Logistics

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TRANSFORMING
10 PL ORGANIZATIONS
Professor Lalith Edirisinghe
CINEC Campus
Manufacturers need
the service of a logistics
service provider as they
outsource elements
of their distribution,
warehousing, and
fulfillment services.
According to the Business directory, a
company that provides management
over the flow of goods and materials
between points of origin to end-use
destination is called a logistics service
provider. This provider will often handle
shipping, inventory, warehousing,
packaging and security functions for
shipments. Its main importance was
first understood during World War
II and then started to be viewed and
applied to logistics as a scientific
subject. According to MTS [2], many
U.S. businesses recognized the
importance of logistics and started to
take advantage of logistics services
beginning in 1960 and continuing to the
present. Logistics make a major impact
on economic activity in any country.
Generally, manufacturers need the
services of a logistics service provider
in the present context as they outsource
their distribution, warehousing, and
fulfillment services. The paradigm
of interconnectedness continues
to hold command in today’s global
community. However, countries face
many challenges in making it happen
competitively given inherent geographic
factors as well as resource constraints
internally. The manufacturers initially
transport cargo as raw material
(source of production process) and
then again transport to the customer
as finished goods after manufacturing
process. International trade refers to
the exchange of capital, goods, and
services across international borders
or territories. Cargo transportation is
a derived demand of trading between
countries (and not a direct demand)
in economic theories . Accordingly,
manufacturing, transport and logistics
go hand in hand. Therefore, it is
important to understand the role of
manufacture and transporter in the first
place.
Transportation is an
essential act of moving
people, animals, and goods
from one place to another.
Thus, transportation is
divided into two parts,
passenger transport and
freight transport.
Manufacture is defined by Webster’s
ii new university dictionary (1984) as
the activity to make or process (a
raw material) into a finished product,
especially by a largescale industrial
operation. To make or process (a
product), especially with industrial
machines it is necessary to integrate all
elements of the manufacturing system
to satisfy the needs and wants of its
customers. However, the sustainability
of commercial production does not
end there. The manufacture needs
an efficient transporter to deliver
the product in a timely and effective
manner. Moreover, raw materials
should be received in timely manner
in the first place to manufacture.
The globalization has increased the
need for interconnectedness for the
respective countries to cross their
borders . Therefore, it is understood
that transport is an indispensable part
in the sustainability of manufacturing
and world trading system. The act of
transport is defined as the specific
movement of an organism or product.
Transportation is, therefore, an
essential act of moving people,
animals, and goods from one place to
another. Thus, transportation is divided
into two parts, passenger transport and
freight transport. Passenger transport
can be public, where operators are
public service or private. Freight has
become an integral part of today’s
world. If the transport cost is brought
down the price of goods and services
are expected to reduce. This would help
a country to bring down its inflation.
Similarly, the country’s exports will be
more competitive in the global market
due to lower transport cost. Increase
of transportation cost in turn leads
to higher prices of consumer goods.
If the manufacture fails to attach a
competitive freight to the product the
sustainability of international trade
is at risk. Because global supply
chains are so varied and complex,
the efficiency of logistics depends on
government services, investments,
and policies. Building infrastructure,
developing a regulatory regime for
transport services, and designing
and implementing efficient customs
clearance procedures are all areas
where governments play an important
role.
Figure 1: Evolving logistics providers

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Third-party logistics
providers typically
specialize in integrated
operations of warehousing
and transportation
services and could
bridge the gap between
the manufacturers and
transporters.
The shipping industry has been playing
a vital role in sustaining world trade
and the economy. In traditional system
the manufacture should have its own
transport and a good example is oil
producing companies. In the initial
stages production and transport both
were undertaken by same party thus
no collaboration was need. Generally,
in Sri Lanka, it is remembered leading
exporters of Tea, Rubber, and Fiber
used to have their own fleet of lorries.
Over the years a synergy between
transporters and manufactures was
considered the most meaningful
competitive advantage in the global
trade. However, this combination
alone was not enough to expand
global production to cater to the
ever-increasing world population. It
became a more complex process that
needs careful planning and control
thus needed a detailed organization
and implementation of this complex
operation. This important part can be
identified as logistics which is much
equivalent to the activity of organizing
the movement, equipment, and
accommodation of troops in military.
