Tarun Vir Singh 2010B41 Prashant Petkar 2010B43 KunaI Singh 2010C43 Agenda Definitions Forms Types of LSP Advantages & Disadvantages Challenges before LSPs FD regulation for LSPs Definition Logistics: Channel of the supply chain which adds the value of time and place utility Inbound Logistics: Logistical activities which are associated with receiving, storing and disseminating input & "nformation of final product. Process Logistics: Logistical activity associated with transforming input into the final product i.e. finished products. Outbound Logistics: Logistical activity which is associated with collecting; storing the goods and their physical distribution to buyers. Reverse Logistics: Goods return from the consumer point to the original supply point, for various reasons. Bad delivery, over-supply, damage, expiry, failing inspection tests at the customer point, goods unsold, recycling and disposal etc., are some instances where the material traverses back. Shipping Storage, security and T nventory & Material handling Pick & Pack Services 2% 98% Cummulative revenue of top 20 logistics company in ndia Rest of logistics ndustry Logistics ndustry 0 10 20 30 40 50 60 70 80 90 100 Logistic ndustry Overall Transportation Warehousing 52 90 60 48 10 40 Outsourced nhouse Source: KPMG Report 2010 Logistics ndustry Forms of Logistics Collaboration Horizontal collaboration Between shippers or service providers in the same market Alliances, partnerships and network organisations Collaborate in some markets, compete in other Vertical collaboration Collaboration Between subsequent actors in the same supply chain Between suppliers, manufacturers and customers orizontaI CoIIaboration orizontaI CoIIaboration VerticaI CoIIaboration VerticaI CoIIaboration Types of LSP irst-party Iogistics (1PL) Second-party Iogistics (2PL) Third-party Iogistics (3PL) ourth-party Iogistics (4PL) 4PL: Network ntegrator 3PL: Performs all or a large portion of client's Supply chain logistic acts adding value thru info & knowledge. 2PL: Manufacturer's logistic border expands and requires this trucking co. or warehouse operator 1PL: Small businesses buying & selling at one single location PL Pyramid irst-party Iogistics (1PL) A firm or an individual that needs to have cargo, freight, goods, produce or merchandise transported from a point A to a point B. Can be a manufacturer, a trader, importer/ exporter, wholesaler, retailer, or a distributor. 2 types of 1PL Sender of the Merchandise: Consignor/Shipper Receiver of the Merchandise: Consignee Typically they subcontract their transportation's needs to 2PLs and 3PLs, which are companies specialized in transportation. Second-party Iogistics (2PL) A second Party Logistics provider is an asset based carrier, which actually owns the means of transportation. Second-party Iogistics providers can be: shipping Iines, which own, lease, or charter their ships, airIines, which own, lease, or charter their planes, truck companies, which own, or lease their trucks, barge companies, which own, lease, or charter their barge, raiI companies, which own their trains Third-party Iogistics (3PL) 1st Party Producer of Goods 3rd Party Logistical Partner A firm that provides outsourced logistics services to the other 2 parties for some portion or all of their supply chain mgmt functions 2nd Party The Customer unctions of 3PL %#% Transportation Warehousing Cross Docking nventory Mgmt Freight Forwarding Packaging Custom Clearance OverIap Between 2PL and 3PL 2PL can also be 3PL at the same time in the following cases: when a shipping line owns a freight forwarder, when an airline owns a general sales agent (GSA), when a freight forwarder owns trucks, or a warehouse, when a courier company owns planes, trucks, or a warehouse. 2PL 3PL Types of 3PL Providers Transportation logistics services Leveraged 3PLs use assets of other firms Non-leveraged 3PLs use assets of the parent firm only Examples FedEx, UPS Transportation based These have former warehouse and / or distribution experience Examples - Caterpillar Logistics, BM Warehouse / Distribution Based ndependent middlemen with forwarder roles Non-asset owners providing range of logistic services Examples AE, Kuehne & Nagle Forwarder Based Services relating to freight payment, auditing, cost accounting & control Provide tools for monitoring, booking, tracking, tracing & managing inventory (FleetBoston) Finance Based nternet based B2B, electronic markets for transport & logistics services Examples Transplace, Nistevo nformation Based Key Considerations before choosing a 3PL Partner Price Financial stability Location Asset ownership nternational scope Customer service Capacity to accommodate and grow The ability to meet or exceed promises Service quality and performance Available Talent nformation system and technology capabilities Experience in the same industry or with similar companies Flexibility and capability to handle unique business requirements Responsiveness to unforeseen problems or unexpected events Commitment to continuous improvement Key Bottlenecks for 3PL industry in ndia Poor infrastructure and transportation facilities Complex Tax Laws Complexity in international trade documentation process and lack of T infrastructure. [No Automation] ndustry readiness. [Use of T and systems still not a focus area amongst the 3PLs] Lack of training and trained personnel. Fourth-party logistics (4PL) The term 4PL is generally considered to have been introduced by Accenture. 4PL (Fourth Party Logistics) is a company who manages 3PL's on behalf of the customer. 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. The customer does not have to deal with all these 3PL's individually but has one single point of contact: the 4PL company. Companies providing 4 PL services are, SCMO, CPCS, BMT, Delloite, CapGemini, Accenture. Seventh-Party logistics (7PL) The concept of 7PL stems from the very simple notion of amalgamating the well-established 3PL domain with the concept of 4PL. 7PL serves to optimise and rationalise the new economy Supply chain partners. 7PL is the effective fusion of physical and process expertise of 3PLs, with the enhanced knowledge-based macro-strategic consulting and T capabilities of 4PLs. The concept is new to the business world and companies are trying to build the expertise and infrastructure required. Advantages & Disadvantages dvantages Disadvantages Strategic Concentration on core competences Access to specialized knowledge and capabilities Faster entrance to new markets Higher flexibility Dependence of a third party Point of no return inanciaI Lower operational costs Make cost variable No investments in logistics assets Switching cost Transaction cost OperationaI More efficient operation More effective operation mprovement of customer service level No direct contact with customer Have less grip on quality Additional effort needed to manage third party Lack of expertise of a third party in a specific market Challenges Fierce competition in the global market High Specialties Fixed cost Fragmentation of transport flows Congestion Shortage of staff Rising petrol and labor prices Proliferation of products with shorter life cycles Profit margins decrease ncreasing expectations of customers in terms of both service and price FD Regulations 100% FD under the automatic route is permitted for all logistic services except services mentioned in points ii and iii below ii. FD up to 100% subject to FPB approval is permitted for courier services iii. FD up to 49% under the automatic route is permitted for air transport services, including air cargo services. It is pertinent to mention in this context, that Press Note 1 (2007) that is expected to be imminently notified by the DIPP proposes to increase the limit of FDI on air cargo services in 74%. The road ahead The demand for fully-enabled logistics service providers will grow rapidly. The evolution of the traditional middleman in wholesale distribution- the middleman will sell services and not products. Older practices of buy-hold-sell give way to contracted logistics services. Expanded role will be to help facilitate transactions, organize client inventories and catalogues, take and fill orders, execute shipments and keep track of every minute detail, all in real time.