BY Gajendra Behera.

Definition of logistic. Definition of 3PL. Objectives of 3Pl. Advantages and Disadvantages of 3PL. Key Drivers of 3PL. Services provided by 3PL. 4th Party logistic. How 4th party differs from 3pl. 4 PL set up Role of 4PL Future of 4Pl. Conclusion.

LOGISTICS

Logistic is the flow of goods, services, information, etc from point of origin to the point of consumption (at a specified time ) to meet the requirement of consumers. It involves integration of information , transportation, inventory, ware housing, material handling, packaging and occasionally the security. Logistic is the channel of supply chain which adds the value of time and place utility.

Third Party Logistics

Third-party Logistics is simply the use of an outside company to perform all or part of the firms materials management and product distribution function.
-- Simchi-Levi

OUTSOURCED OPERATION

FIRMS

TRANSPORTATION

WAREHOUSE

FIRMS FIRMS
IN-HOUSE LOGISTIC FIRMS IN-HOUSE LOGISTIC FIRMS DEPARTMENT IT SUPPORT OTHERS

3PL

IT SUPPORT
SC INTEGRATION

OTHERS

WAREHOUSE

TRANSPORTATION

OBJECTIVES OF 3PL
Reduction in Risk and Liability. Value added services to Customers. Source of process improvement. Wider market coverage.

Key Driver For 3rd Party Distribution

Cost factor . Service factor . Organizational factor . Physical factors.

PAST V/S PRESENT LOGISTICS EXPENDITURES FOR 3PL

80% 70% 60% 50% 40% 30% 20% 10% 0% North America Western Europe Asia-Pacific Latin America

2006 2009-2011

Advantages
Reduction in Logistic Cost By 7 to 10% Reduction in Logistic assets By 20 To 25%. Reduction of the order cycle time. Focus on core competency Improved efficiency, service and flexibility Industry-specific application buildto-order systems and e-merchants.

Drawbacks of 3PL
Still requires top management's time to manage relationships & resources Unable to cover full range of SC requirements e.g. logistics information, tech development... Lack of shared goals... Loss of control. Impact on in-house workforce

TYPES OF 3PL PROVIDER.

TRANSPORTATION BASED WAREHOUSE/ DISTRIBUTION BASED. FORWARDER BASED FINANCIAL BASED INFORMATION BASED

Factors for 3PL Selection

Core Competencies of 3PL Provider Cost of 3PL Services Information Handling Capability / Compatibility Breadth of Services Provided Past Experience of your Industry Technological Competencies of the Provider System Flexibility & Capacity Safety & Insurance Cover / Programs Geographical Location & Spread Company Reputation Responsiveness & Service Quality Management Structure & Quality of Workforce

SERVICES PROVIDED BY 3PL

VENDOR MANAGEMENT INVENTORY ORGANIZATION (V.M.I) WAREHOUSE INFORMATION SYSTEM (W.I.S). FREIGHT FORWARDING SERVICE PROVIDER (F.F.S). CUSTOM HOUSE AGENT (C.H.S) SOFTWARE APPLICATION SERVICE PROVIDER (S.A.S.P).

ROLE OF F.F.S AS 3PL ORGANISATION

It is outsourced for a total cost effective and time effective supply chain activities. It provide service for both forward and Reverse logistic. Aware of rule of the country in in total global scenario . Perfection about visibility of the consignment with knowledge domain of GPS , RFID , etc. Awareness of IMO codified hazardous Goods . Aware of EPA and Green planet (environment protection act.

Software application service provider

Web based Order process -ing System

Customer Places order

WEBSITE

ONLINE BANKING

Material Procurement department

DISTRIBUTION CHANNEL

software Application Service Provider

INWARD STORES

GLOBAL SUPPLIER

Indigenous Supplier

LOCAL SUPPLIER

F.G STORES

FINAL ASSLY

Warehouse Information System

Warehouse Information System -WIS has registered the name, acronym originated from WMS. It is an important part of the supply chain and provide directed stock rotation, intelligent policy of picking , automatic consolidation and cross-docking to maximize use of valuable warehouse space . The system also manages and optimizes the willingness to "putaway or placed in the warehouse, based on real-time information about the status of the use of shelves. Information technology in the warehouses, including the logistical systems of information, allow better integration between activities in the supply chain. However, alone does not solve problems, but changing organizational patterns. The stores must have logistics systems that have information systems in order to take care of customer requests, refer them to the suppliers and give instructions authorizing the movement or shipment of material. Information systems facilitate the planning and controlling the supply of services, and its efficiency a key to the smooth operation of logistics systems, so for the proper operation of warehouses

3PL Providers

FOURTH PARTY LOGISTIC

Fourth party logistics is an external organization who is able to provide a user with an overall supply-chain-wide solution by incorporating the resources and expertise of any number of third parties to best effect. It will be involved in both the design and the management of the clients logistics system and will act as a coordinator for many different types of services , which may include distribution, information system, financial services, etc.