Therefore, in the business environment
the commercial activity of transporting
goods to customers also called as
logistics. Traditional logistics focuses
on activities such as procurement
distribution, maintenance and inventory
management. A new paradigm was
created with this development and
industry used to call it “Third party
logistics” or 3 PL. Third-party logistics
providers typically specialize in
integrated operations of warehousing
and transportation services and
could bridge the gap between the
manufacturers and transporters. With
leaning curve advantage of handling
extensive activities of different types
of manufacturing or production
organizations these specialists
were able to scale and customize to
customers’ needs. Picture 1 illustrates
the evolving trend of logistics providers.
A logistician is someone who analyzes
and coordinates the supply chain of an
organization. They manage the entire
lifecycle of a product. Logistics is a
part of supply chain management.
It designs, executes and controls
the efficient, effective transportation
and storage of goods and services.
It includes actively streamlining a
business’ supply side activities. Figure
1 shows how the gradual growth
of collaboration between business
partners taken place. Collaboration is
not a new strategy in transportation,
particularly in international shipping .
If the logisticians can learn, appreciate
and use the theories that connects
with logistics it will help improve the
logistics competence. These academic
theories may include, inter alia,
theory of trade; absolute advantage;
comparative advantage; oligopolistic
structure; scale of economies; derived
demand concept; product life cycle
theory; the concepts of services
marketing, customs law, maritime
law; price elasticity value chain etc.
Supply chain management competes
to design, execute, control, and
monitor supply chain activities. This
scenario was briefly explained above
because the extension beyond 3PL
made the operation more complex
and comprehensive. Such knowledge
combined with skills will improve
confidence and helps to maximize
customer value and gain a competitive
advantage in the market.
Reducing resource
utilization is a common
motivation in all supply
sectors. However, this
has led to some extreme
situations in which all
middle customers in the
chain tend to consider
only their individual
profitability and not the
overall profitability and
sustainability of the
chain thus deliver the
best solution to the end
customer.
Fourth-party logistics provider, the
next stage in his process, is an
independent, singularly accountable,
non-asset-based integrator. According
to experts in the trade 4PL is generally
a consulting firm offering logistics
advice, transportation and supply chain
management services. They are capable
in assembling the resources, and
technology of its own organization. This
stage has been identified by experts as
the supply chain management (SCM).
Usually, a chain describes a simpler,
sequential set of links revealing a
series of processes linked together to
form a chain. Therefore, SCM is the
management of the flow of goods and
services and includes all processes
that turn raw materials into final
products. It accepts all traditional
supplies, including marketing, product
development, finance and customer
service. Reducing resource utilization
is a common motivation in all supply
sectors. However, in the chain it has
led to some extreme situations in which
all middle customers focus only on
their individual profitability and not the
overall sustainability of all partners
in the chain. One good example is the
frequent pressure exerted by exporting
companies on transporters. Although it
may give some short-term benefits to
exporters in free market economy its
long-term damage to overall business
is much higher. The value of the synergy
of exporters and transporters towards
one common goal (delighting the end
customer) is visible when analyzing
the success stories of other countries.
Skimming from the service provider all
the time creates a harmful atmosphere
and such countries fail to compete in
the global market.
Therefore, today countries move away
from such “live and let die” attitude
and encourage the harmony within
the supply network for better results.
In the next stage the organization
will aggregate the demands of the
logistics providers and others to
derive economies of scale advantage.
A supply chain can work well only if
there is proper coordination between
all the participants in the chain.
