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Evolution of 4 PL / 5 PL Concepts in Logistics

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“Logistics is a Science, the scope of which is ever

expanding and quite soon it will expand to encompass

various business functions and will become the Prime

Driver of the business model of any organization”

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EVOLUTION

AND

IMPORTANCE

OF LOGISTICS

4

VENDOR

INPUTS

PROCUREMENT VALUE ADDITION

PRODUCT

DISTRIBUTION

CUSTOMER

5

TRADITIONAL TRANSPORTATION

MFG.ORG.

PLAN TRANSPORTACTIVITIES

PREPARESPECS.

CONTRACTING TRANSPORTER

WAREHOUSE

DISTRIBUTION

CUSTOMER

T/SLE

HIRE OF WAREHOUSE

APPOINT DISTRIBUTOR

PAYMENT

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3 PL CONCEPT

PLANDISTRIBUTION

PLANWAREHOUSING

PREPARESPECS

FOR 3PL

OWN PARTTRANSPORT

VEHICLES

DISTRIBUTOR

CUSTOMER

PLAN TOTALTRANSPORTOPERATIONS

MFG.ORG.

CONTRACTING

3 PL AGENCY

HIRE PARTTRANSPORT

VEHICLES

HIREWAREHOUSE

DELIVER TODISTRIBUTOR

ALL AS PER MFG.CO’SNEEDS &DESIGNS

PAYMENT

3 PLT/SLE

APPOINT DISTRIBUTOR

PAYMENT

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A 4 PL agency is retained by a manufacturing organization simply by stating its Logistics needs.

The role of a 4 PL agency is as follows:

A. Interacting with the marketing function to understand the desired availability of products at different geographical locations at different times.

B. Interacting with manufacturing function to understand the production scheduling.

C. Depending on A & B, defining the shipment size.

D. Hiring of godowns (Bonded or otherwise) at different geographical locations.

E. Planning and establishing the logistics hubs which are large and modern warehouses.

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F. Hiring the services of 3PL agencies.

G. Hiring of “Freight Forwarders” and “Custom House Agents” in cases of exports and imports.

H. Hiring the services of IT software agencies to develop the appropriate software. Also hiring or owning, IT hardware for inter connecting all hubs, godowns, marketing and manufacturing.

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

J. Doing all the above for multiple clients to reduce the cost to individual manufacturing organizations.

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Very often, the 4 PL agency also offers the following services to the manufacturing client:

i. Repacking.

ii. Relabelling.

iii. Bar Coding.

iv. Quality Assurance.

v. Invoicing.

vi. Collection of dues.

vii. Insurance Coverage.

viii. Customer Relations Management (CRM).

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4 PL CONCEPT

MFG.ORG.

SPELL OUT LOGISTICSNEEDS INCLUDING

TRANSPORT WITHINMFG.CO’S FACTORY

4 PL

CONTRACT WITHMFG.CO.

PREPARE 4PL’SOWN SPECS.

PLANTRANSPORTATION

IDENTIFY 3 PLPLAN

WAREHOUSINGPLAN

DISTRIBUTIONPLAN INFO

FLOW

CUSTOMER ORDERFULFILMENT

DESIGN

T/SLE

3 PL

OWN PARTTRANSPORT

VEHICLESHIRE PART

TRANSPORTVEHICLES

HIREWAREHOUSE

DELIVER TODISTRIBUTOR

ALL AS PERSPECS DRAWNBY 4 PL

DISTRIBUTOR

CUSTOMERPAYMENT

HIRE DISTRIBUTOR

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REPACKING

RELABELLING

BARCODING

QUALITY ASSURANCE

INVOICING

COLLECTION OF DUES

INSURANCE

FUTURE SEVICES OF 4 PL

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The 4PLs are thus basically specialised consulting organisations not owning large resources but having a

focused team of experts.

Even the interaction with 5 PLs would be done by 4PLs.

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5 PL1. 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 coverages

- Imbalance of containers

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5 PL cont…

2. TECHNOLOGY:-

- Global positioning system

- Swipe card system

- Bar coding

- Packaging

3. IT:-

- Specialised softwares (e.g.. Fleet Management)

- Tailor-made softwares

4. STATUTORY INFORMATION:-

- Road permits

- Central Govt./ State Govt. taxation

- Overloading rules

- Pollution control rules

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5 PL cont…

5. REFERENCE DOCUMENTS:-

- Cabotage laws

- Service tax manuals

- Concor manuals

- ICD/ CFS manuals

6. All other information regarding host of related subjects:-

- Banking and bill discounting

- Financing

- Warehousing

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Thus we can say that a 4PL agency is responsible for effective management of the whole value chain of

the organisation.

