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

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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%

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Transportation Mgt 21%

Lead Logistics 4% Other 5%

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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

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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)

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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 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.

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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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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.
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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.

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Q&A
Thank You Kiran Salunkhe MD Siesta Logistics Corporation Ltd Bangalore Kiran.salunkhe@siestaindia.com

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