Reference no: EM132078129
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.