O R G A N I Z A T I O N

3PL Providers

4PL Provider

IT Service Providers

3PL Providers

Models of 4PL A) Lead logistics provider: The 4PL provider acts as an in house freight management company, it might or might not have a role in the selection of 3 PL partners. It takes care of transport invoicing and the monitoring of the performance of the 3 PLs. B) Solution Integrator: In this variant of the model, the 4PL acts as the integrator of various 3PLS and as a single window for freight negotiations, 3PI selection and freight management on behalf of its client. C) Industry Innovator: Under this model the 4PL uses its expertise and resources to create a solution not for any single client, but for offering 4PL services to a number of clients in an industry.

LOGISTICS OUTSOURCING MODELS

Advanced Services Lead Logistics(4PL) Value-Added(Third Party logistics)

Basic services(Logistics Service Providers)

Insourcing

4PL : differs from 3PL...

The 4PL organization is often separate entity established as a joint venture or long term contract between a primarily client and one or more partners. It acts as single interface between the client and multiple logistics service providers. All aspects of the clients supply chain are managed by the 4PL organization. It is also possible for a major 3PL provider to form a 4PL organization within existing structure

4PL Set-up
Primary Client Contribution
Start-up equity Assets Working capital Operational expertise Operational staff
Primary Client's)

3PL Providers Contribution:

Transportation services Ware house facilities

Partners Contribution:
Set-up equity Logistics strategy IT development Customer service management Supplier management Logistics consultancy Best practices

4PL Organization

Partners

The role of a 4 PL agency

Interacting with the marketing function to
understand the desired availability of products at different geographical locations at different times. Interacting with manufacturing function to understand the production scheduling. Depending on A & B, defining the shipment size. Hiring of godowns (Bonded or otherwise) at different geographical locations. Planning and establishing the logistics hubs which are large and modern warehouses.

Hiring of Freight Forwarders and Custom House Agents in cases of exports and imports. Doing all the above for multiple clients to reduce the cost to individual manufacturing organizations. Hiring the services of 3PL agencies

Understand the transport/handling needs within the premises of the manufacturing organization and outsourcing these to small transporters.

SERVICES OFFERED BY 4PL.

A total supply chain perspective; Visibility along the supply chain; Measurement along the supply chain (cost and performance). Open systems; Technical vision; Flexibility.

Advantages of 4pl.

Addressing strategic failures.

-minimizing the time and effort spent on logistic by the user. - a single point of contract for all aspects of management. - It can source different specialist with best in class credentials.

Addressing service and cost failures.

-freeing the user company's capital for core/ main stream use by selling assets. - the continuous monitoring and improvement of supply chain process, performance and cost .

Addressing operational failures.

- it is easier to eradicate old industrial relations issue. - More flexible working environment can be established.

Additional benefits.
-provision for supply chain accountability for achieving desired performance , -the provider assumes risk on behalf of the user in return for a share of profit.

FUTURE OF FORTH PARTY LOGISTIC

The 4PLs are thus basically specialized consulting organizations not owning large resources but having a focused team of experts. Even the interaction with 5 PLs would be done by 4PLs.

FIFTH PARTY LOGISTIC

1.TRANSPORTATION Courier, Air, Rail, Road, Inland Waterways, Ocean or Multi-modal - Service provider details - Services offered - Market rates - Different routes - Transshipment points - Transit times - Insurance coverage's - Imbalance of containers

2. TECHNOLOGY - Global positioning system - Swipe card system - Bar coding -Packaging 3. IT - Specialized software's (e.g.. Fleet Management) -Tailor-made software's. 4. STATUTORY INFORMATION - Road permits - Central Govt./ State Govt. taxation - Overloading rules - Pollution control rules

5. REFERENCE DOCUMENTS - Cabot age laws - Service tax manuals - Concor manuals -ICD/ CFS manuals 6. All other information regarding host of related subjects - Banking and bill discounting - Financing - Warehousing

CONCLUSION

55% companies use 3PL services in India one form or the other compared to 75% globally 3PL And 4pl are the future, should be seen as a support to corporate growth Close to 60 % of 55% uses transportation and custom clearing & forwarding Of the rest 45%, 75% do not use 3PL services because they are not sure of providers capability Company should focus on outsourcing 3PL services like inventory management, order processing, labeling & packaging and reverse logistics Use of IT in 3PL services is very low both by user and provider

3PL and 4PL providers feel that Users are unwilling to share information Do not show commitment towards the relationship. Do not want to share rewards Do not show interest in continuing the relationship Contracts are used more to avoid risks rather than to develop relationship Today in India, the 3 PL concept is getting established, the 4 PL agencies are just coming up and 5 PLs are on the horizon.