3PL/4PL Logistic3PL/4PL Logistic

AjitPrepared By :-

A third-party logistics provider (3PL, or TPL) is a firm that provides service to its customers of outsourced logistics services for part, or all of their supply chain management functions. Third party logistics providers typically specialize in integrated operation, warehousing and transportation services

A third-party logistics provider (3PL, or TPL) is a firm that provides service to its customers of outsourced logistics services for part, or all of their supply chain management functions. Third party logistics providers typically specialize in integrated operation, warehousing and transportation services

Fourth party logistics (4 PL) companies serve as consultants who manage the relationship between the principal company and one or more 3PLs to make sure all operations are running smoothly. They can carry various levels of responsibility, from advice on choosing the best companies, right up to the day-to-day management of essential logistical tasks being performed for the principal company

Fourth party logistics (4 PL) companies serve as consultants who manage the relationship between the principal company and one or more 3PLs to make sure all operations are running smoothly. They can carry various levels of responsibility, from advice on choosing the best companies, right up to the day-to-day management of essential logistical tasks being performed for the principal company

According to Armstrong & Associates, the world 3PL revenues

1992 - $10 billion1996 - $25 billion2000 - $56 billion2003 - $141billion2006 - $300 billion

The 3PL market in India is least developed.

U.S. 57%Europe 40%Japan 80%

U.S. 57%Europe 40%Japan 80%

The logistics firms offer limited services Lack of trust and awarenessLack of trust and awareness

The 3PL market in India is poised to grow at over 20% compared to the average world growth rate of 10.7%

The Indian Government is working towards a uniform VAT regime. Once implemented, it will enable the 3PL providers to consolidate the warehousing facilities currently maintained in

different states bringing in economies of scale

4PL Logistic

Major Players in India

Some of the Indian conglomerates extended their business to third & forth party

logistics

• Drive India

• Drive India Enterprise Solutions, or DIESL, came out of telecom venture

• It is a TATA group venture• DIESL has 4.5 million sq. ft. of warehousing space across the

country, and hopes to grow the logistics arm at 100 per cent annually

• Revenue: Rs 1100 Crores

DIESEL

• The company plans to set up four mega warehouses (500,000 sq. ft. each) and five small ones (150,000 sq. ft. each) across the country

• It is among the top three logistics players in the auto segment

• Revenue: Rs 1000 Crores

Mahindra Logistics

• It is one of the oldest logistics providing companies of India• In November 2010 it bought UK-based logistics company

Multipart Holdings• In January 2011 it bought US-based logistics service provider

Manufacturers Equipment & Supply Company, or Mesco• Revenue: Rs 1300 Crores

TVS Logistics Services

• It is a Future Group venture• It has 6 million sq. ft. of automated distribution centers

across the country, and plans to add another 9 million• Revenue: Rs 700 Crores

Future Supply Chain Solutions

• TCI is India's leading Multimodal Integrated Supply Chain Solutions provider with a Global presence

• TCI is equipped with an extensive set up of 1000 plus branch offices, a large workforce, huge fleet of customized vehicles and warehouse space of 9.5 million sq ft.

• TCI offers seamless multi-modal logistics solutions• It moves 2.5% of India's GDP by value• Revenue: Rs 2200 Crores

Transport Corporation of India (TCI)

Company Revenues(in Rs Crores)

GATI 1500

AFL Logistics(FedEx) 1400

DHL India 823

Reliance Logistics 319

Geo Logistics 200

Safe Express 50

Indian Players

Top ten player of logistics in worldS. No Name of 3PL Company Revenue Coverage

1 Exel plc Berkshire, UK, London $ 8.3bn Global2 Kuehne & Nagel

International Schindellegi, Switzerland$ 6.9bn Global

3 Schenker Assen, Germany $ 6.4bn Europe, Asia, South America, Africa, North America

4 DHL Danzas Air & Ocean Basel, Switzerland

$ 5.7bn Global

5 P&O Nedlloyd Rotterdam, Netherlands $ 4.8bn Coverage: Europe, Asia, United States

6 TPG/TNT Hoolddorp, Netherlands $ 4.7bn Europe, Americas, Asia7 Panalpina Basel, Switzerland $ 4.6bn Europe, Asia, Americas, Africa8 UPS Supply Chain Solutions Atlanta $ 4.1bn Global

