7PL

The Definitive Supply chain Revolution 7PL
February 2002
White Paper Version 1.2
Copyright 2001. YCH Group. All Rights Reser e!

"o portion o# this publi$ation %ay be repro!u$e! in any #or% or %eans &graphi$' ele$troni$' %e$hani$' %i$ro$opying' photo$opying' re$or!ing or other(ise) (ithout the prior (ritten per%ission #ro% YCH Group.
*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////
Contents
1. Executive Summary Introduction of Concept Evolution of Supplychain
2.
3.
4.
Business Environment & Trends
5.
Conclusion
Page 2 o# 2
Copyright 2001. YCH Group. All Rights Reser e! "o portion o# this publi$ation %ay be repro!u$e! in any #or% or %eans &graphi$' ele$troni$' %e$hani$' %i$ro$opying' photo$opying' re$or!ing or other(ise) (ithout the prior (ritten per%ission #ro% YCH Group.
Executive Summary
All Businesses today understand the value and importance of building an effective Supplychain, as part of organisational growth and profitability. Logistics has come a long way from becoming an expensive corporate support chore, to now a key strategic & competitive advantage. The industry has become a highly regarded professional service that is the source for efficient response to dynamic manufacturing requirements, and fulfilment of demandchain triggers. These are the quintessential facts for todays success and tomorrows edge, in all existing, emerging, and rapidly globalising economies.
Yet despite this apparent fact, and conundrum of exploiting the infinite potential opportunities, many still remain uncertain as to the shape of this new animal, and how, what, when and where the next Supplychain revolution is going to be. With the emergence of terms such as e-logistics, 4PL, 5PL, and collaboration, within a short spans of time, while many are still grappling with 3PL, JIT, and VMI, the exponential progression of the industry is at pace, if not more radical than the information technology industry.
But as we go through the often confusing and inundating logistics models, concepts, and technologies, a new equation has borne out of the cauldron. And as the dust settles, a new hybrid of what we term as 7PL, is to be the defining paradigm shift for the established discourse of Logistics and Supplychain.
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Introduction of Concept
7PL = 3PL + 4PL: The concept of 7PL stems from the very simple notion of amalgamating the well-established 3PL domain with the concept of 4PL, originally coined and trademarked by Accenture. Its representation does NOT connote the over-complication of the Supplychain with 7 other intermediary levels or seconded entities. In fact, 7PL serves to optimise and rationalise the new economy Supplychain partners. In the simplest manner of comprehension for 7PL, it is the effective fusion of physical and process expertise of 3PLs, with the enhanced knowledge-based macro-strategic consulting and IT capabilities of 4PLs.
7PL essentially materialises the long-standing need for a comprehensive and holistic approach to the fulfilment of the most intricate and complex Supplychain requirements for the entire spectrum of logistics. Many debates have risen on the roles and capabilities of the different players in the industry, largely because of disparate definitions of scope and varying degrees of depth of expertise.
More so, the complexities and permutations of the new global economic framework has not only created numerous niche silos of specialised logistics segments, it has also created a vacuum for a truly scaleable and optimal Supplychain partnership integrating the various relationships into a web of synchronised, and streamlined networks of intelligent and collaborative organic Supplychains. This is also partly caused by the multiple platforms of technological
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disparity with all the entities in the Supplychain equation, which complicates matters with the need for further intermediation.
Hence, this hybrid we call 7PL is not just about the definitive
playing field, beyond just managing Supplychains, but the
consolidation and collaboration of all value-creating segments of knowledge, technology and best-of-breed disciplines (such as quality management, human capital enrichment, and entrepreneurial modelling), to truly achieve the utopian fulfilment of seamlessly integrating the physical, information, and financial flows in the most optimum manner for all entities.
Difference between 3PL and 4PL:
Understanding the role and competencies of each entity is necessary so as to truly appreciate the kind of hyper-value created by 7PL. Many 3PLs have claimed to offer integrated or total logistics, but have only succeeded with showcasing the inability to truly understand or appreciate the complexity and the competency required, albeit the expertise in real execution, does enable a 3PL to feel the pulse of the Supplychain.
As well, many 4PLs claim to be able to offer a more strategic management objective, which also raises concerns over live operational, implementation, and execution expertise, as well as further intermediation or dilution of the client from its Supplychain pulse. However, the proposition of the 4PL brings into question the viability, and rapid obsolescence of comprehensive supply-chain reengineering plans that require at least 1-2 years to deploy, within an environment that needs to cater to demand dynamics which are ever-changing within a radically shortened business cycle.
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The question does still remain however, as to who would be most appropriate, to not only have intrinsic knowledge of the customers requirement, and yet have the accountability, responsibility and capability to not just plan/manage, but also to have the necessary to execute the Supplychain. In this respect, it can be clearly seen, even through the many cases that have occurred in the last couple of years, that in order for a thoroughbred 7PL to emerge, the entity must be built and grown from ground-up, and not top-down. This means that the physical, asset-based, infrastructure and hardware must be in place to a certain degree to truly fuse with the intangible, non-asset-based software, through soundly established hardware that feels the Supplychain.
These will be further elaborated in the following sections. Meanwhile, to begin and better understand the current environment, as well as the organic path to the proposition of 7PL, we will explore briefly the evolution of Logistics and Supplychain to date.
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Evolution of Supplychain
Historical Micro rends:
Although, there have been many debates as to the period of the evolutionary milestones, and claims being the paradigm shifters, the
different phases in the evolution of the Supplychain can generally be represented as going through the phases that are described in the following.
Piece!eal Lo"istics #ar"uably before the 7$s%

