BY

Gajendra Behera.

Definition of logistic.
Definition of 3PL.
Objectives of 3Pl.
Advantages and Disadvantages of 3PL.
Key Drivers of 3PL.
Services provided by 3PL.
4th Party logistic.
How 4th party differs from 3pl.
4 PL set up
Role of 4PL
Future of 4Pl.
Conclusion.

LOGISTICS

Logistic is the flow of goods, services,

information, etc from point of origin to the
point of consumption (at a specified time )
to meet the requirement of consumers. It
involves integration of information ,
transportation, inventory, ware housing,
material handling, packaging and
occasionally the security. Logistic is the
channel of supply chain which adds the
value of time and place utility.

Third Party Logistics

Third-party Logistics is simply the use of

an outside company to perform all or part
of the firms materials management and
product distribution function.
-- Simchi-Levi

OUTSOURCED
OPERATION

TRANSPORTATION

FIRMS

WAREHOUSE

FIRMS
FIRMS

3PL

IN-HOUSE
LOGISTIC

IT SUPPORT
SC
INTEGRATION

OTHERS
FIRMS IN-HOUSE LOGISTIC
FIRMS
DEPARTMENT
IT SUPPORT

WAREHOUSE

TRANSPORTATION

OTHERS

OBJECTIVES OF 3PL
Reduction in Risk and Liability.
Value added services to Customers.
Source of process improvement.
Wider market coverage.

Key Driver For 3rd Party Distribution

Cost factor .
Service factor .
Organizational factor .
Physical factors.

PAST V/S PRESENT LOGISTICS EXPENDITURES

FOR 3PL

80%
70%
60%
50%
40%

2006

30%
20%

2009-2011

10%
0%
North America

Western
Europe

Asia-Pacific

Latin America

Advantages
Reduction in Logistic Cost By 7 to 10%
Reduction in Logistic assets By 20 To
25%.
Reduction of the order cycle time.
Focus on core competency
Improved efficiency, service and flexibility
Industry-specific application
buildto-order systems and e-merchants.

Drawbacks of 3PL
Still requires top management's time to
manage
relationships & resources Unable to cover
full range of SC requirements e.g. logistics
information, tech development...
Lack of shared goals...
Loss of control.
Impact on in-house workforce

TYPES OF 3PL PROVIDER.

TRANSPORTATION BASED
WAREHOUSE/ DISTRIBUTION BASED.
FORWARDER BASED
FINANCIAL BASED
INFORMATION BASED

Factors for 3PL Selection

Core Competencies of 3PL Provider

Cost of 3PL Services
Information Handling Capability / Compatibility
Breadth of Services Provided
Past Experience of your Industry
Technological Competencies of the Provider
System Flexibility & Capacity
Safety & Insurance Cover / Programs
Geographical Location & Spread
Company Reputation
Responsiveness & Service Quality
Management Structure & Quality of Workforce

SERVICES PROVIDED BY 3PL

VENDOR MANAGEMENT INVENTORY
ORGANIZATION (V.M.I)
WAREHOUSE INFORMATION SYSTEM
(W.I.S).
FREIGHT FORWARDING SERVICE
PROVIDER (F.F.S).
CUSTOM HOUSE AGENT (C.H.S)
SOFTWARE APPLICATION SERVICE
PROVIDER (S.A.S.P).

ROLE OF F.F.S AS 3PL ORGANISATION

It is outsourced for a total cost effective and

time effective supply chain activities.
It provide service for both forward and Reverse
logistic.
Aware of rule of the country in in total global
scenario .
Perfection about visibility of the consignment with
knowledge domain of GPS , RFID , etc.
Awareness of IMO codified hazardous Goods .
Aware of EPA and Green planet (environment
protection act.

Software application service provider

Customer
Places order

WEBSITE

ONLINE
BANKING

software
Application
Service
Provider

DISTRIBUTION
CHANNEL

GLOBAL
SUPPLIER

Web based
Order process
-ing System

Indigenous
Supplier

LOCAL
SUPPLIER

Material
Procurement
department

INWARD
STORES

F.G
STORES

FINAL
ASSLY

Warehouse Information System

Warehouse Information System -WIS has registered the name,
acronym originated from WMS. It is an important part of the
supply chain and provide directed stock rotation, intelligent policy
of picking , automatic consolidation and cross-docking to
maximize use of valuable warehouse space .
The system also manages and optimizes the willingness to "putaway or placed in the warehouse, based on real-time information
about the status of the use of shelves.
Information technology in the warehouses, including the logistical
systems of information, allow better integration between activities
in the supply chain. However, alone does not solve problems, but
changing organizational patterns.

The stores must have logistics systems that have information

systems in order to take care of customer requests, refer them to
the suppliers and give instructions authorizing the movement or
shipment of material.
Information systems facilitate the planning and controlling the
supply of services, and its efficiency a key to the smooth
operation of logistics systems, so for the proper operation of
warehouses

3PL Providers

FOURTH PARTY LOGISTIC

Fourth party logistics is an external organization who is
able to provide a user with an overall supply-chain-wide
solution by incorporating the resources and expertise of
any number of third parties to best effect. It will be
involved in both the design and the management of the
clients logistics system and will act as a coordinator for
many different types of services , which may include
distribution, information system, financial services, etc.

