Mr.Srinivasan H.R.

Gaining The Competitive Edge Thru 3PL
Multi-Client Logistics Centre - The Back Bone of Third Party Logistics
rinivisan!"!#
Managing $irector
em%a&ang hriram 'ntegrated Logistics (P) Ltd!
PROBLEM DEFINITION:
Most corporates traditionally dealt it! t!e "asic services o# p!ysical distri"$tion and stora%e services
independent o# one anot!er& t!ro$%! dedicated #acilities. 'osts& !ence& ere #i(ed and prod$ctivity
en!ance)ent as possi"le only t!ro$%! vol$)e %rot!. T!is& !oever& )ore o#ten t!an not& as o##set
"y in#lation. Since eac! #$nction as )ana%ed independently& )$c! ti)e as lost in pannin%&
coordination and p!ysical )ove)ent o# )aterial #ro) t!e sta%e o# ra )aterials to #inal delivery to
c$sto)ers.
T!e need o# t!e !o$r as in )a*in% logistics chain as *short* and its cost as *varia%le* as possi"le.
Lo%istics "ein% a derived de)and& )any co)panies anted to !ave a price de#inite or a transactional
price to $se in t!eir on "$d%etin% process& since t!eir on costs are $s$ally "$ilt on a +per $nit+ "asis.
T!e traditional 'ost pl$s arran%e)ent o$ld )ean t!at t!e total costs !ave to "e restated into a
transactional "ase #or internal $se. Most clients t!ere#ore #elt t!e need #or a )et!od to convert t!e
e(istin% ,#i(ed cost )odel, to a ,varia"le cost )odel,.
M-R.ET S/R0E1 2 RE0IE3:
- St$dy cond$cted "y Se)"aan% S!rira) to identi#y t!e *ey drivers led to t!e concl$sion t!at
• 'o)panies pre#er to vie lo%istics cost as a varia"le co)ponent o# t!eir total cost.
• 'o)panies increasin%ly #oc$s on ti)e val$e o# )oney and see* to red$ce total cycle ti)e 4
cost.
E0OL/TION:
T!e evol$tion o# t!e )$lti client lo%istics centre is e(plained in t!e c!art:
Mr.Srinivasan H.R.
+PPL, C"-'. M-.-GEME.T
Characteristics
5rd Party provides
• la"o$r
• c$to)er
pre)ises
Characteristics
5rd Party provides
• la"o$r
• "asic
co)ponent
services
• c$sto)er
provided
pre)ises
4#acilities
Characteristics
5rd Party provides
• la"o$r
• co)ponent
services
• dedicated
#acilities
• possi"ility o#
val$e added
services
Characteristics
5rd Party provides
• )$lti
client
#acilities
• inte%rated
services
• ran%e o#
val$e
added
services
Benefits
• La"o$r
pro"le)s
)ini)ised
• Decrease in
)an poer
Benefits
• F$rt!er
red$ction in
)an poer
• -voids
i)ple)entation
!assles in S'M
Benefits
• F$rt!er
red$ction in
)an poer
• Red$ction in
Invest)ent
• Better #oc$s
on core
co)petencies
6
Man$#act$rin
%& Mar*etin%
Benefits
• 0aria"le
pricin%
• M$c!
lesser ti)e
to )ar*et
• Specialisat
ion in
services
• No
additional
invest)ent
6 "etter
ret$rn on
assets
• No
separate
or%anisatio
n #or S'M
• Better
operations
)ana%e)e
nt

Mr.Srinivasan H.R.
T!ird Party Lo%istics )ana%e)ent !as evolved %rad$ally #ro) t!e sta%e !en #irst corporates
outsourced la%our re7$ire)ent& as a )eas$re to red$ce #i(ed costs and to avoid la"or related disp$tes.
T!e pre)ises and ot!er #acilities incl$din% t!e or%anisational reso$rces o# )ana%erial ti)e and e##orts
re7$ired #or s)oot! #$nctionin% o# t!e s$pply c!ain& $nderstood as transportation and are!o$sin%&
ere still provided and )aintained "y t!e co)panies.

