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Outsourcing is the buzzword today. It has become a readily accepted means of increasing
performance of non-core supply chain activities. Outsourcing allows organizations to
focus on their core competencies, to provide a differentiated level of customer service,
and to take advantage of greater operational flexibility.
While outsourcing often provides solid one-time cost reductions, it does not deliver the
continuous ongoing savings that businesses desire.
The next significant evolution outsourcing in the context of supply chain management
has emerged, and it is called Fourth Party Logistics or 4PL.
Getting to Know….
The Fourth Party Logistics provider is a supply chain 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.
Central to the 4PLs' success is the "best of breed" approach to providing services to a
client. The development of 4PL solutions leverages the capabilities of 3PLs, technology
service providers, and business process managers to provide the client organization with
greater cross-functional integration and broader operational autonomy.
For example, AFL, which was till now focusing on 3PL, has now diversified into 4PL
solution segment positioning itself as a company that will manage the 3PL service
provides.
The second key distinction between 4PL and current approaches to supply chain
outsourcing is 4PL's unique ability to deliver value to client organizations across the
entire supply chain.
The 4PL approaches the concept of supply chain integration through four key drivers of
value:
• Increased revenue,
• Operating cost reduction,
• Working capital reduction, and
• Fixed capital reduction.
Fixed-capital reductions result from capital asset transfer and enhanced asset utilization.
The 4PL's logistics service providers can take ownership of physical assets, thus freeing
up assets of the customer. This allows the client organization to invest in its core
competencies (i.e., research and design, product development, sales and marketing),
rather than in bricks and mortar.
Although 4PL solutions are likely to be customized to suit the needs of a particular client
or situation, the following operating models conceptually portray how 4PL relationships
are configured.
The Future…
Fourth Party Logistics is the next generation of supply chain outsourcing. Supply chain
activities are information-rich, complex and increasingly global. At the same time,
technology and e-enabled capabilities are racing ahead. To enable a firm to capture all the
benefits of supply chain collaboration and synchronization, a new generation of
integration must be deployed, which is currently beyond the capabilities of traditional
sourcing methods.
A 4PL arrangement has the potential to provide an organization with breakthrough supply
chain performance. It is distinct from current approaches to supply chain outsourcing,
because it delivers measurable, sustainable value across the full breadth of the supply
chain. Getting into this relationship with a 4PL begins a journey in which a firm and the
4PL will come together to create an evolving, mutually beneficial, long-term relationship.
As more and more companies outsource their logistics operations from HP to Compaq,
from Mc Donald's to Walmart, and as more and more players enter the market from
Ferdal Express to Geologistics and close home from Gati and Bluedart, the 4PL services
are here to stay. With the consultants like McKinsey and Company and Andersen
Consultancy also joining the bandwagon by setting up their own supply-chain practice
cells, the market is poised to grow, and as with the current rate of growth of 50% over the
last few years, it is expected to become a Rs 500 cr. industry in two years from current
level of Rs 300 cr.
http://www.afl.co.in/corporate/jsp/abt_pro.jsp
AFL brings to you an extensive Express and Logistics network offering a range of value-
added services. Our customized products and service portfolio provide our customers
with a Unique Service dimension worldwide. We continue to uncover efficiencies to keep
you ahead of the competition. This is achieved by focusing on advanced technology,
process consistency and exacting quality standards.