2. CONTENTS
1. HISTORY
2. INTRODUCTION TO 3PL
3. OPERATIONAL AREA
4. TYPES
5. FACTORS INFLUENCING
6. BENEFITS
7. WHY TO USE 3PL
8. 3PL IN TODAY’S BUSINESS ENVIRONMENT
9. CASE STUDY ON YUSEN LOGISTICS
10. RISK OF USING OUTSOURCING
3. A BRIEF HISTORY OF
LOGISTICS SYSTEM AND 3PL
•Logistics has been playing a fundamental
role in global development for almost 5,000
years now. Since the construction of the
pyramids in ancient Egypt, logistics has
made remarkable strides. Time and again,
brilliant logistics solutions have formed the
basis for the transition to a new historical
and economic era. Examples of this
fundamental progress include the invention
of the sea-cargo container and the creation
of novel service systems during the 20th
century. Both are integral parts of
globalization today.
4. LOGISTICS TIMELINE
1. Around 2700 B.C.: Material handling technology in pyramid
construction. Blocks of stone weighing several tons were
transported and assembled at the construction site.
2. Around 300 B.C.: Revolutionary Greek rowing vessels – the new
foundation of intercontinental trade
3. Around A.D. 700: Procurement logistics in the construction of the
Mezquita Mosque – pillars came to Spain from all parts of the
Islamic empire.
4. Around 1200: The international network known as the Hanseatic
League – cooperation for transport bundling and international sea
transport.
5. Around 1500: Progressive postal service in Europe – the first time-
definite mail shipping service.
6. Around 1800: Discovery of new road conveyances and the railroad –
expansion of logistics tasks through new technologies and means of
transport.
7. Around 1800: Discovery of new road conveyances and the railroad –
expansion of logistics tasks through new technologies and means of
transport.
5. 8. Around 1940: Military logistics during the world wars – transfer of military
logistics concepts to the business world.During World War I, military
logistics was the vital link in the network that supplied troops with rations,
weapons and equipment. With the onset of World War II, logistics was
further refined. As a result, logistics gained an important place in the
business world as well.
9. 1956: Invention of the sea container – structural evolution of world trade
and the boom of international flows of goods.
10. The concept of 3pl came into existence in between 70’s and 80’s as
companies outsourced more and more logistics services to the 3rd parties,
over time these 3rd party logistics provider expanded their services to
cover specific geographies ,commodities, ,modes of transportation and
integration of their services with existing warehousing and other
auxiliary services becoming what we known as a “3PL”
6. INTRODUCTION TO THE 3PL
•A third party logistics is a firm that provides services to
its customers of outsourced logistics services for part
or all of their supply chain management functions.
Third party logistics providers typically specialize in
integrated operation , warehousing and transportation
services most of the time these services goes beyond
logistics and include value added services related to
production and procurement of goods .
•A/Q to the COUNCIL OF SUPPLY CHAIN MANAGEMENT
PROFESSSIONALS, 3PL is defined as a firm that provides multiple logistics
services for use of customers, Preferably, these services are integrated, or
bundled together by the provider. Among the services 3PLs provide
transportation,cross-docking,inventory management, packaging, and freight
forwarding.
7. • Third-party logistics (3PL) service providers are
companies who provide a range of logistics activities
for their clients. These are companies independent from
the buyers and sellers but takes over some of their
logistics function.
•The activities are:-
1. Transportation
2. Warehousing
3. Inventory Management
4. Freight forwarding
5. Custom Clearance
6. IT Solutions
7. Cross-docking
8. And several other value added services
8. Types of 3PL Providers
1. Standard 3PL Provider (assets based):-
The most basic form of a 3PL provider which would
perform activities such as Pick-Pack, Warehousing, and
Distribution. For majority of these firms, the 3PL function
is their main activity.
e.g. :- UPS,Caterpilar and IBN
Activities: Benefits:
.Shorter cycle time
.Lower freight costs
.Visibility of pipeline inventory
Consol.
