Third, Fourth & Fifth Party Logistics: 3PLs, 4PLs & 5PLs nooshin Dr.Reza Zanjirani Farahani Presented by: Shabnam HajiRamezan Alagheh Band Nooshin Vaghefi
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Outline Section Section II
Third Party Logistics (3PLs): Definition, Services & (dis)advantages
Section Section II II
Fourth & Fifth Party Logistics (4PLs & 5PLs)
Section Section III III
2006 Third Party Logistics Results and Findings of the 11th Annual Study
Section Section IV IV
Logistics Service Providers
Section Section V V
Case Studies & 3PL Usage in the World
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Outline Section Section II
Third Party Logistics (3PLs): Definition, Services & (dis)advantages
Section Section II II
Fourth & Fifth Party Logistics (4PLs & 5PLs)
Section Section III III
2006 Third Party Logistics Results and Findings of the 11th Annual Study
Section Section IV IV
Logistics Service Providers
Section Section V V
Case Studies & 3PL Usage in the World
May-07
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Logistics system [1] Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements. Entities: goods, vehicles, facilities, infrastructure. May-07
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Why 3PL is developing? [3],[4] Logistics are primary source of profits for firms Logistics systems can cause bottleneck in firms Demand of advanced logistics services Globalization Customer orientation Lead time reduction
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What is 3PL? First party: shipper or supplier Second party: buyer Third party: a firm acting as a middleman A logistics triad is a: three-way relationship between a buyer of goods, the supplier of those goods and a logistics service provider moving and/or storing goods between buyer and supplier.[1] 3PL means outsourcing logistics activities including transportation and warehousing to outside firms.[4]
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What is 3PL? Third-party Logistics is the use of an outside company to perform all or part of the firm’s materials management and product distribution function. [1] 3PL provider is an external provider who manages, controls, and delivers logistics activities on behalf of a shipper.[3]
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What is 3PL? A long-term formal or informal relationship between a shipper and a logistics provider to render all or a considerable number of logistics activities for the shipper.[5] Activities carried out by a logistics service provider on behalf of a shipper and consisting of at least management and execution of transportation and warehousing.[5] May-07
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Terms sometimes used in place of 3PL:[1] Outsourcing Contract logistics TPL Logistics service providers (LSP)
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Typical activities outsourced to 3PL [3] Î
The activities performed can include all or part of the logistics activities but at least management and execution of transport and warehousing should be included.
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Transporting Warehousing Inventory Control Value-added services Information and design service Reengineering of the chain
• • • • •
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Levels of Outsourcing[2] Transactional Outsourcing Tactical Outsourcing Strategic Outsourcing
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3PL Has the following features at present:[4] Integrated logistics service provider Contract-based service provider Consulting service provider 3PL provider can be classified into the: Asset-based Non-asset-based
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[6] May-07
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The conceptual model for 3PL [6] Strategic Planning Inventory Management
Information Technology
Managing third-party Logistics
Transportation (shipping)
Capacity Planning May-07
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Function
Activities
Technologies
Strategic Planning
Corporate/business strategy, development, resource management, market segment analysis
Groupware, shared information such as WWW, EDI, ERP, internet
Inventory Management
Forecasting, location analysis, order management
MRP, EDI,ERP, WWW, online purchasing
Transportation Planning
Shipping, forwarding, (de) consolidation, bill payment, contract delivery
Groupware, Internet, Intranet, linear programming
Capacity Planning
Warehouse, human resource ,and transportation vehicles capacity
Linear programming, MRP,ERP
Information Management
Performance measures and metrics, data collection, reporting
EDI, e-commerce, Internet, expert system, ERP
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[6]
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How to select an appropriate 3PL?[23] AHP ANP Fuzzy TOPSIS SCOR ,…
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Critical Success Factors in Effective Logistics Management [6] Good planning of logistics system Well-designed distribution organization Prudent selection of allied companies Close relationship with trading partners Elimination of barriers to logistics management Commitment of top management Continuous improvement in logistics May-07
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Why use 3PL? Advantages [2],[3],[4] To save time Because someone else can do it better To share responsibility To re-engineer Distribution Network Economies of scale and scope Saving on capital investment Focus on core competency Improved efficiency, service and flexibility Risk-Sharing Fast implementation of new system May-07
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Disadvantages
Searching efforts Coordination efforts Information sharing Loss of control
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Classification of 3PLs [3] Their alliances to customers such as scope of partnership ,design and management Degree of customization and dedication Knowledge level of shippers and providers Material flow characteristics To what extent they are geographically based To what extent 3PLs themselves are outsourcing the logistics services To what extent 3PL business is the core business May-07
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Interactive effects of SCM and 3PL [4]
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Possible appropriate combination of SCM and 3PL [4]
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Outline Section Section II
Third Party Logistics (3PLs): Definition, Services & (dis)advantages
Section Section II II
Fourth & Fifth Party Logistics (4PLs & 5PLs)
Section Section III III
2006 Third Party Logistics Results and Findings of the 11th Annual Study
Section Section IV IV
Logistics Service Providers
Section Section V V
Case Studies & 3PL Usage in the World
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Evolution of 3PLs [3] Third Generation ( 2000 and beyond)
• Online freight marketplaces • Web-based 3PLs • Increasing supply chain integration
Second Generation (1990 – 2000)
• Non asset-based companies • Asset-based companies increased service offerings
• Transportation / warehousing First Generation (1980 - 1990)
• Freight forwarders / brokers • Shipper’s agents
Broader more integrated services May-07
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A Note on Fourth Party Logistics (4PL) [1],[7]
The concept of 4PL was introduced a few years ago by Anderson Consulting. 4PL is the evolution of supply chain outsourcing. Convergence of technology and rapid acceleration of e-capabilities have heightened the need for integrator for supply chain activities. May-07
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4PL 4PL is an integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution. 4PLs manage and direct the activities of multiple 3PLs, serving as an integrator.
