Logistics Outsourcing

An Emerging Trend

Drivers to Outsourcing

•Globalization of markets

•Competitive pressure

•Changing customer demands

•Emerging technologies

- To focus on core competencies- Resource constraints- Cost-saving resulting from better management- Wider geographical coverage- Reduction in risk and liability- Extend superior customer service- Source of process improvement

Why Outsourcing?

• Warehousing and warehousing management• Transportation and freight management• Freight payment and audit• Inventory management• Customs clearance• Material Handling• Packaging

Which Logistics Activities Are Outsourced ?

OutsourcingWarehousingTransportationInventoryOrder processing

Self -relientOrganization performing all logistics operation

Alliance with3 PL Service providerIT OrganizationIT/logistics Consultant

4 PartyLogistics

3 PartyLogistics

In-house logistics

Logistics Evolution

WholesalersThe stand-alone operators, who extend only onetype of service in which they have an expertisesuch as: - Warehousing - Transportation - Customs clearance - Packing - Equipment suppliers - IT support

IntegratorsOne who provides entire logistics services and offers Logistics solutions to customer’s logistics problem

3 PL Service Provider

•Reduction in risk and liabilities

•Value added service to the customer

•Source of process improvement

•Wider market coverage

•Speed to market

Advantages of 3 PL

•Cross docking•Customs clearance•Reverse logistics•Assembly or mixing •Freight consolidation•Special packaging & labelling•Logistics audits•Stock financing

Value Added Services by 3 PL Service Providers

Prominient 3PL providers AFL Limited Dynamic Logistics Fed Ex Gati Logistix limited Patel Roadways SembCorp TCI TNT

- Covers the entire supply chain of the customer

- Collaboration between two or more 3PL service Providers on the resources sharing basis to extend logistic solution to a common customer

- Alliances to be led by integrator with IT based and not asset based service provider

- Flexible arrangement

4 PL Service Provider

• Reduced logistics cost• Concentration on core competencies• Release of management capacities• Reduced assets• Economies of scale• Increase of process quality• Access to latest technologies

Advantages of 4 PL

Switching cost (assets , customer service)

Degree of control (over employees)

Human & electronic interface ( decision issues, EDI)

Tuning logistics to need of channel partners (ITC)

Degree of outsourcing

Legal aspects

Logistics Outsourcing Issues

•Define logistics problems

•Identify problem areas

•Establish objectives

•Search for service provider

•Proposal evaluation

•Selection of service provider

Service Provider Selection - 1

Define logistics problems

- High logistics cost- Longer performance cycle- Increased customer complaints- Reverse logistics

Service Provider Selection- 2

Identify problem areas

- Warehousing- Material handling- Storage arrangement- Transportation- Packaging

Service Provider Selection-3

Establish objectives

- Cost reduction- Performance cycle compression- Customer complaints resolution- JIT delivery- Freight optimization- Route planning- Inventory carrying cost

Service Provider Selection-4

Search for service provider

- Integrator- Wholesaler- Consultants

Service Provider Selection-5

Proposal evaluation & Selection

- Credentials- Logistics infrastructure- Experience and customer base- Technology- Cost of service- Reliability- Government liaison

Service Provider Selection-6

•Date & place of the contract•Names and addresses of contracting parties•Scope of service•Delivery requirements•Payment terms•Extra services from service providers•Charges for services offered•Value proposition by service provider•Damage liability•Responsibilities•Performance measures criteria•Risk sharing•Termination of contract•Notice period•Notice for claims and filing suits •Authority & jurisdiction of dispute settlement•Governing laws

Logistics Service Contract Agreement

Reverse Logistics -A New Wave

The process of moving goods from their place of use , back to their place of manufacture for reprocessing, refilling, repairs or waste disposal

It’s a planned process of goods movement in reverse direction done in efficient and cost-effective manner through the organized network. It can be standalone or integrated system in company’s supply chain

Reverse Logistics What it is…

•Growing public concern for environmental pollution

•Government regulations on product recycling and waste disposal

•Growing consumerism

•Stiff competition

Why Reverse Logistics ?

RefillingLPG Cylinders, Soft Drink Bottles, Liquor Bottles,

Pallets, Containers

Product RecallDefective product, Shelf life over (Johnson)

RefurbishingUsed and returned within warranty period

RemanufacturingUsed product for quality up-gradation

Waste DisposalRecycling the waste

Reverse Logistics Scope

Car Dealer

CarDealer

Car

Dealer

Customer

Customer

Customer

Customer

Customer

Customer

CarProduce

r

Steel melters

Componentsproducers

Tyre producers

Packagingmanufacturer

s

Battery suppliers

Stage II Stage III Stage I

Three Stage Reverse Logistics System for Used Car Recycling

Reverse Logistics: System Design Considerations

• Product location identification

• Product collection system

• Product recycling / disposal centres

• Documentation system

• Cost implications

• Legal issues

Reverse Logistics in India

Refilling of LPG Cylinders, & Soft Drink Bottles Bharat Petroleum, Hindustan Petroleum Pepsi, Coca-Cola United Breweries (Beer)

Return of ‘Life Expired’ Products Nestle (Yoghurt) Mongini’s (Cakes)

Rest in the next ……