Delay in one area may cause slow
productivity of entire chain. There will
be resource wastage in the form of
labor and service redundancy. The
ultimate result of missed deadlines
leads to significant costs. These are
inherent characteristics of a ‘chain’
concept. This may include negotiating
more favorable rates with airlines and
shipping companies and the overall
process will benefit through this
non asset-based firms it will work
seamlessly across all disciplines. It
was noted that a network approach
may ease above unfair pressure to
the services providers in the middle of
the supply chain that deteriorate the
delight of the end customer. Therefore,
the chain will transform into a network
from its previous reflection and the
negative impact on the sustainability
of overall supply chain (as a result of
extreme approaches) paved way to 5
PL. According to Harland et al., (2001)
‘Network’ describes a more complex
structure, where organizations can be
cross-linked and there are two-way
exchanges between them. This provides
solutions to various disadvantages of a
‘chain’.
Artificial Intelligence (AI)
driven supply network and
more internet of things
(IoT) applications have
been instrumental in these
advancements. However,
from the 5PL onwards it is
difficult to draw a line to
differentiate the operative
mechanism and define the
precise logistics age of the
company.
At the sixth stage, it aims to help the
logistics industry adopt a sustainable
development strategy. Accordingly,
6 PL companies consider logistics
social responsibility and ensure fair
existence of all partners in the system.
Artificial Intelligence (AI) driven supply
network management and more
internet of things (IoT) applications are
used at this stage. The IoT is a system
of interrelated computing devices,
mechanical and digital machines
provided with unique identifiers and
the ability to transfer data over a
network without requiring human-
to-human or human-to-computer
interaction. However, from the 5PL
onwards it is difficult to draw a line to
differentiate the operative mechanism
and define the precise logistics age the
company. These characteristics may
overlap due to its complicated nature.
Moving on, 7PL may be identified as
a combination of all activities in the
supply chain up to this point and offered
under one contract. However, it may
reflect characteristics of a turnkey
solution system than a custom-built
or designed system. When the supply
management system reaches to
8PL level the organization focuses
its attention to analyze competitor’s
results against the own network.
Therefore, it represents a super
committee to advise the management.
When it is augmented to next level
namely, 9PL it is noted that the
organization follows the crowdsourced
managed logistics strategy. Basically,
crowdsourcing is a kind of opposite
scenario to outsourcing. It is a method
that sources people or firms from a
Picture 3: Keep harmony among middle customers to make end customer happy
Picture 2: Pressure on middle customers makes the end customer unhappy

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large, relatively open and often rapidly
evolving group of participants unlike
selecting from specific, pre evaluated
group though a formal process as in the
case of outsourcing.
Logistics costs are a
significant part in any
company’s expenses.
Businesses have long
realized that using external
resources could reduce
these logistics costs. For
the organizations to reach
10 PL level they should
improve their supply
management to the most
productive, sustainable,
and profitable. Thereby
the supply chain/network
becomes self-aware and
runs itself.
As per experts’ views the final stage
of the chain/network is 10 PL. If the
organization has made its genuine
efforts and reached their supply
management to the most productive,
sustainable, and profitable stage the
chain/network becomes self-aware and
runs itself. According to Transforce
[3] XPO Logistics; UPS Supply Chain
Solutions; and DHL Supply Chain
have been ranked 1-3 top logistics
companies in the world respectively
in 2018 and 2019. XPO says, “Our
people focus on finding new ways to
help our customers succeed, while
becoming continuously more efficient
ourselves”. One of the mission of UPS
is to “Inspire our people and business
partners to do their best, offering
opportunities for personal development
and success”. First logistics provider
in the world, DHL, says “we’re
thinkers, makers and pioneers that
constantly challenge what’s possible.
And now we’re tackling the ultimate
border: delivering to the moon”. The
logistics company’s view and continued
efforts, therefore, to add more value
that benefits the end customer.
Logistics costs are a significant part
of any company’s expenses. Logistics
and supply chain cost reduction has
become the focus for companies and
after containerization the container
logistics plays a dramatic role in global
supply chain. Transportation is the
web that links people, cultures, cities,
towns and villages in to a one common
network of relationships . Businesses
have long realized that using external
resources could reduce logistics costs.
In a globalized world, every business
is a potential buyer and equally a
potential supplier simultaneously.
