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 firm’s materials management and

product distribution function.”

-- Simchi-Levi

3PL

WAREHOUSE

IT SUPPORT

SCINTEGRATION

OTHERS

TRANSPORTATIONFIRMS

FIRMS

FIRMS

FIRMSIN-HOUSE LOGISTICDEPARTMENT

IT SUPPORT

OTHERSTRANSPORTATIONWAREHOUSE

OUTSOURCEDOPERATION

IN-HOUSELOGISTIC

FIRMS

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

0%10%

20%30%

40%50%

60%70%

80%

North America WesternEurope

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 – “build-to-

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.

MaterialProcurementdepartment

INWARDSTORES

FINALASSLY

F.GSTORES

LOCALSUPPLIER

IndigenousSupplier

GLOBALSUPPLIER

DISTRIBUTIONCHANNEL

CustomerPlaces order

WEBSITEWeb based

Order process-ing System

ONLINEBANKING

softwareApplication

ServiceProvider

Software application service provider

Warehouse Information SystemWarehouse 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 "put-away 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 LOGISTICFourth 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 client’s logistics system and will act as a coordinator for many different types of services , which may include distribution, information system, financial services, etc.

ORGANIZATION

4PL

3PL Providers

IT ServiceProviders

3PL Providers

Provider

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

Basic services(Logistics Service Providers)

Value-Added(Third Party logistics)

Lead Logistics(4PL)

Advanced Services

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 client’s 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-upPrimary ClientContribution

PartnersContribution:

3PL ProvidersContribution:

•Start-up equity•Assets• Working capital•Operational expertise•Operational staff

•Transportation services•Ware house facilities

• Set-up equity• Logistics strategy• IT development• Customer service• management• Supplier management• Logistics consultancy• Best practices

PrimaryClient's)

4PLOrganization

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.

1.TRANSPORTATIONCourier, 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

FIFTH PARTY LOGISTIC

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 provider’s 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.