Fundamentally, the character of the modern industrialised commercial logistics industry was basically made up of stand-alone logistics service providers who specialised in any 1 of the 3 basic services ie: Transportation, Warehousing, or Freight Forwarding. Integration was non-existent as each service provider took pains to establish their own position and importance in the flow of goods, with no consideration of the macro perspective. This left an often over-complex and highly inefficient set-up, which resulted in more wasted resources from the customer to manage and ensure that the loose ends connected.
&nte"rated Lo"istics Ser'ices ( 3PL

As the industrial manufacturing revolution kicked in, a glaring
opportunity arose within the logistics industry to provide integrated logistics services (ie: connecting the 3 fundamental service elements as 1 offering). This was a requirement of major manufacturers who saw tremendous cost savings to streamlining and centralising the critical logistics functions to a one-stop-shop
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that removed the bureaucratic administration of the 3 distinct yet vital elements. This also saw the gradual shift away from in-house managed logistics by companies, who saw to outsource more and more of the non-core-competent functional elements of the organisation to grow and globalise effectively. It was only the beginning of a new breed of what has been historically termed as 3 Party Logistics service providers.
rd
3PLs took many different forms, depending on their heritage among the 3 areas Transport, Warehousing, Freight. Even then, the lines were blurred as to which element would be an appropriate anchor to develop comprehensive integrated logistics services. In any case, the realisation then of the importance of logistics in the back-end, and the potential of its impact in the front-end took shape. The growing realisation in the empowerment of knowledge, and the advantaged positioning of the entity possessing the goods, added significant clout to the equation of the Supplychain, so much so that it was very easy for logistics companies to move up the value-chain and offer other secondary value-added activities to the situation.
&!pact of &nfor!ation echnolo"y

This was enhanced further by the information and PC revolution in the 80s, which created a commonly accessible channel for entities to tap, extrapolate, integrate and manage information with machinelike velocity and accuracy. The information that was already in the box on the back of the truck, within the four-walls of the warehouse, and on-board the shipping vehicle, proved to be a gold-mine for the picking. The empowerment was obvious, as service providers began to mine this information to create new niches and opportunities with value-adding activities, with the newfound intelligence acquired through technology. Logistics service
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providers were no longer mere executors of instructions, but also
able to offer planning and sub-management of the Supplychain.
Supplychain Mana"e!ent ( Solutions

As technology became an essential appendage to the logistics
machine, e-commerce, web and WAP technologies added new dimensions to the scenario. The frequency of the business cycle was dramatically intensified, manufacturing and fulfilment
expectations were raised to an all-new level, traditional supply-chain models were thrown out the window, sophistication and complexity were magnified exponentially, with new permutations of
requirements, as well as hybrid / unconventional channels of providing related services. Truly, the new and intelligent world of commerce created a whole new realm of expectations, anticipation, and fulfillment of the final demand-chain, with comprehensive Supplychain solutions built on empowering technologies.
4PL
With this came boundless new opportunities, where previously perceived as unrelated entities began to associate themselves as part of the Logistics function or Supplychain in the relational equation. Primarily, there have been many lively discussions with respect to the most notable inclusion of a 4PL or 4 Party Logistics.
th
While many argue for and against the necessity, value and role of the 4PL, everyone agrees on the need for a new level of competency for the Logistics and supply-chain partner of the sophisticated global corporation. Lengthy debates have arisen with regards to effectiveness of the 4PL as a lead logistics integrator or complexity manager, providing impartial strategic oversight and higher-levels of holistic management expertise, in an asset-free
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environment with no direct vested operating responsibility. While we do not deny the increasing importance of incorporating these capabilities into the service portfolio, and that tremendous value has been created with such interventions and re-engineering, the question remains as to the foreseeable form of the hyperintegrator, and the likelihood from which the background of such a hybrid should evolve from operator/executor or
information/knowledge administrator.
As much as one contends to the rapidly over-taking importance of the information flow than the physical flow, and how 3PLs and 4PLs are typically conflicting breeds, again we are left to expound on the virtues and eventuality of the integration of the 3PL and 4PL competencies into the 7PL.
he )e*t +e'olution
At the end of the day, the power shift of the Logistics and Supplychain entities is not a question of whether the 4PL (front-end) or the 3PL (back-end) should take the lead, it is a question of synchronising the 2 competencies into a new revolution of Supplychain partnership. The trends pointing to this eventuality are very apparent. As information technology is getting more accessible and made easily adaptable, the barriers to entry for a 3PL to develop 4PL competencies are being broken down effortlessly, while 4PLs are increasingly looking into getting more involved with the operating back-end, through mutually vested arrangements, and valuable hands-on understanding, which does not come-by through short-cuts or without time-tested resource investments. Even with newly-coined terms such as 5PL for e-hubs and exchanges, this does not in any way undermine the potential of the 7PL as the coupde-grace for ultimate Supplychain collaboration and optimisation.
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Business Environment & Trends

