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Notes on Topics: Logistics Outsourcing, Logistics packaging, Reverse Logistics,

Q – 1) Define 4th party logistics (2 Marks)

Ans: Fourth party logistics can be defined as a complete supply chain management
solutions which integrates organizational activities along with its 3rd party service
providers, Information technology for giving logistical solutions.

Fourth Party Logistics (4PL) provider is a supply chain integrator that assembles and
manages the resources, capabilities and technology of its own organization with those of
complementary service provider to deliver a comprehensive supply chain solution.

It mainly provides IT based supply chain solutions; Ex: Spend Management solutions
provided by ARIBA.

Q – 2) Drivers in reverse logistics (2 Marks).

Ans: Drivers in Reverse logistics are as below:


a. Repairs and Refurbishments
b. Government policies
c. Waste disposal Management
d. Environment
e. Society
f. Company policies
g. Product recall
h. Refilling, Ex: Bottling plants

Q – 3) Define reverse logistics (2 Marks)

Reverse logistics is defined as a process of moving goods from their place of use, back to
their place of manufacture for processing, refilling, repairs, or waste disposal.

It stands for all operations related to the reuse of products and materials. It is "the process
of planning, implementing, and controlling the efficient, cost effective flow of raw
materials, in-process inventory, finished goods and related information from the point of
consumption to the point of origin for the purpose of recapturing value or proper disposal

Retailers,
Manufactur Distributors, Consumer
er Warehousing
etc

Material Sold
Materials Return
Q – 4) What is the process of outsourcing and what are the benefits of an
organization gets by outsourcing their logistical functions (5 Marks) (Oct’07).

Outsourcing is defined as the contracting of one or more of a company’s business


processes to an outside service provider to help increase shareholder value, by primarily
reducing operating cost and focusing on core competencies. CIO defines outsourcing as
an arrangement in which one company provides services for another company that could
also be or usually have been provided in-house.

Outsourcing is the contracting out of a company’s non-core, non-revenue-producing


activities to specialists.

It differs from contracting in that outsourcing is a strategic management tool that involves
the restructuring of an organization around what it does best—its core competencies.

Company
Outsourcing
Some of the Logistical
Functions to 3rd party Service Providers

Information Flow

Procurement Warehousing Inventory


Management

3 rd Party Logistics Service Providers

Benefits of Outsourcing are as below:

1. Reduce costs: Outsourced company will have expertise in handling the activities
which is outsourced to them also they combine work for various other companies as well
hence the overall costs reduces.

2. Focus on core functions: By outsourcing the various activities company can focus on
its core strength. Ex: Paint manufacturing company will out source the distribution and
will use the resources on its core strength i.e making, developing various types of paints.
3. Acguire new skills: A company may find that its in-house skill set is inadequate for a
given function. This is the most common reason and is used for outsourcing those
functions that require high skill levels, such as engineering and computer services.

4. Acquire better management: A company may find that an in-house function is not
performing as expected not because of any problem with the staff but because of
inadequate management support or capability.

5. Assist a fast growth situation: If a company is rapidly acquiring market share, the
management team will be stretched to its limit, building the company up so that it can
handle the vastly increased volume of business. In such situations, the management team
will desperately need additional help in running the company. A supplier can step in and
take over the function so that the management team can focus its attention on a smaller
number of core activities. For example, a company in a high growth situation may
outsource its customer support function to a supplier, who already has the phone line “
capacity and trained staff available to handle the deluge of incoming calls.

6. Avoid labour problems: If a company is constantly bogged down by labour problems


which start affecting its productivity and performance, outsourcing becomes a viable
option. Companies can in such cases use suppliers infrastructure, manpower and facilities
for production and concentrate on marketing or getting business.

7. Focus on strategy: A company’s managers typically spend the bulk of each day
handling the detailed operations of their functional areas—the tactical aspects of the job.
By outsourcing a function while retaining the core management team, a company can
give the tactical part of each manager’s job to supplier, which allows the management
team to spend far more time in such strategy related issues as market positioning, new
product development, acquisitions, and long-term financing issues.

8. Avoid major investments: A company may find that it has a function that is not as
efficient as it could be, due to lack of investment in the function. If the company keeps
the function in-house, it will eventually have to make a major investment in the function
in order to modernize it. Outsourcing this function can avoid any major investments. For
example, by outsourcing transportation activity, the company that owns an ageing
transportation fleet can sell the fleet to a supplier, who then can provide an upgraded fleet
to the company as part of its service.

9. Handle overflow situations: A company may find that there are times of the day or
year when a function is overloaded for reasons that are beyond its control. In these
situations it may be cost effective to retain a supplier to whom the excess work will be
given.

10. Improve flexibility: This is similar to using outsourcing to handle overflow


situations, except that the supplier gets the entire function, not just the overflow business.
When a function experiences extremely large swings in the volume of work it handles, it
may be easier to eliminate the fixed cost of an internal staff and move the function to a
supplier who will only be paid for the actual work done. This converts a fixed cost into
variable cost—the price of the supplier’s services will fluctuate directly with the
transaction volume it handles.

