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Third, Fourth & Fifth

Party Logistics:
3PLs, 4PLs & 5PLs
nooshin
Dr.Reza Zanjirani Farahani
Presented by:
Shabnam HajiRamezan Alagheh Band
Nooshin Vaghefi

85125078

85125053

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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3PLs, 4PLs & 5PLs

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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3PLs, 4PLs & 5PLs

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.
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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 firms
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]
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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]

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.

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]
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The conceptual model for 3PL [6]


Strategic
Planning
Inventory
Management

Information
Technology

Managing
third-party
Logistics

Transportation
(shipping)

Capacity
Planning
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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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[25]

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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
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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
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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
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[3]

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[3]

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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


Shippers agents

Broader more integrated services


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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.
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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.
The term LSI is used for operators that provide
only administrative services to their customers
such as 4PL, forwarder, web-marketplaces,
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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
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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
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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.
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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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ITs 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
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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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