Logistics Partnering-Third Party Logistics(3PL) &Fourth Party Logistics ( 4PL)-A Perspective- Indian Context

Presented by :- Kiran SalunkheMD Siesta Logistics

?What comes to our mind when we think about transportation as a function of logistics

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Support fixtures

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 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.

LOGISTICS

Why Third Party Logistics(3PL) Required?

Description Savings Realized

Route Design & Optimization

Closed Loop Dedicated Operations

Mode Conversion

Core Carrier Management

Rate Negotiation & Audit

Inbound Consolidation

Reverse Logistics

DC Location Realignments

Reduced Inventory

10-15%

15%

10-15%

5-10%

4-5%

20-25%

10-15%

10-12%

7-10%

Contract Logistics Savings Potential

Need for 3PL originated Globalization Manufacturing revolution – JIT/ Lean sigma / TPS Reengineering- BPR Technological growth

Outsourcing of logistics

“Third-party Logistics is simply the use of an outside company to perform all or part of the firm’s 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 )

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Introduction to 3PL

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Services Provided By 3PL’s

Transportation Mgt21%

Private Fleets7%

Intermodal4%

Warehousing21%

Value Added20%

International9%

Integrated9%

Other5%

Lead Logistics4%

Types of 3PL providersHertz and Alfredsson (2003) describe four categories of 3PL providers:

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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

3PL Market in India

Year 2005 2012(Estimated)

3PL market(in billion) 890.4 3556.7

Growth Rate

(in %)--- 21.9

Challenges for 3PL in India

Factors that are Driving Indian Logistics towards 3PL

Two major projects Golden Quadrilateral network and North-South-East-West (NSEW) Corridor

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4PL(Fourth Party Logistic)

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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

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• 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.

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Fifth-party logistics- Emerging Trends• Fifth-party logistics service i.e. the

realization of full-scale operation of e-procurement. 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.

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Sixth Party Logistics (6PL) - Emerging Trends

• Sixth Party Logistics (6PL) to the outsourcing of a manufacturing and marketing for the organizations.

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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.

CONCLUSION:

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Conclusion- Road AheadThe Indian 3PL market is set to grow tremendously in the next 5-7 years, spearheading the growth of logistics market. Several factors including government’s 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.

 

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Q&A

Thank You

Kiran Salunkhe

MD Siesta Logistics Corporation Ltd

Bangalore

Kiran.salunkhe@siestaindia.com