INDUSTRY OF 3PLBY- AVINASH KUMAR CHAUHANIB/004/2ND Sem/2015-17

CONTENTS

1. HISTORY2. INTRODUCTION TO 3PL3. OPERATIONAL AREA4. TYPES5. FACTORS INFLUENCING6. BENEFITS7. WHY TO USE 3PL8. 3PL IN TODAY’S BUSINESS

ENVIRONMENT9. CASE STUDY ON YUSEN LOGISTICS10.RISK OF USING OUTSOURCING

A BRIEF HISTORY OF LOGISTICS SYSTEM AND 3PL

•Logistics has been playing a fundamental role in global development for almost 5,000 years now. Since the construction of the pyramids in ancient Egypt, logistics has made remarkable strides. Time and again, brilliant logistics solutions have formed the basis for the transition to a new historical and economic era. Examples of this fundamental progress include the invention of the sea-cargo container and the creation of novel service systems during the 20th century. Both are integral parts of globalization today.

LOGISTICS TIMELINE1. Around 2700 B.C.: Material handling technology in

pyramid construction. Blocks of stone weighing several tons were transported and assembled at the construction site.

2. Around 300 B.C.: Revolutionary Greek rowing vessels – the new foundation of intercontinental trade

3. Around A.D. 700: Procurement logistics in the construction of the Mezquita Mosque – pillars came to Spain from all parts of the Islamic empire.

4. Around 1200: The international network known as the Hanseatic League – cooperation for transport bundling and international sea transport.

5. Around 1500: Progressive postal service in Europe – the first time-definite mail shipping service.

6. Around 1800: Discovery of new road conveyances and the railroad – expansion of logistics tasks through new technologies and means of transport.

7. Around 1800: Discovery of new road conveyances and the railroad – expansion of logistics tasks through new technologies and means of transport.

8. Around 1940: Military logistics during the world wars – transfer of military logistics concepts to the business world.During World War I, military logistics was the vital link in the network that supplied troops with rations, weapons and equipment. With the onset of World War II, logistics was further refined. As a result, logistics gained an important place in the business world as well.

9. 1956: Invention of the sea container – structural evolution of world trade and the boom of international flows of goods.

10. The concept of 3pl came into existence in between 70’s and 80’s as companies outsourced more and more logistics services to the 3rd parties, over time these 3rd party logistics provider expanded their services to cover specific geographies ,commodities, ,modes of transportation and integration of their services with existing warehousing and other auxiliary services becoming what we known as a “3PL”

INTRODUCTION TO THE 3PL

•A third party logistics is a firm that provides services to its customers of outsourced logistics services for part or all of their supply chain management functions. Third party logistics providers typically specialize in integrated operation , warehousing and transportation services most of the time these services goes beyond logistics and include value added services related to production and procurement of goods .•A/Q to the COUNCIL OF SUPPLY CHAIN MANAGEMENT

PROFESSSIONALS, 3PL is defined as a firm that provides multiple logistics services for use of customers, Preferably, these services are integrated, or bundled together by the provider. Among the services 3PLs provide transportation,cross-docking,inventory management, packaging, and freight forwarding.

• Third-party logistics (3PL) service providers are companies who provide a range of logistics activities for their clients. These are companies independent from the buyers and sellers but takes over some of their logistics function.•The activities are:-1.Transportation 2.Warehousing3.Inventory Management4.Freight forwarding5.Custom Clearance6.IT Solutions7.Cross-docking8.And several other value added services

Types of 3PL Providers1. Standard 3PL Provider (assets based):- The most basic form of a 3PL provider which

would perform activities such as Pick-Pack, Warehousing, and Distribution. For majority of these firms, the 3PL function is their main activity.

e.g. :- UPS,Caterpilar and IBN Activities:

Benefits:.Shorter cycle time.Lower freight costs.Visibility of pipeline inventory

Consol.Center

Point of Sale/Point of Use/Customers

IncomingMaterialsOr Products

Outsourced

De-conCenter

Customs

. Transport arrangement

. Customs clearance

. Shipment visibility

. Carrier mgmt / rate mgmt

Activities:Labor & supervisionReceiving, storage, shipping

Benefits:Lower capital investmentLower fixed/variable cost ratioFocus to the coreProfessional service

