THIRD PARTY LOGISTICS
MID-TERM REVIEW
DARSHAN KARIA
11BIE019
OVERVIEW/SEMINAR COVERAGE
INTRODUCTION
DEFINITION
EVOLUTION OF TPL
FOURTH PARTY LOGISTICS
LAYERS TO LOGISTIC SERVICES
FIRST PARTY LOGISTICS/1PL
SECOND PARTY LOGISTICS/2PL
THIRD PARTY LOGISTICS/3PL
FOURTH PARTY LOGISTICS/4PL
ROLE OF TPL IN SUPPLY CHAIN AND COMPANY
PERFORMANCE.
OUT SOURCING DECISIONS
SUPPLY CHAIN SURPLUS AND ASSOCIATED RISK
FACTORS AFFECTING SUPPLY CHAIN SURPLUS
HOW TPL AIDS IN INCREASING SUPPLY CHAIN SURPLUS
OVERVIEW/SEMINAR COVERAGE
ADVANTAGES AND DISADVANTAGES
OF A TPL
IMPLEMENTATION
IMPLEMENTATION ISSUES AND REQUIREMENTS OF A 3PL
COLLABORATION
PROBLEM AREAS IN IMPLEMENTATION OF A STRATEGIC ALLIANCE
ISSUES TO BE CONSIDERED BEFORE CONTACTING A 3PL PROVIDER
IMPLEMENTATION OF INFORMATION TECHNOLOGY IN A
TPL
CURRENT STATE OF TPL AND FUTURE OPPORTUNITIES
CHALLENGES FACED BY TPL
CASE STUDY
HOW THE OPERATOINS ARE PERFORMED WITHIN A TPL
INTRODUCTION
DEFINITION
(Maloni and Carter, 2006). Third-party logistics was initially defined as the
use of external companies to perform logistics functions that have traditionally
been performed within an organization.
Generally referred to as TPL/3PL.
EVOLUTION
Initially started with basic logistic activities
Logistic owners collaborated started owning warehouses
Introduction of Information technology
OPERATIONS
Transportation
Warehousing
Information technology
Reverse logistics
Special skills/handling
LAYERS TO LOGISTIC SERVICES
FIRST PARTY LOGISTICS/1PL
Specialized in certain goods / logistics services in a
limited region
SECOND PARTY LOGISTICS/2PL
Larger (national) geographical area than the 1PL
FOURTH PARTY LOGISTICS/4PL
The idea of a fourth-party logistics provider was given
by the consulting company Accenture.
FOURTH PARTY LOGISTICS(4PL)
An integrator that assembles the resources , capabilities and technology of
its own organisation and other organisation to design build and run
comprehensive supply chain solutions. (Accenture)
4PL
MANAGES
3PL BROKERS,
SUPPLIERS, ETC
There is a however a very little distinction left between a 3PL & 4PL
Essentially taking complete responsibility for the customer
OUTSOURCING DECISIONS
OUTSOURCING: The process in which a firm hires an outside firm to
perform an operation rather than executing the operation within the
firm.
Following questions are to be answered before hiring a third party for
conducting operations .
Q.1 Will the third party increase the supply chain surplus relative
to performing the activity in house ?
Q.2 To what extent do risks grow upon outsourcing ?
SUPPLY CHAIN SURPLUS
The difference between the revenue generated from the customers and the
overall cost across that supply chain.
Supply Chain Surplus = Customer Value - Supply Chain Cost.
Supply chain cost includes all the costs that is incurred from placing the order
by the customer to the fulfilment demand by the supplier.
Product cost is not equal to consumer cost.
Supply chain participant can survive in long term only if its presence increases
the supply chain surplus.
Ultimately correlated with profit of the party.
FACTORS
AFFECTING
SURPLUS
SCALE
UNCERTAINITTY
SPECIFICITY OF
ASSETS
HOW DO THIRD PARTIES INCREASE THE
SUPPLY CHAIN SURPLUS
Either increase value for the customer or decrease the decrease the
supply chain cost relative to a firm performing the task in-house.
Capacity aggregation
Inventory aggregation
Transportation aggregation by transportation intermediaries
Warehousing aggregation
Procurement aggregation
Information aggregation
Relationship aggregation
Lower cost and higher quality
RISKS
The process is broken
Underestimation of the cost of coordination
Reduced customer/supplier contact
Loss of internal capability and growth in third party
power
Leakage of sensitive data and info.
Ineffective contracts
DECISION
A firm gains the most by outsourcing to a third party if its needs are
small, highly uncertain, and shared by other firm outsourcing form the
same third party.
Specificity of assets involved in
function Low
High
Firm scale
Demand
uncertainty
Low
High growth
in surplus
Low-medium
growth in
surplus
High
Low growth
No growth
Low
Low-medium
growth
Low growth
High
High growth
Low medium
growth
ADVANTAGES
Cost and time savings for the client
Logistics is there core business
Better know how and continuously updated systems and
procedures
Low capital commitment
No need to own your own transportation or storage facilities
Sufficient capital available for the core business
Ability of client to focus on core business
3PLs provide flexibility
Much higher flexibility in terms of warehouse and workforce
Logistics fix cost is turns to variable cost
DISADVANTAGES : Associated risks
REFERENCES
Supply Chain Management by Sunil Chopra and Peter Meindl
Paper: What drives the choice of a third party logistic provider? By edward
Anderson
Third party logistics study Campgemini
Logistics and supply chain management cases and concepts (G Raghuram , N
Rangaraj)