Center
Point of Sale/
Point of Use/
Customers
Incoming
Materials
Or
Products
Outsourced
De-
con
Center
Customs
. Transport arrangement
. Customs clearance
. Shipment visibility
. Carrier mgmt / rate mgmt
9. Activities:
Labor & supervision
Receiving, storage, shipping
Benefits:
Lower capital investment
Lower fixed/variable cost ratio
Focus to the core
Professional service
Bulk
Warehouse
Distribution
Center
Incoming
Products
Customers
Retailers
Outsourced In-house
Warehousing Based
10. 2. Service developer (management based) :-
This type of 3PL provider will offer their customers advanced value
added services such as tracking and tracing , cross docking ,
specific packaging, or providing a unique security system. A solid
IT foundation and a focus on economies of scale and scope will
enable this type of 3PL provider to perform these type of tasks.
e.g. YUSEN Logistics , Diesel logistics, Delivery Logistics etc
Manufacturers DistributorsSupplier
Customers /
Retailers
11. 3. The customer Developer :-
This is the highest level that a 3PL can attain with
respect to its processes and activities . This occurs when
the 3PL provider integrates itself with the customer and
takes over their entire logistics function. These
providers will have few customers, but will perform
extensive and detailed tasks for them.
e.g. :- AEI, Kuehne & Nagle, TVS logistics
4. The customer Adapter :-
It comes with the request of customer and essentially
takes over control complete of the company’s logistics
activities. The 3PL provider improves the logistics
dramatically, but does not develop a new service .
The customer base for this type of 3PL provider is typically
quite small.
e.g. ADDOR capital
13. BENEFITS
1. Greater flexibility
2. Improved operations
3. Enhanced customer service capabilities
4. Reduction of capital expenditures
(equipment and distribution centers)
5. Matching up with Fluctuation
14. WHY TO USE 3PL
1. IT SAVES TIME AND MONEY
2. IT OFFERS SCALABILITY AND FLEXIBILTY
3. IT MAKES VALUABLE EXPERTISE ACCESSIBLE
4. IT HAS DIVERSE RESOURCE NETWORK
5. IT ENCOURAGES CONTINIOUS OPTIMIZATION
6. IT MAXIMIZES RATE OF GROWTH
7. IT ENUSRES SECURITY
8. IT IMPROVES QUALITY
9. IT IMPORVES CUSTOMER SERVICE
10.IT PRIORITIZE ADVANCE TECHNOLOGY
15. Influence of 3PL in today's Business Environment
•The global 3PL market reached $ 750 billion in 2015, and grew to $157 billion in the
US
•Demand growth for 3PL services in US ( 7.4% YoY ) outpaced the growth of the US
economy in that year
•Today 80 percent of all fortune 500 companies and 96 of every fortune 100 are
using some form of 3PL services.
16. The 3PL is outsourcing of various elements of logistics and distribution
by companies to logistics service provider .
Today shipper outsource some or all the supply chain management
functions to the 3pl service provider.
These are responsible for handling customer logistics requirement and
performs tracking tracing and other services
It has been forecasted that 3PL services will grow at a CAGR of 2.14 % till
2018
17. The 3PL industry is expected to become a $90
million industry from the current $58 million,
as around 55 per cent of Indian companies are
outsourcing logistic services like supply chain
management and warehousing, which used to
be between 10-15 per cent, ten years ago. “One
of the contributing factors for this is Value
Added Tax (VAT) which is expected to drive
Indian industry towards using more 3PL
services”
The Indian Logistics Market generates annual
revenue of USD 50 to 90 Billion, but the share
of 3PL providers in this huge market, is very
small. This is very much in contrast to the US
Industry, which is estimated at USD 105
Billion
PRESENT/FUTURE TRENDs OF 3PL IN INDIA
18.
19. Optimizing International Flows Delivers Step-
Change For Global Pharmaceutical Manufacturer
Yusen Logistics was initially appointed by this leading global pharmaceutical
manufacturer to implement lean principles in 2007, which involved re-engineering its
European flows as part of its international requirement to deliver over 1 billion packs
to patients.
20. As part of its lean strategy, the customer was seeking to
optimize freight movements within its international supply
chain across the modes of ocean, air and road to deliver
further step-change benefits. The solution covers 28
manufacturing sites worldwide.
Yusen is responsible for this customer’s product movements
between selected global manufacturing sites into Europe,
movements from global manufacturing sites leaving Europe,
as well as all inter- and intra- European flows. The product
range is held under three different temperature regimes
and Yusen handles it at every production stage, from active
pharmaceutical ingredient (API) and excipients, through to
bulk tablets, finished tablets, samples and packaging. This is
a highly complex and demanding supply chain, with delivery
points including manufacturing sites, wholesalers, inmarket
distributors and laboratories.