12. Enhance credibility: A small company can use outsourcing as a marketing tool. It
can tell potential customers the names of its suppliers, implying that since its functions
are being maintained by such well-known suppliers, the company’s customers can be
assured of a high degree of quality service. In these instances, the company will want to
hire the best known suppliers, since it wants to draw off of their prestige. Also, for key
functions, the company may even want to team up “with a supplier to make joint
presentations to company customers, since having the suppliers staff present gives the
company additional credibility.

13. Maintain old functions: A company may find that its in-house staff is unable to
maintain its existing functions, while transitioning to new technology or to a new
location. Outsourcing is a good solution here, for it allows the company to focus its
efforts on implementing new initiatives while the supplier maintains existing day-to-day
functions. This reason is most common in computer services, where suppliers are hired to
maintain old ‘legacy’ systems while the in-house staff works on transitions to an entirely
new computer system.

14. Improve performance: A company may find that it has a function that has bloated
costs or inadequate performance. To shake up the function, company management can
put the function out to bid and include the internal function’s staff in the bidding process.
The internal staff can then submit a bid alongside outside suppliers that commits it to
specific service levels and costs. If the bid proves to be competitive, management can
keep the function in-house, but hold the functions staff to the specific cost and
performance levels noted in its bid. As long as suppliers are told upfront that the internal
staff will be bidding and that the selection will be a fair process, they should not have a
problem with this type of competition. This approach can be used for any functional area.

Q – 5) Short note on Third party logistics (5 Marks)

Ans:

Third Party Logistics (3PL) provider handles all or most of freight of the organizations
including the management of information by the third party, freeing the company from
day to day interaction with carriers, and having to oversee hundreds or thousands of
shipment. New and cheaper information flow resulting from internet enabled solutions,
will lead not only achieving immediate cost reductions in operations but also to enormous
productivity gains over the next few years.

The tracking and control of movement of goods drive freight optimization and asset
utilization. The options are : increased trailer utilization, combining full truckload
shipments, consolidation, aggregation of smaller buyers. Purchase asset based
transportation is becoming increasingly a commodity.

To put simply, 3PL refers to the outsourcing of a logistics function. It could be the use of
a transportation carrier, a warehouse, or a third party freight manager to perform all or
part of a company’s production distribution functions.

The principle reasons of for this function are as under:

• Globalization of sourcing, manufacturing and distribution leading to an increase in the


complexity of material movement.
• Competition that has forced companies towards more responsiveness and a reduction in
inventories. An increased need for small but frequent shipments with 100 percent
reliability, requiring core competence in logistics management.
• Resource constraints that require companies to concentrate only on their core
manufacturing or new product development activities.

Company

Information Flow

Procurement Warehousing Inventory


Management

3 rd Party Logistics
Service Provider
Typical set – up of a 3rd party logistics
Q – 6) Fourth party logistics – short note (5 Marks)

Ans: Fourth party logistics can be defined as a complete supply chain management
solutions which integrates organizational activities along with its 3rd party service
providers, Information technology for giving logistical solutions.

Fourth Party Logistics (4PL) provider is a supply chain integrator that assembles and
manages the resources, capabilities and technology of its own organization with those of
complementary service provider to deliver a comprehensive supply chain solution.

It mainly provides IT based supply chain solutions; Ex: Spend Management solutions
provided by ARIBA.

4PL organizations can create unique and comprehensive supply chain solutions that
cannot be achieved by any single provider. According to John Gaftorna, “White
oufsourcing third party logistics is now a accepted business practice, Fourth Party
Logistics is emerging as a breakthrough solution to modern supply chain challenges... to
provide maximum overall benefits.”

4PL can be described as the complete outsourcing of the logistics function including
procurement of service providers. 4 PL companies are suppliers which have the expertise
to manage resources, value delivery processes and technology for their clients in order to
allow their clients to totally outsource their logistics management activity. The 4PLs do
not compete with 3PLs as they have superior expertise in their respective fields by virtue
of their investment and specialization.

4PL providers do not own assets for transportation or warehousing, but rather leverage
the solutions created by 3PL.providers, in order to identify and provide ‘best in class’
services to their clients. There are many variations of the 4PL model that are practiced.

4 th Party Company
Logistics
service
provider / IT
interface
Procurement Warehousing Inventory
Management

3 rd Party Logistics
Total SCM / Logistics
Solutions Information Flow Service Provider
Q- 7) Explain the difference between consumer and logistics oriented packaging.
(May’07). (5 Marks)

Consumer packaging Industrial packaging

1. It has a marketing emphasis 1.It has a more of logistics emphasis


2. This packaging is used to motivate customer 2. Industrial packaging is very critical element
to buy the product. And also to protect the in the physical distribution process of the
product from the environment finished goods

3. - Consumer packaging design focuses on 3. It aims to protect, store and move the
customer convenience, market appeal, retail finished goods conveniently from point of
shelf utilization, and product protection manufacture to the point of consumption

4. Also used to mark product related


information\ on outside of the packaging. Ex: 4. - Generally these packages have markings
Price, expiry date, Weight, or any other which are used for tracing of the products
marketing related information

5. Finds application in movement of goods from


5. It finds it application mainly at selling point,
manufacturer to distributor to retailers and then
retailers or at consumer end
at consumer.

