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Third, Fourth & Fifth Third, Fourth & Fifth Party Logistics:Party Logistics:3PLs, 4PLs & 5PLs3PLs, 4PLs & 5PLs

Dr.RezaDr.Reza ZanjiraniZanjirani FarahaniFarahaniPresented by:Presented by:

Shabnam Shabnam HajiRamezanHajiRamezan AlaghehAlagheh Band 85125053Band 85125053

Nooshin Vaghefi Nooshin Vaghefi 8512507885125078

May-07 3PLs, 4PLs & 5PLs 2

Outline

Third Party Logistics (3PLs): Definition, Services & (dis)advantages

Section ISection ISection I

Section IISection IISection II Fourth & Fifth Party Logistics (4PLs & 5PLs)

2006 Third Party LogisticsResults and Findings of the 11th Annual Study

Section IIISection IIISection III

Section IVSection IVSection IV Logistics Service Providers

Section VSection VSection V Case Studies & 3PL Usage in the World


Outline









Logistics system [1]

Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage ofgoods, services and related information between the point of origin and the pointof consumption in order to meet customers’requirements.

Entities: goods, vehicles, facilities,infrastructure.


Why 3PL is developing? [3],[4]

Logistics are primary source of profits for firmsLogistics systems can cause bottleneck in firmsDemand of advanced logistics servicesGlobalizationCustomer orientationLead time reduction


What is 3PL?

First party: shipper or supplierSecond party: buyerThird party: a firm acting as a middleman

A logistics triad is a: three-way relationship between a buyer of goods, the supplier of those goods and a logistics service provider moving and/or storing goods between buyer and supplier.[1]3PL means outsourcing logistics activities including transportation and warehousing to outside firms.[4]


What is 3PL?

Third-party Logistics is the use of an outside company to perform all or part of the firm’s materials management and product distribution function. [1]

3PL provider is an external provider who manages, controls, and delivers logistics activities on behalf of a shipper.[3]


What is 3PL?

A long-term formal or informal relationship between a shipper and a logistics provider to render all or a considerable number of logistics activities for the shipper.[5]Activities carried out by a logistics service provider on behalf of a shipper and consisting of at least management and execution of transportation and warehousing.[5]


Terms sometimes used in place of 3PL:[1]

OutsourcingContract logisticsTPLLogistics service providers (LSP)


Typical activities outsourced to 3PL [3]

The activities performed can include all or part of the logistics activities but at least management and execution of transport and warehousing should be included.

• Transporting• Warehousing• Inventory Control• Value-added services• Information and design service • Reengineering of the chain


Levels of Outsourcing[2]

Transactional OutsourcingTactical OutsourcingStrategic Outsourcing


3PL Has the following features at present:[4]Integrated logistics service providerContract-based service providerConsulting service provider

3PL provider can be classified into the:Asset-basedNon-asset-based

May-07 3PLs, 4PLs & 5PLs 13[6]


The conceptual model for 3PL [6]

InventoryManagement

Managingthird-partyLogistics

StrategicPlanning

InformationTechnology

CapacityPlanning

Transportation(shipping)


Function Activities TechnologiesStrategic Planning

Corporate/business strategy, development, resource management, market

segment analysis

Groupware, shared information such as WWW, EDI, ERP,

internetInventory

ManagementForecasting, location

analysis, order managementMRP, EDI,ERP, WWW, online

purchasingTransportation

PlanningShipping, forwarding, (de) consolidation, bill payment,

contract delivery

Groupware, Internet, Intranet, linear programming

Capacity Planning

Warehouse, human resource ,and transportation vehicles

capacity

Linear programming, MRP,ERP

Information Management

Performance measures and metrics, data collection,

reporting

EDI, e-commerce, Internet, expert system,

ERP[6]


How to select an appropriate 3PL?[23]

AHPANPFuzzy TOPSISSCOR

,…

May-07 3PLs, 4PLs & 5PLs 17[25]


Critical Success Factors in Effective Logistics Management [6]

Good planning of logistics systemWell-designed distribution organizationPrudent selection of allied companiesClose relationship with trading partnersElimination of barriers to logistics managementCommitment of top managementContinuous improvement in logistics


Why use 3PL?Advantages [2],[3],[4]

To save timeBecause someone else can do it betterTo share responsibilityTo re-engineer Distribution NetworkEconomies of scale and scopeSaving on capital investmentFocus on core competencyImproved efficiency, service and flexibilityRisk-SharingFast implementation of new system


