Logistics Outsourcing

An Emerging Trend

Drivers to Outsourcing

Globalization of markets
Competitive pressure
Changing customer demands
Emerging technologies

Why Outsourcing?
- To focus on core competencies

- Resource constraints
- Cost-saving resulting from better
management
- Wider geographical coverage
- Reduction in risk and liability
- Extend superior customer service
- Source of process improvement

Which Logistics Activities Are

Outsourced ?

Warehousing and warehousing management

Transportation and freight management
Freight payment and audit
Inventory management
Customs clearance
Material Handling
Packaging

Logistics Evolution
4 Party
Logistics

3 Party
Logistics

In-house
logistics

Alliance with
3 PL Service provider
IT Organization
IT/logistics
Consultant

Outsourcing
Warehousing
Transportation
Inventory
Order processing

Self -relient
Organization
performing
all logistics
operation

3 PL Service Provider
Wholesalers
The stand-alone operators, who extend only one
type of service in which they have an expertise
such as:
- Warehousing
- Transportation
- Customs clearance
- Packing
- Equipment suppliers
- IT support

Integrators
One who provides entire logistics services and offers
Logistics solutions to customers logistics problem

Advantages of 3 PL
Reduction in risk and liabilities
Value added service to the customer
Source of process improvement
Wider market coverage
Speed to market

Value Added Services by

3 PL Service Providers
Cross docking
Customs clearance
Reverse logistics
Assembly or mixing
Freight consolidation
Special packaging & labelling
Logistics audits
Stock financing

Prominient 3PL providers

AFL Limited
Dynamic Logistics
Fed Ex
Gati
Logistix limited
Patel Roadways
SembCorp
TCI
TNT

4 PL Service Provider
- Covers the entire supply chain of the customer
- Collaboration between two or more 3PL service
Providers on the resources sharing basis to
extend logistic solution to a common customer
- Alliances to be led by integrator with IT based
and not asset based service provider
- Flexible arrangement

Advantages of 4 PL

Reduced logistics cost

Concentration on core competencies
Release of management capacities
Reduced assets
Economies of scale
Increase of process quality
Access to latest technologies

Logistics Outsourcing Issues

Switching cost (assets , customer service)
Degree of control (over employees)
Human & electronic interface ( decision issues,
EDI)
Tuning logistics to need of channel partners
(ITC)
Degree of outsourcing
Legal aspects

Service Provider Selection - 1

Define logistics problems
Identify problem areas
Establish objectives
Search for service provider
Proposal evaluation
Selection of service provider

Service Provider Selection- 2

Define logistics problems

-

High logistics cost

Longer performance cycle
Increased customer complaints
Reverse logistics

Service Provider Selection-3

Identify problem areas
-

Warehousing
Material handling
Storage arrangement
Transportation
Packaging

Service Provider Selection-4

Establish objectives
- Cost reduction
- Performance cycle compression
- Customer complaints resolution
- JIT delivery
- Freight optimization
- Route planning
- Inventory carrying cost

Service Provider Selection-5

Search for service

provider
- Integrator
- Wholesaler
- Consultants

Service Provider Selection-6

Proposal evaluation &
Selection
- Credentials
- Logistics infrastructure
- Experience and customer base
- Technology
- Cost of service
- Reliability
- Government liaison

Logistics Service Contract Agreement

Date & place of the contract
Names and addresses of contracting parties
Scope of service
Delivery requirements
Payment terms
Extra services from service providers
Charges for services offered
Value proposition by service provider
Damage liability
Responsibilities
Performance measures criteria
Risk sharing
Termination of contract
Notice period
Notice for claims and filing suits
Authority & jurisdiction of dispute
settlement
Governing laws

Reverse Logistics -A New Wave

Reverse Logistics
What it is
The process of moving goods from their
place of use , back to their place of
manufacture for reprocessing, refilling,
repairs or waste disposal
Its a planned process of goods
movement in reverse direction done in
efficient and cost-effective manner
through the organized network. It can be
standalone or integrated system in
companys supply chain

Why Reverse Logistics ?

Growing public concern for
environmental pollution
Government regulations on
product recycling and waste disposal
Growing consumerism
Stiff competition

Reverse Logistics Scope

Refilling
LPG Cylinders, Soft Drink Bottles, Liquor
Bottles,
Pallets, Containers

Product Recall
Defective product, Shelf life over (Johnson)

Refurbishing
Used and returned within warranty period

Remanufacturing
Used product for quality up-gradation

Waste DisposalRecycling the waste

Three Stage Reverse Logistics

System for Used Car Recycling
Stage III

Stage II

Steel
melters

Car
Dealer

Battery
suppliers
Packaging
manufacturer
s
Tyre
producers
Components
producers

Stage I

Car
Produce
r

Customer
Customer
Customer

Car
Dealer

Customer

Car

Customer

Dealer

Customer

Reverse Logistics:
System Design Considerations
Product location identification
Product collection system
Product recycling / disposal centres
Documentation system
Cost implications
Legal issues

Reverse Logistics in India

Refilling of LPG Cylinders, & Soft
Drink Bottles
Bharat Petroleum, Hindustan Petroleum
Pepsi, Coca-Cola
United Breweries (Beer)

Return of Life Expired Products

Nestle (Yoghurt)
Monginis (Cakes)

Rest in the next