Company Background KEMS LLP is a chemical logistics services company located in

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Company Background

KEMS LLP is a chemical logistics services company located in Chester, Pennsylvania, a suburb of Philadelphia. The company was founded in 1995 by four former managers of a large and diverse, asset-based logistics service provider. The four founders saw an opportunity to specialize in offering service for chemical and related products without investing in transportation equipment or storage facilities. Essentially, they planned to operate as what is called a third-party logistics company (3PL) that would offer services to small- to medium-size companies in the chemical industry. The actual transportation and related services were purchased from asset-based service providers such as motor carriers and railroads. KEMS managed these services for their customers and provided them with efficient and effective deliveries. All four partners had solid but complimentary experience, which enabled them to get started quickly. In addition, they were able to purchase part of the business from their former owners with very favorable terms, which provided a solid basis for their growth.

The first 10 years were challenging as they tried to establish a foothold and an identity in the marketplace. They experimented with a portfolio of services offerings that included consulting, telemetrics to measure available stock levels in tanks on a remote basis, and selected educational services. They were very flexible and operated leanly that allowed them to adjust to the ups and downs of the very competitive marketplace. By 2005, they had established an identity and expanded their service offerings by leasing and purchasing rail tank cars to provide a more competitive service; partnered with a large computer and software company to offer Transportation Management Services (TMS) to coordinate shipments and lower transportation costs. They also purchased a small European company that offered similar services in the EU countries to provide a footprint there and to expand their global operations. KEMS has now successfully integrated the EU company and retained most their employees.

Future Expansion and Opportunities

The four partners are considering expanding their geographic reach either in North America (Canada and/or Mexico) or in South America. One of their advisory board members recommends considering other bulk liquid products that are less risky such as vegetable oil and other liquid agricultural products and stick to their current market area.

1. Based upon the information above and other sources at your disposal, evaluate potential global geographic opportunities for their consideration and make appropriate recommendations.

2. Would you support the recommendation of the advisory board member? Why or why not

Explanation / Answer

1. Geographic opportunities in Canada, Mexico, and, South America

Logistics cost as a percentage of GDP (data till 2005); 9.3, 9.9, 11.9, 15, and, 15.7% for United States, North America, Canada, Brazil & Mexico, South America respectively. As per 2016 Logistics Performance Index, US is ranked 10. Canda is ranked 14. Brazil and Mexico are ranked 55 and 54 respectively. Analyzing the LPI rank data, the organization can expand into Brazil and Mexico. The organization can invest in Logistics & tracing, and, International shipments.

2. Current Market Area

The opportunities for improvement are in Customs and International Shipments. The organization can improve and provide services similar to the services provided by logistics' organizations in Germany, Netherlands, and, Singapore, in terms of Customs. Sweden, Belgium, Hong Kong & China provide better services in terms of international shipments. If the organization can compete in Europe, expanding into Mexico & Brazil can work for the organization's profitability. In Europe, the organization can provide tracking & tracing services in Denmark & Finland. These LPI value for these countries is low in comparison to the United States of America.

The data is from the World Bank's LPI Global Rankings.

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