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UNIT 1 –PART 1 Introduction to freight planning and management

TABLE OF CONTENTS Introduction Type of logistic parties Why 3 PLs Activities of 3 PLs Detailed 3 PL activities Advantages of 3 PL Disadvantages of 3 PL Types of 3 PLs Fourth-Party Logistics Evolution in supply-chain outsourcing 4 PL differs from a 3 PL Fifth-Party Logistics Framework of 3 PL’s

INTRODUCTION Logistics outsourcing has attracted the attention of lots of industrialists in recent years. As a result, having long-term relationships with logistics parties seems to find its undeniable place in today’s growing extent of outsourcing affairs. Third party logistics, in particular, has received substantial attention from logistics experts, leading to a great deal of research in this area. Furthermore, improved versions of logistics parties, especially fourth parties, are growing with high speed. Because of its importance, this chapter is dedicated to the introduction and general implications of logistics parties. Logistics is basically the concept of how to deal with the movement and storage of materials or products that results in the highest consumer satisfaction. The modern form of logistics concept dates back to the second half of the twentieth century. During the past several years, this field has obtained greater importance and has been theoretically and practically extended.

TYPE OF LOGISTIC PARTIES

WHY 3 PLS 3 PLs emerged in the early 1990 s when LSPs started offering consolidated services and an increasing number of customers entered into longer business contracts with the LSPs. The 3 PL business is developing as a result of the increasing demand of advanced logistics services, including globalization, lead-time reductions, customer orientation, and outsourcing. Therefore, the role of logistics providers is changing both in content and in complexity and brings about the development of new logistics providers who offer various services to their customers

ACTIVITIES OF 3 PLS A 3 PL can perform the following activities: transportation, warehousing, freight consolidation and distribution, product marking, labelling and packaging, inventory management, traffic management and fleet operations, Freight payments and auditing, cross docking, product returns, order management, packaging, reverse logistics, carrier selection, rate negotiation, and logistics information systems

DETAILED 3 PL ACTIVITIES, INCLUDING GLOBAL FUNCTIONS, INCLUDE THE FOLLOWING : Planning functions � � Equipment functions � � � � Selection Allocation Sequencing Positioning Inventory control Ordering Repair Terminal functions � � Location selection Supplier contracting Scheduling Gate checks Location control Handling functions � � � Pickup Consolidation Distribution Expediting Diversion Transloading

DETAILED 3 PL ACTIVITIES, INCLUDING GLOBAL FUNCTIONS, INCLUDE THE FOLLOWING: Administrative functions � � � � Warehousing functions � � � Receiving Inventory control Reshipment Pre/Post production � � � Order management Document preparation Customs clearance Invoicing Inventory management Performance evaluation Information services Communications Sequencing Assorting Packaging Postponement Marking Transportation functions � � � Modal coordination Line-haul services Tracking and tracing

ADVANTAGES OF 3 PL Save time Share responsibility Reengineer distribution networks Focus on core competencies Exploit external logistical expertise Reduction in inventory levels, order cycle times, and lead times Economies of scale and scope Improved efficiency, service, and flexibility

DISADVANTAGES OF 3 PL Poor searching efforts Poor coordination efforts Poor information sharing Loss of control Poor service performance Inadequate provider expertise Inadequate employee quality Loss of customer feedback

TYPES OF 3 PLS Standard 3 PL providers are the most basic form of 3 PL provider. They perform the most basic functions of logistics such as picking and packing, warehousing, and distribution. Service developers offer advanced value-added services to their customers such as tracking and tracing, cross docking, specific packaging, and providing a unique security system. Customer adapters provide services at the request of the customer and take thorough control of the company’s logistics activities. The 3 PL providers improve logistics services, but do not develop a new service. The customer base for this type of 3 PL provider is typically quite small. Customer developers are the highest level of 3 PL provider, integrating themselves with customers and taking over entire logistics function. These providers will have few customers, but they will perform extensive and detailed tasks for them.

FOURTH-PARTY LOGISTICS The terms fourth-party logistics (4 PLs) and lead logistics provider (LLP) were introduced in 1996 by Bob Evans of Arthur Anderson (now Accenture) and are defined as follows: “A 4 PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, build, and run comprehensive supply chain solutions”

EVOLUTION IN SUPPLY-CHAIN OUTSOURCING

4 PL DIFFERS FROM APL 3 IN THE FOLLOWING WAYS A 4 PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and multiple LSPs. A 4 PL organization acts as a single interface between the client and multiple LSPs. All aspects (ideally) of the client’s supply chain are managed by the 4 PL organization. It is possible for a major 3 PL provider to form a 4 PL organization within its existing structure.

TWO KEY DISTINCTIONS MAKE THE CONCEPT OF 4 PL APART FROM OTHERPL 3 OUTSOURCING OPTIONS: A 4 PL presents a comprehensive supply-chain solution. A 4 PL delivers value through the ability to have an impact on the entire supply chain.

FIFTH-PARTY LOGISTICS 5 PL is a new concept in outsourcing. It is the management of all parties of the supply chain in conjunction with e-business. 5 PLs uses an elogistics network focusing on global operations.

WHEN MAKING AN OUTSOURCING DECISION, THE FOLLOWING FOUR CATEGORIES OF CONSIDERATIONS CAN BE DISTINGUISHED. Economic considerations Market issues Availability of personnel and equipment Supplier dependence

SELECTING THE RIGHT 3 PL A service provider’s quality could be judged based on experiences using it as a 3 PL. In most cases, the service quality is even more important for the shipper than the servicecost. The throughput rate and delivery reliability of the goods can be decisive. The 3 PL must have a high degree of flexibility in place, time, volume, quantity, and product. The 3 PL’s willingness and skillfulness at having discussions with the shipper on the regular basis is of great importance. These discussions include agreements about liability, supplementary to standard transport liability for errors, negligence, and carelessness. A 3 PL must also have a cost-control system with a clearly and logically composed tariff structure. It must be prepared to clearly state which performances and actions are covered in the tariff. The financial strength of the 3 PL is an important factor for selecting the appropriate 3 PL.

PURCHASING 3 PL SERVICES Identification of the need to outsource logistics Development of feasible alternatives Evaluation of candidates and selection of the supplier Implementation of services Ongoing service evaluation

A FRAMEWORK FOR THE DEVELOPMENT OF AN EFFECTIVE 3 PL Strategic planning Inventory management Transportation Capacity planning Information technology