It is needless to mention that the
carrier actions, and their reactions to
various market conditions particularly
the demand for shipping have direct
impact to supply chains. The aim of
purchasing is to supply raw materials
with the fastest and lowest costs, and
the end goal is to find the shortest
and most cost-effective way to sell
products to the whole world. Therefore,
the clear understanding about these
global trends namely, logistics,
supply chain, and supply network is
essential for competitive advantage and
sustainability.
Sri Lanka is enriched with
highly experienced and
knowledgeable logistics
experts. Most of them have
trained in multinational
logistics companies. Now
it is time to extend their
services for the betterment
of logistics training and
education and help future
logisticians.
Shipping is the most favoured mode
of international transportation in Sri
Lanka. Also, Sri Lanka has the unique
advantage of connecting this region to
the Western Indian Ocean. It should be
noted that due to the past ignorance
regarding logistics, many tangible
and intangible resources in Sri Lanka
are seemed unutilized. The ultimate
results are not favorable. Sri Lanka’s
Logistics Quality and Competence is
ranked at 109 out of 160 countries
as per the Connecting to Compete
international LPI results for 2018. The
aggregated international LPI results
across four editions namely, 2012,
2014, 2016, and 2018 ranks Sri Lanka’s
Logistics Quality and Competence
at 85 out of 160 countries. Therefore,
improving education and research in
logistics, supply chain/network is one
of the key strategies to lift our logistics
performance indicator. Sri Lanka’s LPI
2018 is 94 o of 160 countries. Sri Lanka
is enriched with multiple comparative
advantages in the areas of naval,
aviation and commercial logistics. The
Global Competitiveness Report (2019)
ranks our liner shipping connectivity
at 16 out of 140 countries. It reflects
the competitive advantage that Sri
Lanka gained due to the geographic
positioning. However, efficient maritime
transportation is heavily dependent
on the smooth operation of land
transportation. Although the country
is small and consist a small consumer
market, the neighboring India is a
giant in the international trade. The
main sea route that connects the
world from East to West running very
close SL and places the nation in a
very strategic position from a logistical
context. Sri Lanka’s geo-positioning is
very strategic. Being at the southern
tip of the only land mass extending
towards the Indian Ocean between the
Arabian and Malayan peninsulas. With
the advantages of the current status
of cabotage law, Sri Lanka is benefited
with transshipment cargo of India and
we do well with transshipment cargo.
Sri Lanka (SL) is expected its economic
growth achievement through five hubs
concept –namely, Maritime, Aviation,
Commercial, Knowledge and Energy
Hubs. Logistics was recognized as a
discipline at university level in Sri Lanka
two decades ago. Its only two years
since this subject was incorporated in
C.C.E. (Advanced Level) syllabus in Sri
Lanka. The ministry for supply chain
management was commissioned only
References
[1] Businessdictionary.com, “Businessdictionary.com,” WebFinance Inc. , 2020. [Online]. Available: http://www.businessdictionary.com/definition/
logistics-provider.html. [Accessed 10 07 2020].
[2] L. Edirisinghe, “Cross-border Logistics Performance in Sri Lanka: The way forward,” in International Conference on Business Management,
Colombo, 2013.
[3] L. Edirisinghe, “Regional Cooperation for Maritime Logistics:the commercial perspectives of Sri Lanka,” in Fostering Strategic Partnerships for
Maritime Logistics, Trincomalee, 2017.
[4] L. Edirisinghe, “The Influence of Logistics Competence in International Trade in Sri Lanka: A Contemporary Study,” in 6th International Conference
of Sri Lanka Forum of University Economists, Mihintale, 2017.
[5] L. Edirisinghe, J. Zhihong and A. Wijeratne, “Evaluation Of Expected Payoff Through Container interchange between shipping lines: a solution to
container inventory imbalance in Sri Lanka,” Int. J. Logistics Systems and Management, vol. 21, no. 4, pp. 503-533, 2015.
[6] L. Edirisinghe, Z. Jin and A. Wijeratne, “Container Inventory Management: Factors influencing Container Interchange,” in 13th International
Conference on Business Management, Sri Jayawardanepura, 2016 b).
[7] L. Edirisinghe, “Virtual Container Pool: Solution to Container Inventory Management,” Logistics Conference 2016 Journal, pp. 179-204, 2016.
