Plans for logistics company certification
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Plans for Logistics Company Certification. Contents. 1. Progress to date1 2. Certification criteria (draft) 2 3. Certification via strategic alliances (draft) 21 4. Certification procedures 23 5. Future action plans 26. Progress to date.

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Plans for Logistics Company Certification

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Plans for logistics company certification

Plans for LogisticsCompany Certification


Contents

Contents

1. Progress to date1

2. Certification criteria (draft) 2

3. Certification via strategic alliances (draft) 21

4. Certification procedures 23

5. Future action plans 26


Progress to date

Progress to date

  • Prepared Logistics Company Fostering System aimed at advancing the logistics industry (August 2004)

    * Newly adopted system aims to foster and certify qualified logistics service providers

  • Goods Distribution Promotion Act amended in January 2004 for adoption of the certification system (effective Jan. 2006) and laid the legal foundation

    ꊱ Certify companies providing comprehensive logistics services

    ꊲ Certification criteria and lower regulations stipulated as joint ordinances of concerned authorities

    ꊳ Give priority to major logistics facilities, prepare foundation for financial and other supports

  • Drawing up certification criteria and enforcement regulations in preparation for full adoption of the new system beginning 2006

    - Joint ministerial ordinance being drafted: task forces set up and working on the draft (public hearing held on 29 July 2005)

1


Comprehensive logistics company certification criteria draft

Comprehensive Logistics Company Certification Criteria (Draft)

1. Basic directions

■ Do away with simple logistics service providers and focus on companies providing more comprehensive services

■ Prepare separate criteria for transport-oriented, facilities-oriented, and service-oriented companies reflecting the diverse features of comprehensive logistics companies

■ Certify strategically allianced companies in order to induce participation of competitive small and medium sized companies

ㅇ Companies applying for certification are to be evaluated in 3 categories (transport, facilities and service perspectives) with the highest of the three scores becoming the candidate company’s final evaluation point.

2


Certification requirements draft

Certification Requirements (Draft)

2. Certification requirements in general

■ Set basic features of a comprehensive logistics company as essential criteria

■ Diversify the evaluation categories to ensure that special characteristics of comprehensive logistics companies are taken into account and to ensure that only competitive companies certified

Logistics Company

Diversity

Corporate Scale

Potentials

Networks

Sales structure

Clientele

Investments

Assets

Sales

3rd party logistics

Globalization

Informatization

Stability

Human resources

Management

3


Certification requirements draft1

Certification Requirements (Draft)

3. Requirements

■ Minimum requirements to qualify as comprehensive logistics company

■ Companies not meeting the minimum requirements are not eligible for certification

〔Logistics businesses〕

■ A company operating at least 3 logistics businesses with transporting, which has the highest outsourcing rate, and logistics facilities operations as core businesses

* Logistics sales should account for min. 3% of the total sales or be at least 3 billion won

〔3rd party logistics sales〕

■ Logistic company aiming at 3rd party logistics

■ 3rd party logistics sales should account for min. 20% of the total logistics sales

4


Certification requirements draft2

Certification Requirements (Draft)

4. Evaluation categories for certification

■ Average points for diversity, corporate scales, and growth potentials should meet minimum required points

■ Different categories will be weighed differently according to the characteristics of each company

* e.g. Growth potential weight more heavily than corporate scales for service-oriented companies

5


Certification requirements draft3

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

■ Set perfect scores for each category

- Ceilings set so that excellence in any one field will not be over estimated ⇒ ratios to be calculated within the perfect score range

- Top 20% of the 110 logistics companies surveyed for polls and audited by the Financial Supervisory Commission to be set as the range for perfect scores

* However, large scale categories such as service-oriented category shall be set at top 40% with separate scoring standards applied

6


Certification requirements draft4

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

(1) Diversity standards: Networks, sales structures, clientele

〔Networks diversity〕

* Hubs where the sales were generated are recognized as hubs

* Multiple hubs in a single region are permitted

7


Certification requirements draft5

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Diversity in sales structure〕

* Sales for each business type needs to be at least 3% of the total sales or at least 3 billion won in total

* Divided into 11 smaller categories in the annexed table under the Enforcement Decree of the Goods Distribution Promotion Act

8


Certification requirements draft6

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Clientele diversity〕

* Only long-term contract (min. one year) clients apply

* Minimum 5 clients are guaranteed when sales to the largest clients is 20% or under.

* Limited to sales in the logistics sector only

9


Certification requirements draft7

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

(2) Structure and scale of companies: capital, assets, sales

〔Capital volumes〕

* Scope of capital: paid in capital + funds that are capital in nature and that are actually invested as they appear in the settlement of accounts

10


Certification requirements draft8

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Asset (transportation) volumes〕

*Includes vessels and aircraft

* 300DWT vessels, 1 ton of aircraft loaded cargo calculated as equivalent to 1 motor vehicle

* Values of motor vehicles determined based on vehicle sizes (see p. 8)

* Owned & secured: owned & operated is owned, leased is secured

11


Certification requirements draft9

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Asset (facilities) volumes〕

* Additional points awarded according to areas and usages

⇒ 1.0 pt for delivery centers, general warehouses & other building areas

⇒ 0.5 pts for storage yards, garages, container yards, other land areas

⇒ 1.0 pt for warehouses in cases of CFS and 0.5 pts for containers yards

* Owned and secured: self-owned is owned and long-term lease is secured

12


Certification requirements draft10

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Asset (misc. logistics assets) value〕

* Containers, pallets, loading/unloading equipment, automation equipment, etc.