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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.

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CONTINUOUS

IMPROVEMENT

IN

LOGISTICS

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i. Marketing

ii. Information Technology

iii. Capital Expenditure

iv. Manufacturing

v. Human Resources Management

vi. Finance & Accounting

vii. Sourcing & Procurement

viii. Product Development

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e-logistics is the process, carried out over digital media for planning/implementing/controlling/monitoring effective

flow of input materials, work-in-progress (WIP), inventory and finished goods from the point of origin to the point of

consumption for the purpose of fulfilling the requirements of customers AND suppliers.

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e-LOGISTICS

SUPPLIER INBOUNDTRANSPORT

MFG.PROCESS

OUTBOUNDTRANSPORT

WAREHOUSING 2nd LEGTRANSPORT

CUSTOMER AFTER SALES SPARES

PROCUREMENT

VALUE ADDITION

INVENTORYCONTROL &DISTRIBUTION

C R M

FLOW OF MATERIALS

FLOW OF FUNDS

MARGINS

FLOW OF INFORMATION

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VALUE CHAIN

MFG. ORGANISATION

SUPPLIERS

CUSTOMERS

VALUEADDITION

SUPPLIERS

CUSTOMERS

TIER-1SUPPLIER

TIER-2SUPPLIER

TIER-3SUPPLIER

TIER-1CUSTOMER

TIER-2 CUSTOMER

TIER-3CUSTOMER

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e-BUSINESS VIS-À-VIS LOGISTICS:

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e - BUSINESSMFG.CO.

SELLER

BUYER

CUSTOMER

PAYMENT

e-MARKET PLACE

e-CRM

ALLIANCE WITH A4 PL PROVIDER 4 PL SERVICES

• e-CATALOGUE

• SPECIFICATIONS

• MODEL NOS.

• TECH DETAILS

• PRICES

• EXPECTED DELIVERY

e-CRM

DELIVERY OF GOODS

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LEAN MANUFACTURING VIS-À-VIS LOGISTICS

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PACKAGING-- AN IMPORTANT PART OF LOGISTICS:- Standardisation of sizes

- Standardisation of packaging materials

- Reuse

- Reverse logistics

- Disposal

- Over packing

- Under packing

- Standardisation of specifications:. Bursting strength. GSM of paper. Quality of paper. Ply details. Printing details

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e-MARKET PLACES AND THEIR DEPENDENCE

ON

LOGISTICS

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OUTSOURCING OF PROCUREMENT FUNCTION

VIS-À-VIS

LOGISTICS

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MULTIMODAL LOGISTICS

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OCEAN FREIGHT

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OCEAN TRANSPORTATION (End to End Operation)

CONTAINER’STRANSPORT (FULL) CONTAINER

STUFFING OFCONTAINER

FREIGHTFORWARDER

FCLCONSOLIDATE

TOFCL,IF REQD.

SHIPPINGLINE

SHIPPING LINE

AGENT

CONTAINERPARKING

YARD

CONTAINER TRANSPORT (EMPTY)

EXPORTER

CUSTOMHOUSEAGENT

B/LEXPORT

DOCUMENTATIONCUSTOMS

CLEARANCE

B/L TOBANK

BANK

PAYMENT

SHIP

SHIPPED ONBOARD ADVICE

OCEANSHIPMENT

ALL PREVIOUSACTIVITIES

INREVERSE

ORDER

OVERSEASCUSTOMER

OVERSEAS PARTINDIAN PART

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THE ROLE OF FREIGHT FORWARDERS

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THE ROLE OF THE CUSTOM HOUSE AGENTS

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AIR FREIGHT

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RAIL FREIGHT:- Own rakes

- Freight express

- CONCOR

- Subsidies (Passenger Vs Freight)

- Classifications/ Codification

- Industry feedback & Rly. budget

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ROAD FREIGHT:

- Cost models (Rs / t / Km)

- Seasonality

- Sensitivity to fuel rates

- Sensitivity to backhaul

- Sensitivity to bonus/penalty

- Large capacity modern vehicles -- limitations

- ODCs

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ROAD FREIGHT

JAN JULY DEC

FREIGHT

ANNUALRATE

MONTH

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WAREHOUSING:

- Storage should be minimum

- Shared facilities

- Segmentation & placements

- Computer operated hoists

- IT linkages and softwares

- Fire fighting facilities

- Ventilation facilities

- A.C. facilities

- Handling facilities

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“Logistics is a Science, the scope of which is ever

expanding and quite soon it will expand to encompass

various business functions and will become the Prime

Driver of the business model of any organization”