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3PL in Supply Chain Management

3PL in Supply Chain Management

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Published by Adrian Liew
Supply chain is one of the key trade enabler and is of a connected network of operations/partners. The 3rd party logistics (3PL) partners play a key role in gaining the supply chain efficiency and in optimizing it. More & more organizations are using 3PLs through outsourced supply chain services. Hence having some of the basic knowledge about 3PL operations and factors influencing in Supply Chain Management are critical. This short article is trying to address the supply chain & 3PL service areas briefly, which will help to articulate the current trends and environments.
Supply chain is one of the key trade enabler and is of a connected network of operations/partners. The 3rd party logistics (3PL) partners play a key role in gaining the supply chain efficiency and in optimizing it. More & more organizations are using 3PLs through outsourced supply chain services. Hence having some of the basic knowledge about 3PL operations and factors influencing in Supply Chain Management are critical. This short article is trying to address the supply chain & 3PL service areas briefly, which will help to articulate the current trends and environments.

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Published by: Adrian Liew on Jul 10, 2012
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3PL in Supply Chain Management by Jaishankar K S Page 1
http://www.linkedin.com/groups/SCS-Supply-Chain-Management-SIG-2427903
 
http://www.facebook.com/SCS.SCM/ 
3PL in Supply Chain Management
Jaishankar K S(ks.jaishankar@dhl.com)
 
Supply Chain Systems Consultant, Solutions Delivery, DHL Customer Solutions & Innovation,Singapore
 Abstract 
-
Supply chain is one of the key trade enabler and is of a connected network of operations/partners. The 3
rd
party logistics (3PL) partners play a key role in gaining the supplychain efficiency and in optimizing it. More & more organizations are using 3PLs throughoutsourced supply chain services. Hence having some of the basic knowledge about 3PL operationsand factors influencing in Supply Chain Management are critical. This short article is trying toaddress the supply chain & 3PL service areas briefly, which will help to articulate the currenttrends and environments.
 
 Index Terms
 
 – 
 
Supply Chain Models, Supply Chain Management, SCM, 3PL Services
 I.
 
INTRODUCTIONHistorically, the Supply Chain Management was dependent on the individual business entity and was
“Point
-To-
Point”. There was a frequent changing hand in the supply chain
that means it was not an End-To-End connected network, in other words very much disconnected network. This was essentially an
“entity centric” model, which involved higher inventory and the operations are characterized as capital
intensive with long cash-to-cash cycles [1].The development of applied computing technology and introduction of computers in business was aparadigm shift. This enhanced & introduced end-to-end view of overall operations of an organization.With this development, the globalization and initiatives of productivity gain within the globalorganizations, increased outsourcing of their supply chain activities. The last two decades saw increasedcontract logistics or buying services from 3
rd
Party Logistics (3PL) service providers. The globalization,growth oriented economic development and its market opening further increased the necessity of end-to-end view of the operations and a special management practice i.e., Supply Chain Management (SCM)evolved.The initial involvement of 3PL was on Freight Forwarding and Customs Brokerage. Some of the largeorganizations dealt this with directly asset owned carriers (e.g., Ocean/Sea Carriers with Vessels) andlocal agents for customs clearance. Others used Freight Forwarders i.e., organizations used Non-VesselOperator (NVO) or Non-Vessel Operating Common Carrier (NVOCC). The NVO / NVOCC facilitatedthe transportation coordinating with the transporting organization and the Ocean-Carrier / Ocean-Liners.Similarly for the Air-Freight, Air-Liners, Freight Forwarders & Customs Brokers were involved and thisinvolved usually Port-To-Port transportation and Export & Import Customs Clearance.In pre-globalization, limitations in market access, the activities like warehousing and domesticdistribution to the wholesale and/or retail chain are basically managed by the importers in the importing
 
3PL in Supply Chain Management by Jaishankar K S Page 2
country. However, the globalization and opening of economy attracted the global organization to havelocal offices to gain market share and establish themselves in the growing economy/market. All the aboveglobal economic changes created the need for distribution centers (warehouses) and domestictransportation services. The importance of tightly connected network with extended/outsourced SCMmodels increased. The competition, graining quick access to the market and for efficient supply chain,organizations looked at 3PL services through contract logistics. The contract logistics extended the scopeof 3PL activities, from international (port-to-port) transportation, customs brokerage to warehousing,domestic transportation and various other value-added logistics operations.II.
 
