Sharing some useful article published in a magazine on:

logistic management and supply chain integration

Logistics dissected into 3PL and 4PL

eTailing India Thought Corner

Logistics management is an integral factor in the success of any
manufacturing company’s operations and has a direct impact on their
bottom line.

How is Logistics Management Defined?

Logistics management is the governance of supply chain functions
that includes transportation management, fleet management,
warehousing, materials handling, order fulfillment, logistics network
design, inventory management and planning of supply/demand.
An important aspect in the overall design of the logistics system is the
choice to directly manage logistics functions, or to outsource them to
a third party through a contract mechanism. For instance, rather than
operate and maintain a fleet of vehicles and drivers, a transportation
company can be hired to transport the commodities from the supplier
to the recipient (e.g., from the regional warehouse to the district
warehouses in the region). An advantage to outsourcing is that
functions are assigned to companies that specialize in that particular
function. A perceived disadvantage to outsourcing is that you have
less direct control over that logistics function. Outsourcing can take
many forms and phase which involves all or only some commodity
management functions.

Today, let’s shed a light on 3PL and 4PL

What is a 3PL?
A third party logistics company is one that works with shippers in
order to manage another company’s logistics operations department.
3PL is the action of outsourcing activities that are related to logistics
and distribution.
What is a 4PL?
The concept of a 4PL provider is an integrator that accumulates
resources, capabilities and technologies to run complete supply chain
solutions.
Main Difference between 3PLs and 4PLs
The 3PL targets a single function, whereas the 4PL manages the entire
process. A 4PL may manage the 3PL also.
3PL
Third party logistics providers usually work on:
 Integrating operations

 Warehousing

 Transportation services

 Cross-docking

 Inventory management

 Packaging

 Freight forwarding

These services are scaled and customized to the customer’s specific

needs based on their market conditions and the different demands and
delivery service requirements according to their products.

Types of 3PL Providers

1. Standard
Basic activities: Pick and pack, warehousing and distribution.
2. Service Developer
Value-added services such as tracking and tracing, cross-docking and
specific packaging
3. Customer Adapter
This comes in at the request of a customer. It is when the 3PL takes
over complete logistics of the firm.
4. Customer Developer
This is the highest level of 3PL. This is when the 3PL integrates itself
with the company, and ends up taking over the whole logistics
operation.

4PL:
Fourth party logistics providers usually work on:
 Procurement

 Storage
  Distribution
 Processes

A 4PL company takes over the logistics section of a business. This

could be the entire process, or a business module that’s necessary to
have as part of the main business.

3PL Implementation Process:

Step 1. Choose a 3PL
Look for a 3PL that shares your values and can deliver on the service
levels you promise your customers. As part of your research, ask for
evidence of their performance with other companies like yours; and
gauge how well they can adapt to meet retailers' evolving needs in the
fast-pace eCommerce ecosystem.
The concerned should have a proven warehouse management system
(WMS) that easily integrates with your systems, provides accurate
inventory control and speeds up order processing times.

Step 2. Set up systems and software

Once you've chosen your 3PL, your IT teams will work together to
ensure integration between the 3PL's systems and your own. A well-
integrated system ensures complete and continued transparency, and
adds value at every phase of the fulfilment journey.

Step 3. Create work-flow at distribution centre

You can take a back seat at this stage and let your 3PL do the work.
Their expert team will design a streamlined, cost effective process for
the picking, packing and delivery of your items.
Step 4. An order arrives.
Your 3PL is now ready to start processing orders. When the first order
comes through onto their WMS, someone on the warehouse floor
collects the items (this is called picking).
The 3PL will have enough insights to handle orders. For example,
they may recommend placing high-turnover stock closer to the picker.
Such strategies will save your business money, and get products out to
customers faster.

Step 5. The order is packed

Warehouse staff then packs the items according to the customer's
delivery request or your company's service promises. For example,
your website may state that you only use recycled packaging –you
stick on the pre-defined commitments.

Step 6. The order is dispatched

Again, this will be done according to the delivery request. Most
customers stick with standard delivery, but if they request an express
delivery then it's the 3PL's job to ensure timely delivery.

Step 7. Returns processing is possible

Handling returns is part of the order processing function, and you
want your 3PL to make it as easy and stress-free for customers as far
as possible.

Step 8. Ongoing visibility and audits

Your 3PL should provide you with full access to their WMS, so you
about your orders, stock levels and stock movement. You can use this
data for inventory management, product planning, marketing and
other strategic purposes of your business.
As part of this, your 3PL should conduct regular audits to ensure that
their fulfillment and order processing systems are performing at the
optimum level.
Key 3PL players in India: Gati, DTDC, Menlo, TCI Group

Business module of 4PL

Step 1. The first step involves reinventing a 4PL solution. A
synchronization of supply chain planning & execution activities
across supply chain is required.

Step 2. The next level is transformation. Focus is laid on specifi#eoc

supply chain functions such as sales & operations planning,
distribution management, procurement strategy and customer support.
It’s a critical phase to the success of the solution.

Step 3. The third step involves implementation. A 4PL implements

recommendations including business process realignment, systems
integration of technology across the client organization and service
providers. The goal is to avoid ineffective implementation strategies.

Step 4. The final level is Execution. A 4PL provider caters to

operational functionality for multiple supply chain functions &
processes. The scope of work goes beyond third party transportation
and warehouse management. The phase includes manufacturing,
procurement, supply chain IT, demand forecasting, network
management, customer service, inventory management and
administration.

Overall, a 4PL will act as a subset of a critical path supply chain

focusing on all elements of supply chain management.
Key 4PL players in India: Gati, Agarwal Packers and movers,
Hindalco Logistics, Pan Lloyd Logistics

Conclusion:
Third party logistics industry is growing at a rapid pace in India and
according to a report, third party logistics industry is expected to
touch Rs.48,000 crores by 2019.Whereas, the emergence of Fourth
Party Logistics is a new concept and is based on to provide
competitive advantage to the supply chain participants