BulkWarehouse

DistributionCenter

IncomingProducts

CustomersRetailers

Outsourced In-house

Warehousing Based

2. Service developer (management based) :- This type of 3PL provider will offer their customers

advanced value added services such as tracking and tracing , cross docking , specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these type of tasks.

e.g. YUSEN Logistics , Diesel logistics, Delivery Logistics

etc Manufacturers DistributorsSupplier Customers /

Retailers

3. The customer Developer :- This is the highest level that a 3PL can

attain with respect to its processes and activities . This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.

e.g. :- AEI, Kuehne & Nagle, TVS logistics

4. The customer Adapter :- It comes with the request of customer and essentially takes over control complete of the company’s logistics activities. The 3PL provider improves the logistics dramatically, but does not develop a new service .The customer base for this type of 3PL provider is typically quite small. e.g. ADDOR capital

3PL

Economical

naturalsocial

legal Political

Environmental

Technological

Factors influencing 3PLs Development

BENEFITS

1. Greater flexibility2. Improved operations3. Enhanced customer service capabilities4. Reduction of capital expenditures (equipment and distribution centers)5. Matching up with Fluctuation

WHY TO USE 3PL

1.IT SAVES TIME AND MONEY2.IT OFFERS SCALABILITY AND

FLEXIBILTY3.IT MAKES VALUABLE EXPERTISE

ACCESSIBLE4.IT HAS DIVERSE RESOURCE

NETWORK 5.IT ENCOURAGES CONTINIOUS

OPTIMIZATION6.IT MAXIMIZES RATE OF GROWTH7.IT ENUSRES SECURITY8.IT IMPROVES QUALITY9.IT IMPORVES CUSTOMER SERVICE 10.IT PRIORITIZE ADVANCE

TECHNOLOGY

Influence of 3PL in today's Business Environment •The global 3PL market reached $ 750 billion in 2015, and grew to

$157 billion in the US•Demand growth for 3PL services in US ( 7.4% YoY ) outpaced the growth of the US economy in that year•Today 80 percent of all fortune 500 companies and 96 of every fortune 100 are using some form of 3PL services.

The 3PL is outsourcing of various elements of logistics and distribution by companies to logistics service provider .Today shipper outsource some or all the supply chain management functions to the 3pl service provider.These are responsible for handling customer logistics requirement and performs tracking tracing and other services

It has been forecasted that 3PL services will grow at a CAGR of 2.14 % till 2018

The 3PL industry is expected to become a $90 million industry from the current $58 million, as around 55 per cent of Indian companies are outsourcing logistic services like supply chain management and warehousing, which used to be between 10-15 per cent, ten years ago. “One of the contributing factors for this is Value Added Tax (VAT) which is expected to drive Indian industry towards using more 3PL services” The Indian Logistics Market generates annual revenue of USD 50 to 90 Billion, but the share of 3PL providers in this huge market, is very small. This is very much in contrast to the US Industry, which is estimated at USD 105 Billion

PRESENT/FUTURE TRENDs OF 3PL IN INDIA

Case study on Yusen logistics..

Optimizing International Flows Delivers Step-Change For Global Pharmaceutical

ManufacturerYusen Logistics was initially appointed by this leading global pharmaceutical manufacturer to implement lean principles in 2007, which involved re-engineering its European flows as part of its international requirement to deliver over 1 billion packs to patients.

As part of its lean strategy, the customer was seeking tooptimize freight movements within its international supplychain across the modes of ocean, air and road to deliverfurther step-change benefits. The solution covers 28manufacturing sites worldwide.Yusen is responsible for this customer’s product movementsbetween selected global manufacturing sites into Europe,movements from global manufacturing sites leaving Europe,as well as all inter- and intra- European flows. The productrange is held under three different temperature regimesand Yusen handles it at every production stage, from activepharmaceutical ingredient (API) and excipients, through tobulk tablets, finished tablets, samples and packaging. This isa highly complex and demanding supply chain, with deliverypoints including manufacturing sites, wholesalers, inmarketdistributors and laboratories.

