1|Page

Third Party & Fourth Party Logistics

Submitted To- Mr Sibia Submitted By- Mayur Hangloo MBA Biotechnology University Business School

2|Page

Third-Party Logistics
A third-party logistics provider is a firm that provides service to its customers of outsourced logistics services for part, or all of their supply chain management functions. Third party logistics providers typically specialize in integrated operation, warehousing and

transportation services that can be scaled and customized to customers' needs based on market conditions and the demands and delivery service requirements for their products and materials. Often, these services go beyond logistics and included value-added services related to the production or procurement of goods, i.e., services that integrate parts of the supply chain. Then the provider is called third-party supply chain management provider or supply chain management service provider.

Types of 3PL providers

Third-party logistics providers include freight forwarders, courier companies, as well as other companies integrating & offering subcontracted logistics and transportation services

Standard third-party logistics provider: this is the most basic form of a third-party logistics provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.

Service developer: this type of third-party logistics provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of third-party logistics provider to perform these types of tasks.

The customer adapter: this type of third-party logistics provider comes in at the request of the customer and essentially takes over complete control of the company's logistics activities. The third-party logistics provider improves the logistics dramatically, but do not develop a new service. The customer base for this type of third-party logistics provider is typically quite small.

The customer developer: this is the highest level that a third-party logistics provider can attain with respect to its processes and activities. This occurs when the 3PL provider

3|Page

integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.

Case Study for India 3PL Industry Set for Remarkable Growth
According to our latest market research offering 3rd Party Logistics Market in India, India represents enormously untapped but one of the fastest growing 3PL logistics market globally. The industry has successfully survived the economic downturn on the strong fundamentals of logistics outsourcing demand from automobile and manufacturing industries. The research reveals that continued improvement in logistics infrastructure and increasing awareness about efficient logistics practices in public as well as private sectors will enable 3PL industry in the country to register over 25.1% CAGR during 2010-2013. The study has identified that the share of 3PL services in overall logistics cost in India is far less as compared to other developed markets such as Japan, US and Europe. But if the share of logistics cost as percentage of GDP is calculated, it comes out to be high in case of India, where it ranges in between 13%-15%. We anticipate that the share of 3PL in overall logistics cost will see an exponential growth in coming years on the concrete fundamentals of various prevailing trends analysed and discussed thoroughly in the report. 3rd Party Logistics Market in India is an outcome of extensive research and thorough analysis on the burgeoning 3PL industry in India and its components. The report also discusses the market structure, current and past market performance and factors critical to the success of the concerned industry in India. We have also identified all the key players in the Competitor Analysis section of the report. The section talks about the business profile and strategic moves of the leading players operating in the sector. Additionally, the report has an especial emphasize on the 3PL market trends in all prominent vertical industry segments including Retail, Automobile, IT Hardware, FMCG, Consumer electronics and others. It provides sector-wise industry developments and facilitates deeper understanding of the 3PL potentials in these sectors.

4|Page

Most importantly, the report provides segment-wise industry forecast based on correlation of past drivers, challenges and opportunities for expansion. In this way, the report presents a complete and coherent analysis of the Indian 3PL industry that will prove decisive for clients.

Fourth-Party Logistics
Fourth Party Logistics is the evolution of supply chain outsourcing. The convergence of technology, the rapid acceleration of e-capabilities has heightened the need for an overarching integrator for supply chain-spanning activities. Fourth Party Logistics is the shared sourcing of supply chain spanning activity with a client and select teaming partner, under the direction of a 4PL integrator. In essence, the Fourth Party Logistics provider is a supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organisation with those of complementary service providers to deliver a comprehensive supply chain solution. A holistic approach fourth-party logistics (4PL) has evolved as a breakthrough supply chain solution comprehensively integrating the competencies of third party logistics (3PL) providers, leading edge consulting firms and technology providers. Such strategic alliances leverage the skill sets, strategies, technology and global reach, which would have otherwise taken years to duplicate. Globalization is expected to strengthen demand for 4PL due to the substantial lifting of market barriers and import tariffs. Suppliers require a vast network of genuine pan-European and global logistic providers that can successfully integrate processes and information across geographical boundaries. A more connected world results in universal access to sophisticated technology that allow 4PLs to efficiently manage complex supply chains and even modify supply chain networks and processes. For instance, technology advances in wireless networking and Radio Frequency Identification significantly increases productivity, customer satisfaction and ultimately profitability.

5|Page

Case on 4PL
A full blown 4PL can provide all the functions of a 3PL (procurement, storage and distribution and processes for each) as well as the ability to provide a customer with the outsourced financial, customer services and computer systems to support commerce. An importer of bicycles maintains the own stock and warehouse as one move 10,000 units a year. However, by law (such as the Consumer Guarantees Act) one must carry spare parts to maintain their bicycles. Because my supply chain is set up to move entire bicycles, the parts side is not a core business (but one I must have) and is not profitable often it is costly. Then one would then approach a 4PL who would provide all the business functions I require for my spare parts at a fee that should at least break even, if not make this business unit profitable. The 4PL then absorbs this business function into their warehouse facility and by leveraging their latest technologies (warehouse management, integrated ecommerce, ERP etc.) They are able to run my parts business profitably, allowing me to concentrate on core business and keeping on the right side of consumer law. Accenture defines a 4PL in the following manner: "A 4PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design build and run comprehensive supply chain solutions."

6|Page

References
http://www.dhldiscoverlogistics.com/cms/en/course/management/logistical_net_plan /flow.jsp http://www.businessdictionary.com/definition/fourth-party-logistics-4PL.html http://www.ebizq.net/topics/scm/features/3881.html http://www.tdg.eu.com/4pl.asp http://www.rncos.com/Press_Releases/India-3PL-Industry-Set-for-Remarkable-Growth.htm http://arkenis.com/white_background_service4_3partitions.php http://www.logisticsmediaindia.co.in/articles/3pl-vs-4pl-and-why-everyones-getting-allconfused-about-it