The State of Logistics Outsourcing; 2008 Third Party Logistics Study
3party and 4 party logistics
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Transcript of 3party and 4 party logistics
arun palanisamyI MBA, TNAU. 104/13/23
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1.Logistics outsourcing
2. Third party logistics
3.fourth party logistics
4.Difference between the TPL and FPL.
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Logistics is the management of the flow of goods between the
point of origin and the point of consumption in order to meet some
requirements.
information flow,
material handling,
production,
packaging,
inventory,
transportation,
warehousing, and often security04/13/23
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Outsourcing - Industry Trends
Findings of a Survey : Why company's Outsource
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Third-party Third-party logisticslogistics
(3PL) involves using external organizations to execute logistics
activities that have traditionally been performed within an organization
itself.
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For example, if a company with its own warehousing facilities decides to employ external transportation, this would be an example of third-party logistics. 04/13/23
The evolution of 3PL market is explained with reference to three distinct phases
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Service Category
Basic Service Some specific value added services
Transportation Inbound, outbound by ship, truck, rail, air
Track/trace, mode conversion
Warehousing Storage, facilities management
Cross-dock, in-transit merge, inventory control
Information technology
Provide and maintain advanced information systems
Transportation management systems, warehousing management
Reverse logistics Handle reverse flows Recycling, customer returns, repair/refurbish
Other 3PL services
Customs brokering, hazardous material, order taking, consulting, port services, etc.
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Services Provided By Services Provided By 3PL’s3PL’s
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Hertz and Alfredsson (2003) describe four categories of 3PL providersHertz and Alfredsson (2003) describe four categories of 3PL providers
Standard 3PL Provider: this is the most basic form of a 3PL
provider.
pick and pack,
warehousing,
distribution
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Service Developer: this type of 3PL provider will offer their customers advanced value-added services such as:
tracking and tracing
cross-docking
specific packaging
unique security system
Service Service DeveloperDeveloper
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The Customer Adapter:
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1. integrated logistics service provider
2. contract-based service provider
3. consulting service provider
3PL (or 3PL provider) has the following features at present
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Asset-based - provider owns some assets, particularly transport-
related assets such as trucks, warehouses, etc.,
Non-asset-based -does not own such assets, and usually relies on
sub-contractors
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Customer # of 3PL’s Used
General Motors 37
Wal-Mart Stores 33
Ford Motor, HP 27
Procter & Gamble 20
General Electric 17
Georgia Pacific, IBM 16
PepsiCo, Sears 13
Coca-Cola, Sara Lee, Target, Xerox 12
General Mills 11
Delphi, Safeway 10
GREATER THE NUMER OF COMPONENTS INVOLVED IN MANUFACTURING MORE 3PL ACTIVITES WILL BE OUTSOURCED
Source : international logistics
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The partnership between Ryder Dedicated Logistics and GM Saturn division is a good example of 3PL. Saturn focuses on automobile manufacturing and Ryder manages most of Saturn other logistics considerations. Ryder deals vendors, delivers parts to the Saturn factory and delivers finished vehicles to the dealers . Saturn Orders parts using Electronic Data Interchange ( EDI ) and sends same information to Ryder. Ryder makes all the necessary pickups from 300 different suppliers in the U.S., Canada and Mexico using special decision-support software to effectively plan routes to minimize transportation costs.
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3PL is more complex than normal outsourcing of logistics
activates .When speaking of 3PL a true partnership condition is usually
assumed because
Strategic nature of services purchased
Buyer of 3PL realizes that synergies can be achieved by exploiting
the logistics provider distinct competencies
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The concept of a fourth-party logistics (4PL) provider was first The concept of a fourth-party logistics (4PL) provider was first
defined by Andersen Consulting as an defined by Andersen Consulting as an integrator that assembles the integrator that assembles the
resources, planning capabilities, and technology of its own resources, planning capabilities, and technology of its own
organization and other organizations to design, build, and run organization and other organizations to design, build, and run
comprehensive supply chain solutions. comprehensive supply chain solutions.
fourth-party fourth-party logistics (4PL) logistics (4PL)
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Synergy Plus operating model
Solution Integrator model
Industry Innovator model
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1. Partnership between 4PL – 3PL to market supply chain solutions
2. Capabilities and market reach of both partners are combined
3. The 4PL provides:
Technology
supply chain strategy skills
capability to go to market
by program management expertise
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Core Model: 4PL operates comprehensive supply chain
solutions for a single client.
Solution encompasses resources,
capabilities and
technology
of the 4PL with complementary service providers
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4PL develops and runs a supply chain solution for multiple industry
players with focus on synchronization and collaboration
This model provides the greatest benefits, however it is complex and
a great challenge
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ProcurementStorageDistribution
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4pl providers
UPS,
CMA
CGM
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1.Higher order-to-delivery cycle times, and order-to-cash cycles that are
increasing in length. Order-to-cash cycles affect other areas of the
company and can be one big area where improvement can free up cash
for important enterprise initiatives such as research and development
2.The need and demand for IT resources. Lack of IT infrastructure to
support an expanding global supply chain can inhibit growth.
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3.Global growth, more inventory in more places, and a shifting
revenue recognition point. Companies often lack the ability to
generate substantive supply chain performance improvement on their
own.
4.Global expansion. Companies wanting to get into markets they have
not been in before need flexible, effective supply chain processes to
be successful
SOURCE: Carl Fowler, senior director of operations, and leader of Menlo Logistics’ 4PL practice
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Economies of Scale
Reduced Supply Chain costs
Increased flexibility
Combines the advantages of in- and outsourcing
Manufacturers can focus on core competencies
Improved customer service
Reduced capital requirements
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Loosing sight of original core-concept of SCM due to loss of Loosing sight of original core-concept of SCM due to loss of
controlcontrol
Customer relationships should not be dismissed on basis of Customer relationships should not be dismissed on basis of
efficiencyefficiency
Strict functional organization structure hinders integrated Strict functional organization structure hinders integrated
Supply ChainsSupply Chains
Resistance to change – the biggest obstacle to Resistance to change – the biggest obstacle to
implementation of new implementation of new approachesapproaches
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An example here would be a bicycle importer. The main function is
to import bicycles however, they need to have spare parts for these
unique bikes. A 4PL would manage the total logistic operations for
the spare parts business.
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Difference between 3PL and 4PL FPL differs from TPL in several respects
FPL organization is often a joint venture between a primary client
and one or more partners;
FPL organization acts as a single interface between the client and
multiple logistics service providers;
The major part, of the client's supply chain is outsourced to the FPL
organization.
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ALL THE COMPANYS WOULD LIKE TO PROVIDE ALL THE COMPANYS WOULD LIKE TO PROVIDE
AN BETTER THING IN BETTER MANNER TO AN BETTER THING IN BETTER MANNER TO
STABLIZE AND INCREASE THEIR STABLIZE AND INCREASE THEIR
EFFECTIVENESS AND EFFECIENCY IN THIS EFFECTIVENESS AND EFFECIENCY IN THIS
COMPETITATIVE WORLDCOMPETITATIVE WORLD
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Thank u
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The supply chain integration The raise of 4pl : gail dutton Third party logistics by C. John Langley Jr., Ph.D.
Logistics outsourcing and selection of third party logistics service provider (3pl), erdal çakir 2009.
Fourth party logistics a study of modern logistics Paulo Bragança 2009
http://www.cquential.co.za/industries/3pl-4pl/
REFERENCE
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