T!e second sta%e in t!e evol$tion sa t!e "asic co)ponent services o# transportation and are!o$sin%
also o$tso$rced& "$t )ostly to di##erent services providers. Hence !ile t!e or%anisation re7$ired at
every distri"$tion point as red$ced& a separate lo%istics )ana%e)ent tea) as still re7$ired to
coordinate it! t!e vendors on #lo o# )aterials.
T!e t!ird sta%e as a )a8or develop)ent over t!e second& in t!at& t!e lo%istics co)ponent services
providers started providin% and )aintainin% t!e #acilities re7$ired to render services li*e t!e are!o$se
pre)ises& and or%anisin% ve!icles #or p!ysical distri"$tion etc. T!is as also t!e #irst sta%e& !en so)e
)ore val$e added services ere provided alon% it! t!e "asic co)ponent services li*e repac*a%in%&
9.etc. Typically& services providers at t!is sta%e ere proprietors or corporations providin%
local2re%ional services& savin% sin%le c$sto)ers t!ro$%! dedicated #acilities.
T!e latest sta%e in t!e evol$tion o# t!ird party lo%istics services& and a 7$ant$) leap #ro) earlier
practices is t!e advent o# )$lti6$ser #acilities )aintained "y pro#essional lo%istics services providers.
T!ese T!ird Party Lo%istics Services Providers :TPLs; !ave increasin%ly !elped corporates convert t!eir
s$pply c!ain )ana%e)ent into a co)petitive ed%e. T!ey do t!is "y providin% t!e entire ran%e o#
lo%istics services $nder one roo#& passin% on t!e "ene#its o# econo)ies o# cost& ti)e and val$e to t!eir
c$sto)ers.
3H1 M/TI /SER F-'ILITIES -RE HERE TO ST-1:
M$lti $ser #acilities anser t!e )ost critical re7$ire)ents o# today,s "$sinesses 6 red$cin% t!e s$pply
c!ain cycle ti)e and costs.
/aria%le pricing structure
T!e )ost si%ni#icant aspect o# a )$lti $ser #acility is t!e a"ility to render services on a 0/aria%le Cost
model0! In a dedicated #acility& t!e costs inc$rred "y t!e services provider is #i(ed& e(cept #or t!e cost o#
!andlin% )aterials. Hence& pricin% pattern adopted ill alays "e a variation o# t!e 0Cost Plus model0
!ere it o$ld not "e possi"le to in#l$ence costs directly in proportion to t!e vol$)es transacted& and
prod$ctivity i)prove)ent prod$ces di)inis!in% ret$rns to t!e services provider. In a )$lti $ser #acility&
reso$rces not $sed "y one c$sto)er o$ld "e t!e opport$nity to $se it #or anot!er& and can "e c!ar%ed to
t!e c$sto)er on a transactional cost "asis. T!is 0 Pay as you use0 pricin% )odel ens$res t!at t!e
c$sto)ers can plan #or t!eir lo%istics costs as varyin% in proportion it! vol$)es.
#ange of ervices under one roof
M$lti $ser #acilities o##er 'ntegrated logistics services $nder one roo# incl$din% c$sto)s clearance&
stora%e& p!ysical distri"$tion and also a variety o# val$e added services& to s$it c$sto)ers , re7$ire)ents.
For providin% t!e entire %a)$t o# lo%istics services #ro) c$sto)s clearance 4 #rei%!t #orardin%&
stora%e to pri)ary 4 secondary distri"$tion& t!e lo%istics centres are e7$ipped it! t!e relevant #acilities
li*e )aterial !andin% e7$ip)ent& appropriate are!o$sin% #acilities and #leet o# ve!icles. T!is o$ld
ena"le t!e) to )a(i)ise t!ro$%!p$t o# vol$)es transacted. In practice& t!e cost and ti)e o# stora%e can
"e drastically )ini)ised& pro"a"ly ne%ated& t!ro$%! 1ust 'n Time )ove)ent o# )aterials& cross
doc*in% etc. T!e costs o# transporation can also "e )ini)ised "y proper netor*in% and $sin% +!$" and
spo*e+ patterns o# distri"$tion& it! t!e lo%istics centres as t!e consolidation points.
Mr.Srinivasan H.R.