6. Example: The packaging in which Colgate 6. Example: A master carton in which 1000
tooth paste is available at retailer (a small box) Colgate tooth pasts are sent from distributor to
is consumer packaging retailer is industrial / logistical packaging

Q – 8) What is Packaging? Describe various Types of packaging. (5 Marks)

Packaging is defined as a science and an art; it’s more of an art when we are talking about
consumer products and more of a science when we speak about industrial products.
Packaging is the science, art and technology of enclosing or protecting products for
distribution, storage, sale, and use. Packaging also refers to the process of design, evaluation,
and production of packages. Packaging can be described as a coordinated system of preparing
goods for transport, warehousing, logistics, sale, and end use. Packaging contains, protects,
preserves, transports, informs, and sells.It is fully integrated into government, business,
institutional, industry, and personal use.

Packaging can generally be categorizes into two types:

1) Consumer packaging: It has a marketing emphasis


- This packaging is used to motivate customer to buy the product. And also to protect the
product from the environment.
- Consumer packaging design focuses on customer convenience, market appeal, retail shelf
utilization, and product protection.
- Also used to mark product related information\ on outside of the packaging. Ex: Price,
expiry date, Weight, or any other marketing related information.

2) Industrial packaging: It has a more of logistics emphasis.


- Industrial packaging is very critical element in the physical distribution process of the
finished goods.
- It aims to protect, store and move the finished goods conveniently from point of manufacture
to the point of consumption.
- Generally these packages have markings which are used for tracing of the products.

Industrial packaging can be further classified as below:

1) Unitization: For ease in distribution process , individual products are grouped together in
quantities to form a package that can be conveniently moved in the distribution system. This
process of grouping a large number of products in convenient packs is called unitization.

2) Containerization: Containers are the devices in which individual items or master cartons
are placed during the transportation activity. The purpose of providing a box container is to
protect the products or master cartons from damage during transportation, storage, and multiple
transshipment handling.
3) Palletisation: This is a method of stacking individual products or master cartons on pallet
and tightly securing them with metal straps or shrink films. The handling of pallet is done by
forklifts. Pallet does not give the complete protection to the products from environmental effects,
but Palletisation offers tremendous advantages in transportation and handling of goods. The
pallet gives increased stability and damage protection to goods during transportation as
compared to individually handled master cartons. It enhances the productivity of the logistical
system and reduces the cost of handling. Due to standardization of pallet sizes, conforming to
international standards, the loading and unloading operation is very easy.

Q – 9) What are the functions of packaging / Short note on logistics functions of


packaging? (5 Marks).

Ans:
1) Damage protection:
Products received in damage condition at distributors, retailers or customers are of no use
and needs either return to the manufacturer or needs to be scrapped. This is a loss to the
company. Hence it is very essential to protect the products against damage through entire
distribution network. Packaging is used for that purpose.
A major function of master carton is to protect products from damage while moving and
being stored in the logistical system. Master cartons also serve as a obstacle to pilferage.
Achieving the desired degree of protection involves tailoring the package to the producst
and selecting proper materials for package.

2) Protection against physical environment


Package damage results from the transportation, storage and handling systems utilized. If
Privately owned and operated transportation is used, the product will move to its
destination in a relatively controlled environment. On the other hand if common carriers
are utilized, the product enters a non controlled environment.
3) Protection against outside element / environment.
The element environment of a package refers to potential damage from temperature,
humidity, and foreign matter. For the most part, these environmental factors are beyond
the control of the logistical management. However, the protective package must be
designed to cope with the range of possible adversity during transit.

4) For Material Handling efficiency / utility.


Utility is concerned with how packaging affects logistical productivity and efficiency.
All logistical operations are affected by packaging utility – from truck loading and
warehouse picking productivity to transportation and storage cube utilization. Proper
packaging makes material handling easy and effective. Ex: Master cartons, Containers,
Pallets etc.

5) For tracing of the product / communications


Packages are marked with bar code, numbers, identification marks etc for tracking the
respective box and materials through out the logistical network.

6) For transportation and storage


For easy and protection during transportation and also the storage purpose. The best
example is the refrigerated containers used to export meat from India to various African
countries. The refrigerated containers are not only the packing for the meat packs but also
helps in storage at temperatures below 0 degree Celsius to protect the meat.

Note: If question is not asked specifically to mentioned logistical functions of


packaging then add following point also:

6) To create Marketing appeal


7) To spread awareness about the product Ex: Price, Weight, Contains etc.
8) Sales and Marketing promotions etc.