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4PL Most 4pl companies have no assets. They provide services to customers in the form of responsibility and knowledge of how to fulfill the customer requirements. The physical movement of goods is outsourced to other 3PLs. Î The term LSI is used for operators that provide only administrative services to their customers such as 4PL, forwarder, web-marketplaces,… May-07
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[7]
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Who can deliver a 4PL solution? [7] Availability of a large body of trained supply chain professionals If applicable, global capabilities, reach and resources Ability to manage multiple service providers Strong relationship and teaming skills Delivery of world-class supply chain strategy formulation and business process redesign Strength in integrating supply chain technologies and outsourcing capabilities Understanding of organizational change issues May-07
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5PL [6] Management of all parties of the supply chain in conjunction with e-Business. Using e-logistics network focusing on global operations. E-logistics can be defined as the transfer of goods and service using Internet communication technologies such as EDI, e-mail,WWW.
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Outline Section Section II
Third Party Logistics (3PLs): Definition, Services & (dis)advantages
Section Section II II
Fourth & Fifth Party Logistics (4PLs & 5PLs)
Section Section III III
2006 Third Party Logistics Results and Findings of the 11th Annual Study
Section Section IV IV
Logistics Service Providers
Section Section V V
Case Studies & 3PL Usage in the World
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2006 THIRD PARTY LOGISTICS Results and Findings of the 11th Annual Study [8],[9]
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During the spring and summer of 2006, this study was conducted as an extensive study about using 3PL services in: Western Europe Asia-Pacific Latin America. South Africa North America the Middle East
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2006 Study Objectives Measure the development and growth of the 3PL industry across major industry segments and across several diverse regions of the world. Summarize the current use of 3PL services. Identify customer needs and how well 3PL providers are responding to those needs. Understand how customers select and manage 3PL providers May-07
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2006 Study Objectives Examine why customers outsource to 3PL providers. Investigate leading 3PL topics, including service offerings and capabilities, technology, structuring and managing effective 3PL relationships, and how customers view success and value from their 3PL relationships. Provide a strategic assessment of the future of the 3PL industry. May-07
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Respondents were asked to think of a: 3PL as one that provides multiple logistics services for its clients and customers and a : 4PL as one that includes more advanced logistics outsourcing services than a conventional 3PL normally would provide.
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Key industries targeted are:
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Factors Responsible for Decision to Use 3PL Provider
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Outsourced Logistics Services
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Factors Relating to Selecting 3PL Providers
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Number of 3PL Providers Used
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Number of 3PL Providers Used
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3PL Supply Chain Accomplishments
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IT’s Necessity as Element of Overall 3PL Expertise
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Views of Non-Users
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Outline Section Section II
Third Party Logistics (3PLs): Definition, Services & (dis)advantages
Section Section II II
Fourth & Fifth Party Logistics (4PLs & 5PLs)
Section Section III III
2006 Third Party Logistics Results and Findings of the 11th Annual Study
Section Section IV IV
Logistics Service Providers
Section Section V V
Case Studies & 3PL Usage in the World
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Logistics Service Providers
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Services: [10] Global transportation management Dynamic transportation optimization (in an operational environment) Freight audit & payment Carrier selection analysis Track & Trace Documentation and Customs clearance Transportation strategies assessment
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Services: [11],[12] Freight Forwarding Services Logistic Services Courier Services
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Number of Hubs, Warehouses & Terminals: more than 450 Number of Aircraft: 420 Number of Vehicles: 76,200 Number of Countries & Territories: more than 222 Shipments per Year: more than 1.5 billion [11]
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Services: [11],[13] FedEx Express FedEx Ground FedEx Supply Chain Services
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Services: [14] Packaging Postponement Reverse logistics Multi-client warehouses and distribution centers Transportation management Supply chain consulting Supply chain network analysis and design Software and technology solutions Vendor-managed inventory
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UPS Supply Chain Solutions: [11],[16] Transportation and Freight Logistics Consulting Services Industry Solutions
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Outline Section Section II
Third Party Logistics (3PLs): Definition, Services & (dis)advantages
Section Section II II
Fourth & Fifth Party Logistics (4PLs & 5PLs)
Section Section III III
2006 Third Party Logistics Results and Findings of the 11th Annual Study
Section Section IV IV
Logistics Service Providers
Section Section V V
Case Studies & 3PL Usage in the World
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Case 1: Freight Consolidation Policies [24]
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Case 2: Life Sciences and Healthcare [8],[17] Life sciences and healthcare have a higher-than-average focus on core 3PL services: transportation, warehousing, and customs clearance and brokerage. Hospital Logistics Inc. (HLI) provides supply chain services for medical and surgical supplies to the Canadian hospital market: it delivers the right products, at the right time, to the right hospital cart.