[8] L. Edirisnghe, Z. Jin and A. Wijeratne, “An Index to Evaluate Carrier Competence in Container Inventory Management,” in Research for Transport
and Logistics Industry Proceedings of the 2nd International Conference, Colombo, 2017.
[9] L. Edirisinghe and S. Muller, “Converting Sri Lanka into a Commercial Hub in Asia An assessment of postwar progress with insights to the way
forward - A Case Study,” in General Sir John Kothelawala Defense University International Research Conference, Colombo, 2013.
[10] L. Edirisinghe, “The virtual container yard: A complimentary tool to optimize collaboration in shipping,” Journal of Sustainable Development of
Transport and Logistics, vol. 3, no. 2, pp. 74-81, 2018.
[11] L. Edirisinghe, J. Zhihong and A. Wijeratne, “Container Interchange: the 6 R Model Approach,” in GOL University of LeHavre available online
http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=8378070&isnumber=8378066, Le Havre, France, 2018 c.
[12] Dizalogistics, “Logistics & Supply Chain Strategies: What is 1PL, 2PL, 3PL, 4PL, 5PL, 6PL, 7PL, 8PL, 9PL and 10PL!?,” Dizalogistics, 2017. [Online].
Available: https://dizalogistics.wordpress.com/2017/08/24/diza-blogs/#:~:text=8PL%20%E2%80%93%20Super%20Committee%20Created%20
to,Self%20Aware%20and%20Runs%20Itself. [Accessed 10 07 2020].
[13] XPO, “XPO Logistics,” XPO Logistics, 2020. [Online]. Available: https://www.xpo.com/about-us/. [Accessed 09 07 2020].
[14] UPS, “UPS,” UPS, 2020. [Online]. Available: https://www.ups.com/us/en/about.page?. [Accessed 08 07 2020].
[15] DHL, “DHL,” DHL, 2020. [Online]. Available: https://www.dhl.com/lk-en/home/about-us/our-vision.html. [Accessed 07 07 2020].
[16] L. Edirisinghe and A. Rodrigo, “A Study on Electronic Toll Collection Systems in Expressways in Sri Lanka,” in 8th International Research
Conference, Ratmalana, 2015.
few months ago. When analyzing the
global trend (i.e. rapid advancement
of logistics, supply chain and supply
network) it may be advisable to have
more academically qualified people
who are exposed to scientific research
culture. However, it is always a question
whether industry gets enough young
people with required knowledge and
skills to cater to the current demand.
More research and innovation are
required to find sustainable solutions
to ever increasing problems in supply
services. End customer is becoming
more and more demanding. The
practical experience alone will not give
a boost to research and development in
this industry. Sri Lanka is enriched with
highly experienced and knowledgeable
logistics experts. Most of them have
trained in multinational logistics
companies. Container shipping plays a
significant role in global supply chain.
Sixteen top twenty container carriers
have regular services via Colombo
and Sri Lankan work force have been
exposed to sophisticated operating
systems of these mega carriers. They
carry 72% of world container capacity.
Therefore, the impact of shipping to
Sri Lanka is obvious. Those who hold
senior positions in the logistics industry
today have contributed immensely to
their respective organizations. Now
it is time to extend their services for
the betterment of logistics training
and education and help future
logisticians. In academic context the
undergraduates interact with the
industry mainly in three occasions
during their four-year education
namely, (i) Multi-Disciplinary Project, (ii)
Internship, and (iii) Dissertation. These
are good opportunities to guide these
researchers in the right direction. The
industry experts can offer their valuable
time to help undergraduates in above
three areas. They can assist students
find existing industry gaps and conduct
meaningful researches under the joint
supervision of industry experts and
university lecturers. Logistics is a highly
technical subject thus combination
of experience and theory will provide
excellent synergy. It is the efforts of
our community to get the advantage
of what is under our control rather
than complaining about what is not
available. In this regard, the first step
is to develop the knowledge, skills and
confidence in supply chain management
through the rapid socialization of
the subject. In today’s world of
technological change, it is essential
that society be on the lookout for new
subject knowledge.