9 Nippon Express Tokyo, Japan $ 4.0bn Global (except Africa)10 C.H. Robinson Worldwide Eden Prairie, $ 3.6bn North America, Europe, Brazil

Top 10 Countries in Logistics

1. Singapore 2. Netherlands3. Germany4. Sweden5. Austria6. Japan7. Switzerland8. Hong Kong / China9. United Kingdom10.Canada

Global EconomyThe logistics business growth was 4.5% in year 2011 and it is expected to be

3.5% in year 2012.

Factors Contributing to the slow down are

•Euro area economy- The exchange rate of Euro has been depreciated with 10% against American Dollar which is detrimental to Global economy.

•Fuel Prices- In case of road transport the fuel price itself contributes the 40% of their operating cost

•Labor costs - Increase in labor costs world wide leads to high operational cost

•Investment intentions- nominal increase in business volume and heavy increase in operating cost and investment leads to scaling down of the a number investment plans

Global Outlook 2012

Both 3PLs and Their Clients Need to Introduce Change

Embed innovation in the services contractsDevelop innovation capacity in operations Motivate innovation through incentives Establish open, transparent, collaborative

relationshipsUpgrade the deal structure

Case References – Case 1

5.1 CJ-GLS: an analysis on 3PL using Blue Ocean strategy•Ranking 4th in Korean Logistics, CJ-GLS is a subsidiary of Samsung Corporation created a non-competitive blue market strategy in logistics market by positioning itself as a value added service provider in late 80’s •A latecomer in Korean logistics market, CJ-GLS entered into 3 PL segment and created a largest client bases today with its market analysis capability, accurate customer requirement analysis, and the constructing capability of its Logistics Information Systems (LIS)•It’s great success was achieved by giving value addition to customers by introducing RFID based inventory management and grid computing technology services for first time in 1988 •The 3 PL services includes:

Freight consolidation, Distribution, Transportation, Warehouse design and management, Labeling, Packing, and Order management.

•220 companies compose its major customer base which includes National Panasonic, Sony, Nestle, Osram Sylvania and Lego.

Case 1 – contd…

Korean Logistics Market distribution

5.2. TVSL:Hived off as a separate company in 2004 (it was earlier a division of TVS and Sons, the parent company of the $3.6-billion TVS Group).

5.3. Auto Industry Focus•TVSL's rapid growth is due to its unique business model which has turned existing practices in the logistics industry on its head. •Started focusing only on the auto industry, despite the fact that the sector is a logistical nightmare as it requires handling inventories of hundreds of non-uniform components and offers the lowest possible yield per kg. •The two main reasons behind this decision are:

Domain knowledge was available in-house The fast-growing Indian auto industry presented a huge potential— with

4-7 per cent of the auto industry's turnover is spent on logistics services.

Case 2

5.4. TVSL’s Value addition and differentiation through innovation:

5.5. Key results due to innovation:•Quick acquisition of major global clients due to variable cost model. This include global Cummins, JCB, Caterpillar, Ford, John Deere and New Holland, apart from Indian companies such as Tata Motors, Mahindra and Mahindra, Ashok Leyland, Eicher and L&T Komatsu.

•Lower fixed cost investment comparing to major peers. Transport Corporation of India (TCI), a clear market leader in the Indian logistics industry with fixed assets at Rs 413 crore in 2008-09 earned a turnover of Rs 1,304 crore. In comparison, TVSL'S fixed asset was Rs 85 crore against a revenue of Rs 956 crore in 2009-10.

Reference

• http://www.thehindubusinessline.in/2003/06/23/stories/2003062300500600.htm

• http://www.tcil.com/tcil/• http://businesstoday.intoday.in/story/making-of-an-indian-

mnc/1/5226.html• http://www.commodityonline.com/news/third-party-logistics-to-

gain-strength-in-india-17749-3-17750.html• http://forbesindia.com/printcontent/28192