O
R
G
A
N
I
Z
A
T
I
O
N

3PL Providers

4PL
Provider

IT Service
Providers

3PL Providers

Models of 4PL A) Lead logistics provider: The 4PL provider acts as an in house freight
management company, it might or might not have a role in the selection
of 3 PL partners. It takes care of transport invoicing and the monitoring of
the performance of the 3 PLs.
B) Solution Integrator: In this variant of the model, the 4PL acts as the
integrator of various 3PLS and as a single window for freight negotiations,
3PI selection and freight management on behalf of its client.
C) Industry Innovator: Under this model the 4PL uses its expertise and
resources to create a solution not for any single client, but for offering 4PL
services to a number of clients in an industry.

LOGISTICS OUTSOURCING
MODELS
Advanced
Services
Lead
Logistics(4PL)
Value-Added(Third Party
logistics)

Basic services(Logistics Service

Providers)

Insourcing

4PL : differs from 3PL...

The 4PL organization is often separate entity

established as a joint venture or long term
contract between a primarily client and one or
more partners.
It acts as single interface between the client and
multiple logistics service providers.
All aspects of the clients supply chain are
managed by the 4PL organization.
It is also possible for a major 3PL provider to
form a 4PL organization within existing structure

4PL Set-up
Primary Client
Contribution
Start-up equity
Assets
Working capital
Operational
expertise
Operational
staff
Primary
Client's)

3PL Providers
Contribution:
Transportation services
Ware house facilities

4PL
Organization

Partners
Contribution:
Set-up equity
Logistics strategy
IT development
Customer service
management
Supplier management
Logistics consultancy
Best practices

Partners

The role of a 4 PL agency

Interacting with the marketing function to

understand the desired availability of products

at different geographical locations at different
times.
Interacting with manufacturing function to
understand the production scheduling.
Depending on A & B, defining the shipment size.
Hiring of godowns (Bonded or otherwise) at
different geographical locations.
Planning and establishing the logistics hubs
which are large and modern warehouses.

Hiring of Freight Forwarders and Custom House Agents in

cases of exports and imports.

Doing all the above for multiple clients to reduce the cost to
individual manufacturing organizations.
Hiring the services of 3PL agencies

Understand the transport/handling needs within the premises

of the manufacturing organization and outsourcing these to
small transporters.

SERVICES OFFERED BY 4PL.

A total supply chain perspective;
Visibility along the supply chain;
Measurement along the supply chain (cost
and performance).
Open systems;
Technical vision;
Flexibility.

Advantages of 4pl.

Addressing strategic failures.

-minimizing the time and effort spent on logistic by the user.
- a single point of contract for all aspects of management.
- It can source different specialist with best in class credentials.

Addressing service and cost failures.

-freeing the user company's capital for core/ main stream use by selling assets.
- the continuous monitoring and improvement of supply chain process, performance and
cost .

Addressing operational failures.

- it is easier to eradicate old industrial relations issue.
- More flexible working environment can be established.

Additional benefits.
-provision for supply chain accountability for achieving desired performance ,
-the provider assumes risk on behalf of the user in return for a share of
profit.

FUTURE OF FORTH PARTY LOGISTIC

The 4PLs are thus basically specialized
consulting organizations not owning
large resources but having a focused
team of experts.
Even the interaction with 5 PLs would
be done by 4PLs.

FIFTH PARTY LOGISTIC

1.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 coverage's
- Imbalance of containers

2. TECHNOLOGY
- Global positioning system
- Swipe card system
- Bar coding
-Packaging
3. IT
- Specialized software's (e.g.. Fleet Management)
-Tailor-made software's.
4. STATUTORY INFORMATION
- Road permits
- Central Govt./ State Govt. taxation
- Overloading rules
- Pollution control rules

5. REFERENCE DOCUMENTS
- Cabot age laws
- Service tax manuals
- Concor manuals
-ICD/ CFS manuals
6. All other information regarding host of
related subjects
- Banking and bill discounting
- Financing
- Warehousing

CONCLUSION

55% companies use 3PL services in India one form or the

other compared to 75% globally
3PL And 4pl are the future, should be seen as a support to
corporate growth
Close to 60 % of 55% uses transportation and custom
clearing & forwarding
Of the rest 45%, 75% do not use 3PL services because
they are not sure of providers capability
Company should focus on outsourcing 3PL services like
inventory management, order processing, labeling &
packaging and reverse logistics
Use of IT in 3PL services is very low both by user and
provider

3PL and 4PL providers feel that

Users are unwilling to share information
Do not show commitment towards the
relationship.
Do not want to share rewards
Do not show interest in continuing the
relationship
Contracts are used more to avoid risks rather
than to develop relationship
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.