Disadvantages

Searching effortsCoordination effortsInformation sharingLoss of control


Classification of 3PLs [3]

Their alliances to customers such as scope of partnership ,design and management Degree of customization and dedicationKnowledge level of shippers and providersMaterial flow characteristics To what extent they are geographically basedTo what extent 3PLs themselves are outsourcing the logistics servicesTo what extent 3PL business is the core business

May-07 3PLs, 4PLs & 5PLs 22[3][3]

May-07 3PLs, 4PLs & 5PLs 23[3][3]


Interactive effects of SCM and 3PL [4]


Possible appropriate combination of SCM and 3PL [4]


Outline









Evolution of 3PLs [3]

Third Generation( 2000 and beyond)

First Generation(1980 - 1990)

Second Generation(1990 – 2000)

Broader more integrated services

• Transportation / warehousing• Freight forwarders / brokers• Shipper’s agents

• Non asset-based companies• Asset-based companies increased

service offerings

• Online freight marketplaces• Web-based 3PLs• Increasing supply chain integration


A Note on Fourth Party Logistics (4PL) [1],[7]

The concept of 4PL was introduced a few years ago by Anderson Consulting.4PL is the evolution of supply chain outsourcing.Convergence of technology and rapid acceleration of e-capabilities have heightened the need for integrator for supply chain activities.


4PL4PL is an integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.

4PLs manage and direct the activities of multiple 3PLs, serving as an integrator.


4PL

Most 4pl companies have no assets.They provide services to customers in the form of responsibility and knowledge of how to fulfill the customer requirements.The physical movement of goods is outsourced to other 3PLs.

The term LSI is used for operators that provide only administrative services to their customers such as 4PL, forwarder, web-marketplaces,…


[7]


Who can deliver a 4PL solution? [7]

Availability of a large body of trained supply chain professionalsIf applicable, global capabilities, reach and resourcesAbility to manage multiple service providersStrong relationship and teaming skillsDelivery of world-class supply chain strategy formulation and business process redesignStrength in integrating supply chain technologies and outsourcing capabilitiesUnderstanding of organizational change issues


5PL [6]

Management of all parties of the supply chain in conjunction with e-Business. Using e-logistics network focusing on global operations.E-logistics can be defined as the transfer of goods and service using Internet communication technologies such as EDI, e-mail,WWW.


Outline




2006 Third Party LogisticsResults and Findings of the 11th Annual StudySection IIISection IIISection III




2006 THIRD PARTY LOGISTICSResults and Findings of the 11th Annual Study

[8],[9]


During the spring and summer of 2006, this study wasconducted as an extensive study about using 3PL services in:Western EuropeAsia-PacificLatin America.South Africa North Americathe Middle East


2006 Study Objectives

Measure the development and growth of the 3PL industry across major industry segments and across several diverse regions of the world.Summarize the current use of 3PL services.Identify customer needs and how well 3PL providers are responding to those needs.Understand how customers select and manage 3PL providers


2006 Study Objectives

Examine why customers outsource to 3PL providers.Investigate leading 3PL topics, including service offerings and capabilities, technology, structuring and managing effective 3PL relationships, and how customers view success and value from their 3PL relationships.Provide a strategic assessment of the future of the 3PL industry.


Respondents were asked to think of a:3PL as one that provides multiple logistics services for its clients and customers

and a :4PL as one that includes more advanced logistics outsourcing services than a conventional 3PL normally would provide.


Key industries targeted are:


Factors Responsible for Decision to Use 3PL Provider


Outsourced Logistics Services


Factors Relating to Selecting 3PL Providers


Number of 3PL Providers Used


Number of 3PL Providers Used


3PL Supply Chain Accomplishments


IT’s Necessity as Element of Overall 3PL Expertise


Views of Non-Users


Outline









Logistics Service Providers


Services: [10]

Global transportation managementDynamic transportation optimization (in an operational environment)Freight audit & paymentCarrier selection analysisTrack & TraceDocumentation and Customs clearanceTransportation strategies assessment


Services: [11],[12] Freight Forwarding Services

Logistic Services

Courier Services


Number of Hubs, Warehouses & Terminals: more than 450 Number of Aircraft: 420 Number of Vehicles: 76,200 Number of Countries & Territories: more than 222 Shipments per Year: more than 1.5 billion [11]