CUSTOMER CHALLENGE :-
21. YUSEN LOGISTIC’S SUPPLY CHAIN SOLUTION
Yusen Logistics refocused the solution infrastructure
designating its GDP approved, specialist healthcare
distribution centre at Antwerp the primary hub. The Antwerp
facility has excellent access for air and ocean movements
and is at the heart of the Pharmaceutical Superhighway,
Yusen’s Control-Tower driven European multi-modal network.
The award-winning Superhighway, which carries over
1.2million pallets pa, provides a number of pharmaceutical
manufacturers with high security, temperature controlled
coverage, fl exible GDP compliant solutions, which ensure
complete product integrity and legislative compliance.
The Control Tower provides operational alignment between
the customer’s central procurement function and its regional
and global manufacturing sites.
22. Yusen’s integrated IT system manages all transactions from
receipt to final delivery, providing full shipment transparency.
Yusen’s strategically developed VISION transport
management application has been tailored to pharmaceutical
tracking requirements. Using VISION, the planning team can
build millruns, co-loads, round trips and decide whether to
cross dock product or deliver direct. VISION also manages
hauler payment and generates customer invoices. The
system ensures receipt of POD’s and temperature reports,
providing reports to support operations and KPI data.
23. •Airfreight movements have been minimized and ocean maximized, consolidating
inbound freight directly into the European network, saving cost. Where airfreight is
essential, it has been optimised,maximising quality and temperature performance,
delivering cost benefits from enhanced consolidation. Expedited shipments have been
halved as a result of customerconfi dance in the robustness of the solution. Overall,
Yusen has improved quality, eradicated risk and achieved on-going cost-down, faced
with challenging timescales, temperature demands and security requirements
CUSTOMER BENEFITS
Major benefits have been delivered across the air, ocean and road aspects of the
solution, with many individual elements of the overall solution re-engineered to
optimize freight, delivering continuous improvement and cost-down. Refining the
road solution focused on consolidation intoYusen Antwerp. Maximizing co
loading opportunities for onward movement has enabled enhanced performance,
reduced lead times and costs, whilst achieving performance targets.
24. CUTOMER CHALLENGE:-
• Optimize freight movements within an
international supply
chain across the modes of ocean, air and road
• Global, inter- and intra- European flows
• Complex range of products at different
manufacturing stages, 3 temperature regimes
YUSEN LOGISTIC’S SOLUTION:-
• Primary hub in Antwerp supported by
Yusen Logistics’ award-winning
Pharmaceutical Super high way, a Control-
Tower driven European multi-modal network
• Maximized ocean movements, minimized
airfreight
• Maximized consolidation and co-loading
optimizing road movements
BENEFITS:-
• Continued reduction in
global cost per pallet
• Consistent delivery in full,
without temperature
excursions 99.8%
• Optimization of transport
mode, delivering
continuous improvement
and cost down
25. 25
Loss of internal logistics management capabilities
Biased choice of service providers
Leakage of sensitive data and information
Service degradation
Less reliable? Longer order cycle time?
Emergency response?
Loss of control and representation
Reduced contact with final customer
3PL for outbound logistics interact with your customers, you
become less visible to your customers
26. 1) Have an outsourcing strategy.
Know what your outsourcing strategy is. It needs to be well thought out
and measured against in house solutions and capabilities.
SWOT analysis. As a company you should understand the strengths,
weaknesses, opportunities and threats of outsourcing logistics, rather
than keeping them in house.
2) Do your homework.
Do a comprehensive study
Clearly document advantages, challenges, costs and benefits.
Document expectations
Set down expectations in clear terms and include current costs.
27. Create a robust selection process.
Invite companies in to give a formal presentation without giving
requirements. This can help document their strengths and weaknesses.
Make a site visit to the 3PL, and talk with its existing customer.
3) Measure and review performance
Have a efficient and accurate measurement system.
Qualitative measures that focus on effectiveness and quantitative measures
that focus on efficient utilization.
Have an efficient costing system
This will help you to understand the costs involved in outsourcing.
“Are we making money doing this?”
28. 4) Create an Implementation Strategy
Create a project plan road map
Be clear who does what, create a project management team with members
from both organizations and review progress vs. planned milestones.
5) Nurture the Relationship
Both Parties must nurture the relationship to make outsourcing
successful.
Create mutual trust, respect and a sense of integrity.
