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THIRD PARTY LOGISTICS

MID-TERM REVIEW

DARSHAN KARIA
11BIE019

OVERVIEW/SEMINAR COVERAGE
INTRODUCTION

DEFINITION
EVOLUTION OF TPL
FOURTH PARTY LOGISTICS

LAYERS TO LOGISTIC SERVICES

FIRST PARTY LOGISTICS/1PL


SECOND PARTY LOGISTICS/2PL
THIRD PARTY LOGISTICS/3PL
FOURTH PARTY LOGISTICS/4PL

ROLE OF TPL IN SUPPLY CHAIN AND COMPANY

PERFORMANCE.

OUT SOURCING DECISIONS


SUPPLY CHAIN SURPLUS AND ASSOCIATED RISK
FACTORS AFFECTING SUPPLY CHAIN SURPLUS
HOW TPL AIDS IN INCREASING SUPPLY CHAIN SURPLUS

OVERVIEW/SEMINAR COVERAGE
ADVANTAGES AND DISADVANTAGES

OF A TPL

IMPLEMENTATION

IMPLEMENTATION ISSUES AND REQUIREMENTS OF A 3PL


COLLABORATION
PROBLEM AREAS IN IMPLEMENTATION OF A STRATEGIC ALLIANCE
ISSUES TO BE CONSIDERED BEFORE CONTACTING A 3PL PROVIDER

IMPLEMENTATION OF INFORMATION TECHNOLOGY IN A


TPL
CURRENT STATE OF TPL AND FUTURE OPPORTUNITIES
CHALLENGES FACED BY TPL
CASE STUDY

HOW THE OPERATOINS ARE PERFORMED WITHIN A TPL

INTRODUCTION
DEFINITION
(Maloni and Carter, 2006). Third-party logistics was initially defined as the
use of external companies to perform logistics functions that have traditionally
been performed within an organization.
Generally referred to as TPL/3PL.

EVOLUTION
Initially started with basic logistic activities
Logistic owners collaborated started owning warehouses
Introduction of Information technology

OPERATIONS
Transportation
Warehousing
Information technology
Reverse logistics
Special skills/handling

LAYERS TO LOGISTIC SERVICES


FIRST PARTY LOGISTICS/1PL

Specialized in certain goods / logistics services in a


limited region

SECOND PARTY LOGISTICS/2PL

Larger (national) geographical area than the 1PL


FOURTH PARTY LOGISTICS/4PL

The idea of a fourth-party logistics provider was given


by the consulting company Accenture.

FOURTH PARTY LOGISTICS(4PL)


An integrator that assembles the resources , capabilities and technology of
its own organisation and other organisation to design build and run
comprehensive supply chain solutions. (Accenture)

4PL
MANAGES
3PL BROKERS,
SUPPLIERS, ETC

There is a however a very little distinction left between a 3PL & 4PL
Essentially taking complete responsibility for the customer

OUTSOURCING DECISIONS
OUTSOURCING: The process in which a firm hires an outside firm to

perform an operation rather than executing the operation within the


firm.
Following questions are to be answered before hiring a third party for

conducting operations .

Q.1 Will the third party increase the supply chain surplus relative
to performing the activity in house ?
Q.2 To what extent do risks grow upon outsourcing ?

SUPPLY CHAIN SURPLUS


The difference between the revenue generated from the customers and the
overall cost across that supply chain.
Supply Chain Surplus = Customer Value - Supply Chain Cost.
Supply chain cost includes all the costs that is incurred from placing the order
by the customer to the fulfilment demand by the supplier.
Product cost is not equal to consumer cost.
Supply chain participant can survive in long term only if its presence increases
the supply chain surplus.
Ultimately correlated with profit of the party.

FACTORS
AFFECTING
SURPLUS

SCALE

UNCERTAINITTY

SPECIFICITY OF
ASSETS

HOW DO THIRD PARTIES INCREASE THE


SUPPLY CHAIN SURPLUS
Either increase value for the customer or decrease the decrease the

supply chain cost relative to a firm performing the task in-house.

Capacity aggregation
Inventory aggregation
Transportation aggregation by transportation intermediaries
Warehousing aggregation
Procurement aggregation
Information aggregation
Relationship aggregation
Lower cost and higher quality

RISKS
The process is broken

Underestimation of the cost of coordination


Reduced customer/supplier contact
Loss of internal capability and growth in third party

power
Leakage of sensitive data and info.
Ineffective contracts

DECISION
A firm gains the most by outsourcing to a third party if its needs are

small, highly uncertain, and shared by other firm outsourcing form the
same third party.
Specificity of assets involved in
function Low
High

Firm scale

Demand
uncertainty

Low

High growth
in surplus

Low-medium
growth in
surplus

High

Low growth

No growth

Low

Low-medium
growth

Low growth

High

High growth

Low medium
growth

ADVANTAGES
Cost and time savings for the client

Logistics is there core business


Better know how and continuously updated systems and
procedures

Low capital commitment

No need to own your own transportation or storage facilities


Sufficient capital available for the core business

Ability of client to focus on core business

3PLs provide flexibility


Much higher flexibility in terms of warehouse and workforce
Logistics fix cost is turns to variable cost
DISADVANTAGES : Associated risks

REFERENCES
Supply Chain Management by Sunil Chopra and Peter Meindl

Paper: What drives the choice of a third party logistic provider? By edward
Anderson
Third party logistics study Campgemini

Logistics and supply chain management cases and concepts (G Raghuram , N


Rangaraj)

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