Outsourcing

Moving some of the firm's internal activities and decisions to

outside providers

1. Should it outsource – Yes

2. How much should it outsource – As much as possible
3. What process should it outsource - anything which is not a
Core Competency area
Examples of outsourcing

Manufacturing

Design

Problem solving

Advertising

HR/Accounts

Logistics and transportation.

Different Players
Layers to Logistics Services

Actors
1 Services

Cargo owners
P Manufacturing, Retailing

Carriers
L
2PL Transportation

Service integration
3PL
Logistics service
Logistics
providers

4PL
Lead logistics providers Supply chain
& consultants management
 I PL and II PL

A First-party logistics provider (abbreviated 1PL) is a firm or an individual that needs to

have cargo, freight, goods, produce or merchandise transported from a point A to a point B. The
term first-party logistics provider stands both for the cargo sender and for the cargo receiver.

A Second-party logistics provider (abbreviated 2PL) is an asset-based carrier, which actually

owns the means of transportation
 shipping lines, which own, lease, or charter their ships,
 airlines, which own, lease, or charter their planes,
 truck companies, which own, or lease their trucks,
 rail companies, which own their trains,
 warehouse owners.
 3 PL and 4 PL

 A Third-party logistics provider (abbreviated 3PL) - a firm provides

multiple logistics services for use by customers. Preferably, these services
are integrated, or bundled together, by the provider.
 Among the services 3PLs provide are transportation, warehousing, cross-
docking, inventory management, packaging, and freight forwarding.

 A Fourth-party logistics provider (abbreviated 4PL) - a lead logistics

provider, or 4th Party Logistics provider, is a consulting firm specialized
in logistics, transportation, and supply chain management. 
 Sometimes even an exclusive arrenagement
The Reverse Logistics Process
 Reverse Logistics

 Reverse logistics refers to all procedures associated to product returns,

repairs, maintenance, recycling and dismantling for products and
materials.  Overall it incorporates running products in reverse through the
supply chain to gain maximum value.
 Why is it important to deal with organisations who implement reverse
logistics?
 Organisations that implement reverse logistics are able to improve
customer service and response times; reduce environmental impact by
reducing waste and improve overall corporate citizenship.
 An example of Reverse Logistics

Let’s
 look at an example; a manufacturer produces product A which moves through the
supply chain network reaching the distributor or customer.  Any process or
management after the sale of product A involves Reverse Logistics. 

If
 product A happened to be defective the customer would return the product. The
manufacturing firm would then have to organise shipping of the defective product,
testing the product, dismantling, repairing, recycling or disposing the product. 

Product A will
 travel in reverse through the supply chain network in order to retain any
use from the defective product.  This is what reverse logistics is about.