SUPPLY CHAIN MANAGEMENT
The logistics and supply chain professionals increasingly use “Supply Chain” to refer to “the process
and/or effort in producing and delivering the finished product to a give
n market or customer segment” [2
].
It is essentially a “connected network” that involved various parties (e.g., supplier, transporters, logistic
service providers, manufacturers, distributors, retailers, customers, government agencies, commercialagencies, financial institutions etc.,Supply chain management evolved focusing on gaining efficiency and synergies within the internalfunctional management [3]. Various models aim to have better utilization and coordination of the internal
corporate functions. The globalization/global economy and customer expectations (on product’s quality,
usability/function, cost and services) are 2 key drivers for the increased demand for efficient supply chainmodels [4
]. The value of supply chain greatly correlated with “Supply Chain Profitability” [
5]. SCMdeals with the management of supply chain network to maximize the total supply chain profitability.Inventory Control Systems (ICS), Bill of Materials (BOM) and Material Requirement Planning (MRP),MRP II, Enterprise Resource Planning (ERP), Electronic Data Interchange (EDI and standards like ANSIX.12, EDIFACT, RosettaNet etc.,) and other computing/business solutions have been helpingorganizations to better manage the supply chain. Below diagram (Figure-1) shows some of thedevelopments in this area [1];
 
3PL in Supply Chain Management by Jaishankar K S Page 3
Figure-1: Information Technology in Supply Chain (1971-2010)
The ERP deployment alone was not able to fulfill the complex supply chain management in theinterconnected network. Specialized solutions evolved and were applied in Operations/Execution,Tactical and Strategic management levels. Below diagram (Figure-2) [1] shows the strategic fit of SupplyChain Systems.
Communication Technology
PBX & Virtual PBX
eFAX, Email
VoIP, IVR
Use of Computing Technology
Internet
EDI: RosettaNet
Oracle Fusion, GXS, axway, IBM WebSphere& DataStageTX, webMethods,SAP NetWeaver. TIBCO
I2 Technologies, Manugistics, ILOG etc.,
Seibel, Aribaetc.,
IBM Cognos, SAP BusinessObjects, etc.,
TransPro, Class, Optiant, Demantra
RFID, GPS, Pick to Light/Voice etc.,
IT Applications
ERP, SCM, CRM, WMS, TMS, BI Applications
Widely used Fax Technology
Use of Computing Technology
EDI: ANSI X.12, EDIFACT etc.,
SAP R/3, BAAN, JD Edwards, Oracle,Peoplesoft,
Barcoding
FMS / TMS & WMS
1971 To 19901991 To 2010
Time
   I   T
International Trade Governance and/or Pacts /Agreements and Trade Associations
Supply Chain Management:
MRP II, CIM, ISD
TQM, ERP
Freight & Inventory Management
 
Globalization: Increased Free Trade Agreements & Trade Associations
Increased Outsourcing
Supply Chain Management:
Outsourced SCM & Business Analytics
JIT & VMI, MIT, Cross-Dock, Kitting
Direct Factory Shipments
Faster Networks (Time-To-Market)
eCommerce & eProcurements
Models: I2M, FG, SPL, CLS/Service Logistics, Recalls / Emergency
Trade Compliance
Optimization & Integration
Data Analytics and BPM & BAM Analytics
   B   u   s    i   n   e   s   s   P   r   o   c   e   s   s   e   s   I   n    f   o   r   m   a   t    i   o   n   T   e   c    h   n   o    l   o   g   y   D   e   v   e    l   o   p   m   e   n   t

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