CUSTOMER CHALLENGE :-

YUSEN LOGISTIC’S SUPPLY CHAIN SOLUTION

Yusen Logistics refocused the solution infrastructuredesignating its GDP approved, specialist healthcaredistribution centre at Antwerp the primary hub. The Antwerpfacility has excellent access for air and ocean movementsand is at the heart of the Pharmaceutical Superhighway,Yusen’s Control-Tower driven European multi-modal network.The award-winning Superhighway, which carries over1.2million pallets pa, provides a number of pharmaceuticalmanufacturers with high security, temperature controlledcoverage, fl exible GDP compliant solutions, which ensurecomplete product integrity and legislative compliance.The Control Tower provides operational alignment betweenthe customer’s central procurement function and its regionaland global manufacturing sites.

Yusen’s integrated IT system manages all transactions fromreceipt to final delivery, providing full shipment transparency.Yusen’s strategically developed VISION transportmanagement application has been tailored to pharmaceuticaltracking requirements. Using VISION, the planning team canbuild millruns, co-loads, round trips and decide whether tocross dock product or deliver direct. VISION also manageshauler payment and generates customer invoices. Thesystem ensures receipt of POD’s and temperature reports,providing reports to support operations and KPI data.

•Airfreight movements have been minimized and ocean maximized, consolidating inbound freight directly into the European network, saving cost. Where airfreight is essential, it has been optimised,maximising quality and temperature performance, delivering cost benefits from enhanced consolidation. Expedited shipments have been halved as a result of customerconfi dance in the robustness of the solution. Overall, Yusen has improved quality, eradicated risk and achieved on-going cost-down, faced with challenging timescales, temperature demands and security requirements

CUSTOMER BENEFITSMajor benefits have been delivered across the air, ocean and road aspects of the solution, with many individual elements of the overall solution re-engineered to optimize freight, delivering continuous improvement and cost-down. Refining the road solution focused on consolidation intoYusen Antwerp. Maximizing co loading opportunities for onward movement has enabled enhanced performance, reduced lead times and costs, whilst achieving performance targets.

CUTOMER CHALLENGE:-• Optimize freight movements within an international supplychain across the modes of ocean, air and road• Global, inter- and intra- European flows• Complex range of products at different manufacturing stages, 3 temperature regimes

YUSEN LOGISTIC’S SOLUTION:-• Primary hub in Antwerp supported by Yusen Logistics’ award-winning Pharmaceutical Super high way, a Control-Tower driven European multi-modal network• Maximized ocean movements, minimized airfreight• Maximized consolidation and co-loading optimizing road movements

BENEFITS:-• Continued reduction in global cost per pallet• Consistent delivery in full, without temperatureexcursions 99.8%• Optimization of transport mode, deliveringcontinuous improvement and cost down

SUMMARY OF CASE STUDY

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Risks of Out-sourcing Logistics Loss of internal logistics management

capabilitiesBiased choice of service providersLeakage of sensitive data and informationService degradation

Less reliable? Longer order cycle time? Emergency response?

Loss of control and representationReduced contact with final customer

3PL for outbound logistics interact with your customers, you become less visible to your customers

Tips for Successful Implementation1) Have an outsourcing strategy. Know what your outsourcing strategy is. It needs to be well

thought out and measured against in house solutions and capabilities.

SWOT analysis. As a company you should understand the strengths, weaknesses, opportunities and threats of outsourcing logistics, rather than keeping them in house.

2) Do your homework. Do a comprehensive study

Clearly document advantages, challenges, costs and benefits. Document expectations

Set down expectations in clear terms and include current costs.

Tips Continued… Create a robust selection process.

Invite companies in to give a formal presentation without giving requirements. This can help document their strengths and weaknesses.

Make a site visit to the 3PL, and talk with its existing customer.

3) Measure and review performance Have a efficient and accurate measurement system.

Qualitative measures that focus on effectiveness and quantitative measures that focus on efficient utilization.

Have an efficient costing system This will help you to understand the costs involved in

outsourcing. “Are we making money doing this?”

Tips Continued…4) Create an Implementation Strategy Create a project plan road map

Be clear who does what, create a project management team with members from both organizations and review progress vs. planned milestones.

5) Nurture the Relationship Both Parties must nurture the relationship to make

outsourcing successful. Create mutual trust, respect and a sense of integrity.

THANKYOU VERY MUCHHAVE A NICE DAY