third party logistics - class4

10
Mayuresh Unde 27 th August, 2011 Third Party Logistics (3PL)

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Page 1: Third Party Logistics - Class4

Mayuresh Unde

27th August, 2011

Third Party Logistics (3PL)

Page 2: Third Party Logistics - Class4

Third Party 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)

The company acts as a ‘third party’ facilitator between seller/manufacturer (the ‘first party’) and buyer/user (the ‘second party’).”

Page 3: Third Party Logistics - Class4

3PL Vs Transportation Services

Page 4: Third Party Logistics - Class4

Types of 3PL providers

Transportation

•Emphasis on using Transportation based assets

•Co-operation for more comprehensive logistics offerings

Warehouse / Storage

•Primary focus on Warehousing & Inventory Management

• One of the oldest contracting or out-sourcing method

Forwarder

•Very independent middlemen with forwarder roles.

•Non-asset owners that provide a wide range of logistics services.

Financial

•Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory.

Information

•Significant growth and development in this category of Internet-based services

• Business-to-business, electronic markets for transportation and logistics services.

Page 5: Third Party Logistics - Class4

Levels of 3PL providers

•Transactional Outsourcing: Based on transactions, with no long term contracts and no bonding between the 3PL and the outsourcing company.

•Tactical Outsourcing: Outsourcing on a long term basis with negotiated contacts and integrated IT systems to facilitate free information flow and create supply chain visibility.

•Strategic Outsourcing: Based on long-term relationships with successful outcomes, 3PL companies become partners in supply chain management and establish transactional transparency.

Page 6: Third Party Logistics - Class4

Implementation Steps of 3PL provider

• Perform Due Diligence• SWOT Analysis

• Define Outsourcing Strategy• Identify challenges & document expectations• Define advantages, costs •Selection of 3PL based on a robust selection process

• Create an Implementation Strategy• Define project plans, roles & responsibilities• Define contract terms, joint investments, losses shared

• Measure & Review Performance• Define an effective performance measurement plan • Periodic reviews

• Nurture the relationship• Create mutual trust, respect and a sense of integrity

Page 7: Third Party Logistics - Class4

3PL – Pros & Cons

• Advantages

o Cost reduction

o Focus on core competency

o Improved return on assets & inventory turns

o Improved efficiency, service and flexibility

o Access / Expansion to unfamiliar markets

• Disadvantages

o Loss of control

o Impact on in-house workforce

o Inability to change rapidly for changing business needs

Page 8: Third Party Logistics - Class4

Comparative Analysis

Page 9: Third Party Logistics - Class4

4PL

4PL is a firm that leverages the capabilities of 3PLs and suppliers of technology based services through a centralized point of contact

Page 10: Third Party Logistics - Class4

Thank You!

Q & A