemical and utilising their expertise on it.
The 3PL used by Industrial Chrome Chemicals is called Goods Transport Company that
transports the manufactured chemical to their clients using trucks. An average monthly
order is 30 metric tonne. Since one order equals 1 metric tonne, 30 orders are received
and processed on average in a month.
The leather producing factories who are in need of the chemical are situated in Kasur,
Sialkot, Lahore and Karachi.
The Goods Transport Company help Industrial Chrome Chemicals by not only reducing
their costs and help save resources by performing the transportation function, but also
help them in terms of improving order performance, lowering working capital and
increasing customer satisfaction.
When forming a relationship between 3PL and the firm, certain expectations should be
understood by both the parties and should, therefore, be met during their partnership.
According to the Third Party Logistics provider:
1. There should a relationship that mutually benefits both the sides.
2. Trust amongst the parties and open information sharing should be maintained.
3. Fairness in pricing and fiduciary relationship should be preserved at all times.
Similarly a firm expects some expectations from its external supplier, and they are:
1. Excellent performance and efficient service should be provided.
2. Innovation and solution providers.
3. Deep industry knowledge and aligned with their customer strategy.
7. SMEs in Pakistan:

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The company we chose for our project comes in the category of Small and
Medium Enterprises. SMEs in Pakistan seem to be lagging behind in
successfully implementing the supply chain practices in their operations. Small
and Medium enterprises (Munir, 2016) are a medium for supplying goods and
services to organizations operating on a larger scale. The advantages of the
SMEs sector include fostering employment of the country where there is a high
ratio of unemployment. (M. Irfan, 2014)The play a crucial role in the overall
development of the country including economic growth and increase in Gross
Domestic Product(GDP).

8. Distribution
It is the movement of goods and is one of the main sources of profitability since it not
only impacts the clients but also affects the costs as well.
The distribution of each firm is different, some focus on direct delivery, while some
highlight the need to establish Distribution Centres (DCs). Following figure represents
the two different kinds of accumulation.

Fig. v. (Gibson, Brian, 2011)

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ICCL has no warehouses or DCs therefore they undergo the use of the direct delivery
which has no accumulation and hence zero inventory costs.
The firm has outsourced the transportation function to external party, Goods Transport
Company, and which follows a particular set of route of their own for increasing
efficiency and reducing delivery time.
If in the future ICCL does in fact decide to establish its own DC then lots of strategic
decisions need to be made before committing to it.
There are a total of three major classifications to distribution planning and strategy
which are capability requirements, network design issues, and facility considerations.
The diagram below shoes the categories in detail.

Fi
g. vi. (Gibson, Brian, 2011)

Since the product flow of the firm is direct, no such considerations are made as chemical
is directly supplied through trucks to the clients (factories producing leather).
Furthermore, the 3PL providers although seem to be more suitable in terms of overall
cost incurred however Perfect Order Index (POI) needs to be maintained. POI refers to
the timely delivery of the product to the right destination at the right time in the right

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condition with right documentation, pricing etc. this index is highly important and
significantly determines the intensity of customer satisfaction.
The company, using the timeliness measure, determines the level of performance of their
external transport suppliers.

9. Supply Chain Technology:

The implementation of innovative and advanced technology (Harps, 2015) can boost the
daily routine operations, inventory and eventually increase the overall revenue. It should
be made sure that it is implemented correctly. The integration of new technology and
processes is significant for the company.
ICCL believes in innovation and flexibility is a core motive in its long-term strategies.
Due to the firm size and being, an SME ICCL does not have a proper setup for supply
chain technology. It will take time as it is working on expanding its operations.
Moreover, Supply Chain Technology will be implemented realizing its need in future
when the firm size is large enough.

10. Transportation:
Transportation is considered to be the backbone of any firm connecting all the activities
from mean to end of a supply chain. It is a pre requisite for the initiation of any step
involved in the completion of any sort of order or conversion of resources into end
products. The main functions and sub-functions are planned in such a way that resource
optimization is achieved with low costs. The service to customers in ensured to be the
best that comprises the idea of business logistics. The synchronization of all the
processes is a must once the system is implemented. (Fair et al., 1981)
The following figures show the different configurations of transportation from the prime
(manufacturing plant in this case) to the ends (customers). ICCI follows the
configuration where goods are transported using trucks requisite by the outsourced
transportation company, i.e. Hoods Transport.

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Source: Transportation Management Optimization

11.Transport Management Planning Activities

Functional Control of Transportation
At ICCI the department which is responsible to tackle the issues related to transportation
is procurement department.
Decision to Outsource Transportation
The firm we chose, ICCI tends to outsource its transportation from Hoods
Transportation Company. It follows 3PL(third party logistics) system and we also know
that 3PLs tend to buy.

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Source: Brian J. Gibson, Ph.D

At ICCL, raw materials are being transported through trucks. Their suppliers are
dispersed meaning that there is no one specific supplier that makes it difficult for
supplying goods.

12.Conclusion
Industrial Chrome Chemicals (ICCL) is a small company so most of the activities that
can benefit the company is neglected due to the lack of resources and capacity. The
logistics department is not that prominent compared to other companies. If the company
focuses on certain areas in context of managing the consumer trend and technological
advancements. The focus should also be towards in selection of suppliers and other
manufacturers. This will create a widespread and more options for the company to
experiment on. The company has a lot of potential as there are very less companies in
Pakistan with the chemical industry background. The investments done on certain
departments will boost up the performance of the company.

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References
i)

Brunswicker, S. and Vanhaverbeke, W. (2011). Beyond open innovation in

large enterprises: How do small and mediumsized enterprises (SMEs) open

ii)

up to external innovation sources?

Harps, L. H., 2015. Supply Chain Technology: Integrating the Old & New.

iii)

Inbound logistics.
M. Irfan, 2014. MEASURING PERFORMANCE OF SMESIN PAKISTAN.
Canada, Leading Edge Human Capital Management Solutions, Inc,, pp.

iv)

1707-1708.
Munir, A., 2016. SMEs need technology upgrade. Business & Finance

v)

weekly.
Rabinovich, E., Windle, R. and Dresner, M. (1999). Outsourcing of
integrated logistics function, an examination of industry practices.
International Journal of Physical Distribution and Logistics Management,
29, pp.353-373.

vi)

Seuring, S. and Mller, M. (2008). From a literature review to a conceptual

framework for sustainable supply chain management. Journal of Cleaner
Production, 16(15), pp.1699-1710.

vii)

J. Gibson, B. and B. Hanna, J. (2013). The Definitive Guide to Integrated

Supply Chain Management. 1st ed.

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