⇒ All tangible fixed logistics related assets not including transportation and logistics facilities

13


Certification requirements draft11

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Sales volumes〕

* Only pure logistics sector sales apply and goods sales are excluded

* 3rd party logistics: Volume consigned to 3rd party shippers, consignors or goods owners (including logistics companies) based on long-term contacts (min. 1 year). Subsidiary or affiliated companies under Article 11 of the Monopoly Regulation and Fair Trade Act do not qualify as 3rd party companies.

* Turnkey consignment sales: contracted sales that provides integrated logistics services combining 2 or more of the logistics service businesses among 3rd party logistics sales

14


Certification requirements draft12

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

(3) Growth potential based: 3rd party logistics, globalization, informatization, stability, human resources, management quality

〔3rd party logistics – Growth potentials〕

15


Certification requirements draft13

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Globalization – Growth potentials〕

* International investments: Joint venture investments included

* International sales: includes all overseas sales by domestics or overseas companies

⇒ In case of joint ventures, only the portions for actual investment shares are recognized

16


Certification requirements draft14

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Informatization – growth potentials〕

17


Certification requirements draft15

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Stability – Growth potentials〕

* Rate of return: average value of most recent 3 years

18


Certification requirements draft16

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Human resources – Growth potentials〕

* Logistics related license (logistics manager, CPIM, CPM, transport related technicians, customs broker, etc.), master’s degree or higher in related fields (logistics, transportation, etc.)

* Make assessments to see whether company provides training and their performances

19


Certification requirements draft17

Certification Requirements (Draft)

4. Evaluation categories for certification(cont.)

〔Quality management – Growth potentials〕

* Measure company’s business processing qualities via official certification

* Post-certification inspections are conducted to ensure that quality meeting the certification criteria is maintained

20


Certification strategic alliance

Certification & Strategic Alliance

  • Basic concept of strategic alliance

    - One company cooperation with another company to strengthen competitiveness

    - Used as pre-stage to inducing friendly mergers among companies

  • General methods of strategic alliance

    - Contracting: Companies contracting with each other with aim to expand their services and service areas as well as joint marketing activities

    - Exchange of shares: exchanging shares with companies as a way of entering into strategic alliance

21


Certification strategic alliance1

Certification & Strategic Alliance

  • Certification requirements for companies participating in strategic alliances

    - Requirements: same as general logistics companies (p. 4)

    - Strategic alliance requirements

    * Number of participating companied: maximum 5

    * Alliance methods: contracting or share exchanging (undecided)

    * Alliance period: effective for at least 3 years

    * Minimum points requirements for participating companies: minimum 20 certification evaluation points

    * Minimum 3PL priority requirement: 20% or higher

    - Operation requirements

    * Use of joint trademarks

    * Sharing of logistics information system

    * Submission of combined logistics accounting reports

22


Certification procedures

Certification Procedures

  • Certification Evaluation Process

23


Certification procedures1

Certification Procedures

  • Certification Evaluation Process

    〔Certification Committee〕

    - Summary: Run jointly buy the relevant ministries

    - Responsibilities: Designate certification authority, make certification decisions

    〔Certification authority and procedures〕

    - Designate an organization that will be in charge of the certification system (Korea Transport Institute expected to be designated)

    - Set up a certification center within the certification authority (operational funds to be provided by the government)

    〔Run a pool of certification committee members and certification procedures〕

    - Certification authority to compose a pool of certification committee members (50 logistics related experts)

    - Sub-committees composed of about 5 members from the pool to undertake evaluation of individual companies

24


Certification procedures2

Certification Procedures

  • Certification Evaluation Process

    〔Evaluation Process〕

    - Document and on-site inspections

    - Certification sub-committee makes report of evaluation outcomes to the certification authority

    - Certification authority placed those outcomes before the Certification Committee

    - Certification Committee makes final decisions

    [Scheduled Inspections]

    - Annual inspections are conducted to determine whether the company is qualified maintain its certification status

    - Certification is canceled when requirements are not met

25


Future action plans

Future Action Plans

1. Legislate Joint Ministerial Ordinance

- Notification: October 2005

- Ministry of Justice deliberations: Early November 2005

- Proclamation: November 2005

- Date of enforcement: 1 January 2006

2. Certification Center and preparations for enforcement

- Establishment of certification center: October 2005

- Develop Operational Guidelines for Certification Center: October ~ November 2005

- Develop and open Certification Center website: October ~ December 2005

- Final presentations on comprehensive logistics company certification system given: December 2005

26


Thank you

Thank you!

27


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