Logistics PartneringThird Party Logistics(3PL) & Fourth Party Logistics ( 4PL) -A Perspective- Indian Context
Presented by :- Kiran Salunkhe MD Siesta Logistics
What comes to our mind when we think about transportation as a function of logistics
Support fixtures
1 May 2012
But it also includes such Over Dimension Consignments
Connecting the dots 3PL& 4PL Perspective
Lifting the consignment (arranging for cranes) Deciding the transportation means (type of truck- special design or barge) Preparing the fixtures for safe transportation Conducting route survey (road, bridges, water level) Strengthening bridges Taking various permits
LOGISTICS
LOGISTICS is a vital component of a company's strategy to improve performance. Manufacturers abroad have realised that the best way to improve performance is to concentrate on the core competence making a product, and outsourcing the rest, including logistics from a third party logistics (3PL-Third party logistic) service provider.
Why Third Party Logistics(3PL) Required?
Avoid Capital Expenditures Cut Costs Increase Flexibility (service/financial) Focus on Core Business Improve Service Lack of Scale Acquire Talent Avoid Labor Problems
Source: A.T. Kearney
Contract Logistics Savings Potential
Description Route Design & Optimization Mode Conversion Core Carrier Management Savings Realized 10-15% 15% 10-15% 5-10% 4-5%
Closed Loop Dedicated Operations
Rate Negotiation & Audit
Inbound Consolidation Reverse Logistics
20-25%
10-15% 10-12%
DC Location Realignments
Reduced Inventory
7-10%
Need for 3PL originated
Globalization Manufacturing revolution JIT/ Lean sigma / TPS Reengineering- BPR Technological growth
Outsourcing of logistics
Third Party Logistics An Overview
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 ( 2000 ) A relationship between a shipper and third party which, compared with the basic services, has more customized offerings, encompasses a broad number of service functions and is characterized by a long-term, more mutually beneficial relationship -Murphy & Poist ( 1998 )
Introduction to 3PL
Outsourced Operation
Shipper Transportation
Shipper
3PL
Warehousing
Shipper
IT support
In-house Operation
SC integration
Shipper
In-house Logistics Department Others IT support Transportation 1 May 2012 Warehousing 11 Others
Services Provided By 3PLs
Value Added 20% Warehousing 21%
International 9% Integrated 9%
Intermodal 4% Private Fleets 7%
1 May 2012
Transportation Mgt 21%
Lead Logistics 4% Other 5%
12
Types of 3PL providers
Hertz and Alfredsson (2003) describe four categories of 3PL providers:
Standard 3PL provider
Customer developer
Service developer
Customer adapter
Non Assetbased Logistics Providers
1.To Save Time
Why Use 3PL?
2.To Share Responsibility
3.To Re-Engineer Distribution Networks 4.Someone Else Can do it Better
What are the Selection criteria for 3PL
Parameters Cost On time delivery Level of customer service Flexibility demand fluctuation Past experience and client reference Infrastructure capabilities
1 May 2012
15
1.Increase Supply Chain visibility
2.Respond for new customers or processes 3.Increase your value-add through innovation 4.Business information through Web-based architecture
3PL Benefits
3PL Market in India
Year 3PL market (in billion) Growth Rate (in %) 2005 2012
(Estimated)
890.4 ---
3556.7 21.9
3PL Market in India
Largest end-user industry for 3PL services as of 2005, is the auto industry and company's are
Suzuki Honda Ford Others
Challenges for 3PL in India
High bureaucratic control Geographic diversity of India
Deep-rooted corruption
Infrastructure limitations in India
Complicated tax structure
Congested roadways and ports
Factors that are Driving Indian Logistics towards 3PL
1.Uniform tax regime (Value Added Tax)
2.Opened up rail freight operations
3.Focus on improving logistics infrastructure
Two major projects Golden Quadrilateral network and North-South-East-West (NSEW) Corridor
Uniform tax regime (Value Added Tax) Opened up rail freight operations Focus on improving logistics infrastructure
Geographic diversity of India Infrastructure limitations in India Complicated tax structure
Indian 3PL services Provider
Gati AFL Logistics
Blue dart logistics
DHL
Transport Corporation of India LTD Others (KTSPL,TVS)
FED-EX
4PL(Fourth Party Logistic)
1 May 2012
23
The Fourth-Party Logistics service provider (4PL) or Lead Logistic Provider (LLP) is a Business Process Outsourcing (BPO) provider.
Solution Integrator Lead Logistic Provider Industry Innovator
1 May 2012
24
The services provided by a 4PL provider are:
Freight Negotiations with 3PLs Freight Contract Management Transport Billing Continuous Improvement Programs Management of Service Providers IT Solutions Risk Management and Insurance Cash-flow Management.
1 May 2012 25
1 May 2012
26
Fifth-party logistics- Emerging Trends
Fifth-party logistics service i.e. the realization of full-scale operation of eprocurement. A key function of the 5PL is to aggregate the demands of the 3PL into a bulky volume for negotiating more favourable rates with airlines and shipping companies regardless of which generation of logistics solution belongs to all.
1 May 2012
27
Sixth Party Logistics (6PL) Emerging Trends
Sixth Party Logistics (6PL) to the outsourcing of a manufacturing and marketing for the organizations.
1 May 2012
28
CONCLUSION:
Logistics is one of the area of the supply chain i.e. growing at a tremendous phase as the Internet and E-Commerce are drastically changing the contours of business. Due to IT revolution and greater connectivity- influencing and enhancing the effectiveness of logistics, the time is not far when 5 PLs and 6 PLs may emerge which will probably we doing part of the manufacturing and marketing for the organizations.
1 May 2012 29
Conclusion- Road Ahead
The Indian 3PL market is set to grow tremendously in the next 5-7 years, spearheading the growth of logistics market. Several factors including governments support are instrumental in this growth. Though certain challenges remain to be addressed, the general trend is highly positive. With scenario highly favorable for them, the onus is now on 3PL service companies to offer quality services at affordable pricing, and delivering consistent results to maintain the momentum. For now, surely 3PL is the way forward for Indian Logistics Market.
1 May 2012
30
1 May 2012
31
Q&A
Thank You Kiran Salunkhe MD Siesta Logistics Corporation Ltd Bangalore Kiran.salunkhe@siestaindia.com
1 May 2012
32