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3PL Practices: An Indian Perspective [18] Purpose: To carry out a comprehensive survey on 3PL practices in India and to establish the impact of usage of third party logistics services on business results. Research Methodology: To determine the usage of third party logistics practices in India, a mail survey was conducted during 2002-2003.
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3PL Practices: An Indian Perspective [18] Importance rating and extent of outsourcing of logistics activities
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3PL Practices: The usage of third party logistics in Saudi Arabia [19] Purpose: To Examine the usage of third party logistics (TPL) services in Saudi Arabia Research Methodology: A survey was conducted during the last quarter of 2003 and the first quarter of 2004 to determine the usage of TPL services in the kingdom of Saudi Arabia.
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3PL Practices: The usage of third party logistics in Saudi Arabia [19] Information sources of contract logistics services providers
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References 1.Gunnar Stefansson, “Collaborative logistics management and the role of third-party service providers”, International Journal of Physical Distribution & Logistics Management(2006), pp. 76-92 2. www.theabrahamgroup.com 3. Suanne Hertz, Monica Alfredsson, “Strategic Development of Third Party Logistics Providers”, Industrial Marketing Management” (2003) pp.139-149 4.Toshinori Nemoto, koichiro Tezuka , “Advantage of Third Party Logistics in Supply Chain Management” 5. Halldorsson Arni and Tage Skjott-Larsen (2004), “Developing Logistics Competencies Through Third Party Logistics Relationship”, International Journal of Operation and Production Management ,pp.192-206 6.A.Gunasekaran, (2003) ,”The successful management of a small logistics company”, International Journal of Operation and Production Management , pp.825-842 7. Bauknight Dow N. and Miller John R., “Fourth Party Logistics: The Evolution of Supply Chain Outsourcing”
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References 8. 2006 Third Party Logistics Results and Findings of the 11th Annual Study, Sited in “www.3plstudy.com” 9. 2005 Third Party Logistics Results and Findings of the 11th Annual Study, Sited in “www.3plstudy.com” 10. www.baxglobal.com 11. www.wikipedia.org 12. www.dhl.com 13. www.fedex.com 14. www.menloworldwide.com 15. www.tnt.com 16. www.ups.com 17. www.tecsys.com 18. B.S. Sahay and Ramneesh Mohan, (2006), " 3PL Practices: an Indian Perspective", International Journal of Physical Distribution & Logistics Management Vol. 36 No. 9, pp. 666-689 19. Mohammed Sadiq Sohail and Obaid Saad Al-Abdali, (2005), "The usage of third party logistics in Saudi Arabia: Current position and future prospects" , International Journal of Physical Distribution & Logistics Management Vol. 35 No. 9, pp. 637-653 May-07
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References 20. Frazelle. Edward H. , "Supply Chain Strategy: The Logistics of Supply Chain Management" , McGraw-Hill, 2002 21. Christopher, Martin, "Logistics snd Supply Chain Management: Strategies for Reducing Cost and Improving Service" Financial Times , 1998 22.www.timesofindia.com 23.Eleonora Bottani and Antonio Rizzi , (2004) “A Fuzzy TOPSIS Methodology to Support Outstanding of Logistics Services”, Supply Chain Management: An International Journal, pp. 294-308 24.Jonah C. Tyana, Fu-Kwun Wangb, Timon C. Duc,(2003) “An Evaluation of Freight Consolidation Policies in Global Third Party Logistics”, The International Journal of Management Science, pp. 55-62 25. Sanjay Jharkhariaa, Ravi Shankarb,, (2007), “Selection of Logistics Service Provider: An Analytic Network Process (ANP) Approach”, The International Journal of Management Science, pp. 274-289
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