Apart from the functional characteristics of the different players of the logistics and Supplychain equation, the evolutionary trends and the imminent business environment that we have and will be experiencing very much determines the need for the synergising of the 2 main protagonist (3PL and 4PL) of the equation, and augurs very well for the new breed of 7PL. As mentioned before, the logistics and Supplychain element is relentlessly moving up the value-chain of all business contexts. Total Supplychain management outsourcing is becoming
increasingly popular as corporations identify tremendous savings and economies of scale through the realignment of corecompetencies and rationalisation. Also, with shorter demand cycles, increased complexity due to personalisation and customisation, through direct and more intimate/intricate communications with the end-consumer, via e-solutions and i-technologies, the emphasis on further collaborations, lesser intermediations, frequent consolidations, is more than ever. Businesses are constantly searching for the most scaleable, flexible solution to respond to hyper-sensitive supply and demand chains. New economy models have resulted in new sciences and disciplines that create concepts such as Efficient Consumer Response, Execute-To-Demand, pointto-point, door-to-door, & end-to-end Supplychains, to complement with the conventional fields of Customer-Relationship-Management, Enterprise Resource Planning, etc.
7PL is poised to not just gratify the theoretical or hypothetical models of untested studies and consultations, but to merge and synchronise with the reality-based models that have proven their
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worthiness in execution. It is the perfect relationship for materialising innovation and results. 7PL is positioned to manifest the depth of knowledge and intelligence stemming from technological impetus, with hyper-speed in execution of real global Supplychain operations, using optimally scaleable and responsive solutions that are able to organically improve with the Supplychain needs.
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Conclusion
All Supplychain specialists wish to be in Supplychain Heaven where there are no inventories! Innovative financial concepts like Zero Inventory Model (ZIM ) triggers inventory ownership transfer
across the dynamics of the Supplychain and the constant search to integrate the physical, information with the financial flows pose great challenges to the traditional business landscape. Traders, distributors, middlemen that adds little or no value will slowly fade away and in its place will be new regimes of cyber traders, edistributors or simply a well orchestrated Supplychain flawlessly executed that has the similar impact of a DELL direct model. This will be truly an optimised Supplychain the pinnacle of real logistical excellence where the ONE TOUCH of the consumer can trigger the entire Supplychain from finished goods for demand fulfilment and materials for immediate BTO with financial, information and physical flows seamlessly integrated. The Supplychain is getting leaner as we move towards ZeroInventory-Model (ZIM ). With 7PL, the financial / transactional
TM
flow will be more feasibly incorporated and assimilated eventually into the Supplychain, thereby creating a true Logistics
Superhighway in a Borderless World.
END
For further information, please contact YCH Group Corporate Communications at (65) 860-7748 or email corporate@ych.com, or visit www.ych.com
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The Definitive Supply chain Revolution 7PL

Copyright 2001. YCH Group. All Rights Reser e!

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

Business Environment & Trends

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

Difference between 3PL and 4PL:

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

Piece!eal Lo"istics #ar"uably before the 7$s%

&nte"rated Lo"istics Ser'ices ( 3PL

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

&!pact of &nfor!ation echnolo"y

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

able to offer planning and sub-management of the Supplychain.

Supplychain Mana"e!ent ( Solutions

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

Business Environment & Trends

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

*P+ , -he .e#initi e Supplychain Re olution ////////////////////////////////////////////////////////////////////////

Superhighway in a Borderless World.

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