3pl and 4pl


Published on

Published in: Business

3pl and 4pl

  1. 1. Third Party Logistics Providers (3PL)
  2. 2. 3 PL 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.
  3. 3. 3PL Defined  Businesses that provide one or many of the following logistics services:  Transportation Management  Public/Contract Warehousing  Distribution Management  Freight Consolidation
  4. 4. Types of 3PL Providers Transportation Based  Services extend beyond transportation to offer a comprehensive set of logistics offerings.  Examples: UPS Logistics
  5. 5. Transportation Customs Incoming Point of Sale/ Materials Consol. De- Point of Use/ Or Center con Customers Products Cente Outsourced r Activities: Benefits: Transport arrangement Customs clearance Shorter cycle time Shipment visibility Lower freight costs Carrier mgmt / rate mgmt Visibility of pipeline inventory I
  6. 6. Types of 3PL Providers Warehouse/Distribution Based  Many have former warehouse and/or distribution experience.  Examples:Caterpillar Logistics, IBM
  7. 7. Contract Warehousing Incoming Bulk Distribution Customers Products Warehouse Center Retailers Outsourced In-house Activities: Benefits: Labor & supervision Lower capital investment Receiving, storage, shipping Lower fixed/variable cost ratio Focus to the core Professional service
  8. 8. Types of 3PL Providers Financial Based  Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory.  Examples: GE Information Services,
  9. 9. Logistics Financial Services Customers / Supplier Manufacturers Distributors Retailers Activities: Benefits: Inventory finance (factoring,) Reduced cost of capital Distribution finance (asset based Improved cash flow lending, receivable finance) Reduced capital investment Payment solutions , Leasing
  10. 10. Why Use 3PL’s? Save time  Don’t need to invest in:  Trucks  Training  Development Help expand  New markets  International  No roads
  11. 11. Why Use Cont. Narrow your focus  Allows you to focus on your strengths Reach more customers more effectively  Can ensure delivery times  can help a company run leaner
  12. 12. Management Focus Furthering your company Consider potential benefits and drawbacks 3pl’s can increase profitability
  13. 13. Risks of Out-sourcing Logistics 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 13
  14. 14. Tips for Successful Implementation1) 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.
  15. 15. Tips Continued… 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?”
  16. 16. Tips Continued…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.
  17. 17. 4PL Providers Manage and direct the activities of multiple 3PLs, serving as an integrator Refinement on the idea of 3PLs 4PLs are not asset based like 3PLs