3party and 4 Party Logistics

arun palanisamyI MBA, TNAU.
1 5/31/2014
arun palanisamyI MBA, TNAU. 2
1.Logistics outsourcing
2. Third party logistics
3.fourth party logistics
4.Difference between the TPL and FPL.
5/31/2014
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 security
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arun palanisamyI MBA, TNAU. 4 5/31/2014
Outsourcing - Industry Trends
Avoid Capital Expenditures
Increase Flexibility (service/financial)
Focus on Core Business
Improve Service
Lack of Scale
Acquire Talent
Avoid Labor Problems
Cut Costs
Source: A.T. Kearney
Findings of a Survey : Why company's Outsource

(3PL) involves using external organizations to execute logistics
activities that have traditionally been performed within an organization
itself.

For example, if a company with its own warehousing facilities decides
to employ external transportation, this would be an example of third-
party logistics.

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The evolution of 3PL market is explained with reference to three distinct
phases
In 1980's many transportation and warehousing firms developed into 3PL
providers
( e.g. Exel Logistics and Frans Maas )
In the early 1990's firms that specialized in express parcel deliveries
entered the markets
( e.g. DHL, TNT , UPS and FedEx )
In the late 1990's , companies originally specializing in financial services , I.T. services
and management consulting entered the market by developing competence in
information systems and supply chain planning
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.
5/31/2014 10 arun palanisamyI MBA, TNAU.
Hertz 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
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

The Customer Adapter:
1. integrated logistics service provider
2. contract-based service provider
3. consulting service provider
3PL (or 3PL provider) has the following features at
present
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

Buyers of 3PL Services
Customer # of 3PLs 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


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.


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
The concept of a fourth-party logistics (4PL) provider was first
defined by Andersen Consulting as an integrator that assembles the
resources, planning capabilities, and technology of its own
organization and other organizations to design, build, and run
comprehensive supply chain solutions.
Synergy Plus operating model
Solution Integrator model
Industry Innovator model
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
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
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
Procurement
Storage
Distribution
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

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

Loosing sight of original core-concept of SCM due to loss of
control
Customer relationships should not be dismissed on basis of
efficiency
Strict functional organization structure hinders integrated
Supply Chains
Resistance to change the biggest obstacle to
implementation of new approaches
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.

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.
ALL THE COMPANYS WOULD LIKE TO PROVIDE AN BETTER THING
IN BETTER MANNER TO STABLIZE AND INCREASE THEIR
EFFECTIVENESS AND EFFECIENCY IN THIS COMPETITATIVE WORLD

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 akir 2009.

Fourth party logistics a study of modern logistics Paulo Bragana
2009

http://www.cquential.co.za/industries/3pl-4pl/

REFERENCE
5/31/2014

3party and 4 Party Logistics

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