T!is reduces time nor)ally lost "eteen vario$s inter)ediate sta%es "e#ore prod$cts reac! t!e #inal
c$sto)er li*e in pac*a%in% la"elin%& Pre Delivery Inspection& etc.& and attendant indirect costs li*e
or*in% capital interest etc.
/alue -dded ervices
3it! t!e "o$ndaries o# lo%istics )ana%e)ent constantly e(pandin%& even di##erentiation "eteen
)an$#act$rin% and s$pply c!ain )ana%e)ent #$nctions are #adin%. More and )ore activities li*e
pac*a%in% #inis!ed %oods& recon#i%$rin% ra )aterials2#inis!ed %oods to s$it conveniences& *ittin%&
la"ellin%& are increasin%ly "ein% done as val$e added services. Si)ilarly services !ic! ere !it!erto
part o# t!e sales 4 7$ality control #$nctions li*e Pre Delivery Inspection& '!ec*in% 7$ality para)eters o#
prod$cts& Reverse lo%istics Pay)ent 'ollection and "an*in%& con#or)in% to sales ta(& e(cise d$ty
re7$ire)ents etc.& are also "ein% !andled as val$e added services.
T!e t!ird party lo%istics provider can provide as )$c! or as little o# t!ese val$e added services as
re7$ired "y t!e c$sto)er& s$##iciently c$sto)ised to s$it !is individ$al re7$ire)ents.
haring of resources
M$lti $ser #acilities !ave all t!e reso$rces re7$ired #or e##icient #$nctionin%& and $ses t!e) #or several
clients. T!is increases t!eir capacity $tilisation& and translates to lesser s!are o# costs devolvin% on eac!
c$sto)er $sin% t!e #acility.
2le3i%ility
Fle(i"le operations are vital in non standard sit$ations s$c! as varyin% si<e s!ip)ents& opti)isation o#
stoc* !oldin% costs vis6=6vis lar%er space 2 )ore n$)"er o# are!o$ses. Fle(i"le lo%istics )ana%e)ent
can also !elp in ac!ievin% strate%ic %oals& since it res$lts in e##ective $se o# reso$rces and i)proved
operations )ana%e)ent. In an era o# rapid %lo"alisation& #le(i"le lo%istics )ana%e)ent can play a )a8or
role in developin% corporate strate%y and copin% it! c!an%e.
'nformation TechnologyM$lti $ser lo%istics centres are e7$ipped it! a s$ite o# so#tare& )$c! "etter
t!an t!ose o##ered in a traditional syste). S$c! advanced so#tares incl$de Operations Researc! Models
and Decision S$pport Syste)s to s$pport in desi%nin% distri"$tion patterns and plannin% #or "etter
reso$rce )ana%e)ent. T!ey also !ave t!e tec!nolo%y to !elp c$sto)ers "etter #oc$s on t!eir "$siness
and ar) t!e) it! in#or)ation #or plannin% prod$ction& #lo o# inventory and )onitorin% prod$ct li#e
cycle. T!is o$ld place t!e) "etter on t!e 0price value curve0!
'nnovation and Customisation
T!ird party lo%istics services provider o$ld "e constantly in t!e process o# i)provin% and strea)linin%
processes #or vario$s ind$stries and c$sto)ers. S$c! ne ideas& syste)s and "est practices and "e
adapted across ind$stries. /sers o# t!e lo%istics centre& can reap t!e advanta%e o# contin$o$s
i)prove)ent& it!o$t any e(tra e##ort.
Mr.Srinivasan H.R.
ynergy in operations
T!e val$e o# syner%y in processes and reso$rces $sed 'mpacts profita%ility significantly t!ro$%! "etter
e##iciencies& red$ced operatin% costs& increased asset prod$ctivity and interest costs o# red$ced or*in%
capital. >$alitative "ene#its ens$rin% to t!e c$sto)ers incl$de "etter "$siness #oc$s& increased control
over syste)s& s)oot! in#or)ation #lo and accelerated reen%ineerin% "ene#its.
3it! e6co))erce "eco)in% a reality& #$t$re #or M$lti 'lient lo%istics centres is certain %iven t!e #act
t!at de)and and cons$)ption pattern can "e very s*eed.
rinivisan!"!#
Managing $irector
em%a&ang hriram 'ntegrated Logistics (P) Ltd!
Bac* To Ho)e