Services: [11],[13]FedEx ExpressFedEx GroundFedEx Supply Chain Services


Services: [14]Packaging Postponement Reverse logistics Multi-client warehouses and distribution centers Transportation management Supply chain consulting Supply chain network analysis and design Software and technology solutions Vendor-managed inventory


UPS Supply Chain Solutions: [11],[16]

Transportation and Freight Logistics Consulting Services Industry Solutions


Outline









Case 1: Freight Consolidation Policies [24]






Case 2: Life Sciences and Healthcare [8],[17]

Life sciences and healthcare have a higher-than-average focus on core 3PL services: transportation, warehousing, and customs clearance and brokerage. Hospital Logistics Inc. (HLI) provides supply chain services for medical and surgical supplies to the Canadian hospital market: it delivers the right products, at the right time, to the right hospital cart.


3PL Practices: An Indian Perspective [18]

Purpose: To carry out a comprehensive survey on 3PL practices in India and to establish the impact of usage of third party logistics services on business results .

Research Methodology: To determine the usage of third party logistics practices in India, a mail survey was conducted during 2002-2003.


3PL Practices: An Indian Perspective [18]Importance rating and extent of outsourcing of logistics activities


3PL Practices: The usage of third party logisticsin Saudi Arabia [19]

Purpose: To Examine the usage of third party logistics (TPL) services in Saudi Arabia

Research Methodology: A survey was conducted during the last quarter of 2003 and the first quarter of 2004 to determine the usage of TPL services in the kingdom of Saudi Arabia.


3PL Practices: The usage of third party logisticsin Saudi Arabia [19]

Information sources of contract logistics services providers


References1.Gunnar Stefansson, “Collaborative logistics management and the role of third-party

service providers”, International Journal of Physical Distribution & Logistics Management(2006), pp. 76-92

2. www.theabrahamgroup.com3. Suanne Hertz, Monica Alfredsson, “Strategic Development of Third Party Logistics

Providers”, Industrial Marketing Management” (2003) pp.139-1494.Toshinori Nemoto, koichiro Tezuka , “Advantage of Third Party Logistics in Supply

Chain Management”5. Halldorsson Arni and Tage Skjott-Larsen (2004), “Developing Logistics

Competencies Through Third Party Logistics Relationship”, International Journal of Operation and Production Management ,pp.192-206

6.A.Gunasekaran, (2003) ,”The successful management of a small logistics company”, International Journal of Operation and Production Management , pp.825-842

7. Bauknight Dow N. and Miller John R., “Fourth Party Logistics: The Evolution of Supply Chain Outsourcing”


References8. 2006 Third Party Logistics Results and Findings of the 11th Annual Study, Sited in

“www.3plstudy.com”9. 2005 Third Party Logistics Results and Findings of the 11th Annual Study, Sited in

“www.3plstudy.com”10. www.baxglobal.com11. www.wikipedia.org12. www.dhl.com13. www.fedex.com14. www.menloworldwide.com15. www.tnt.com16. www.ups.com17. www.tecsys.com18. B.S. Sahay and Ramneesh Mohan, (2006), " 3PL Practices: an Indian Perspective",

International Journal of Physical Distribution & Logistics Management Vol. 36 No. 9, pp. 666-689

19. Mohammed Sadiq Sohail and Obaid Saad Al-Abdali, (2005), "The usage of third party logistics in Saudi Arabia: Current position and future prospects" , International Journal of Physical Distribution & Logistics Management Vol. 35 No. 9, pp. 637-653


References20. Frazelle. Edward H. , "Supply Chain Strategy: The Logistics of Supply Chain

Management" , McGraw-Hill, 200221. Christopher, Martin, "Logistics snd Supply Chain Management: Strategies for Reducing

Cost and Improving Service" Financial Times , 199822.www.timesofindia.com23.Eleonora Bottani and Antonio Rizzi , (2004) “A Fuzzy TOPSIS Methodology to Support

Outstanding of Logistics Services”, Supply Chain Management: An International Journal, pp. 294-308

24.Jonah C. Tyana, Fu-Kwun Wangb, Timon C. Duc,(2003) “An Evaluation of FreightConsolidation Policies in Global Third Party Logistics”, The International Journal of Management Science, pp. 55-62

25. Sanjay Jharkhariaa, Ravi Shankarb,, (2007), “Selection of Logistics Service Provider: An Analytic Network Process (ANP) Approach”, The International Journal of Management Science, pp. 274-289

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