Gaining momentum of 3rd Party Logistics
Logistics is a cost centre for any organisation
Logistics is a cost centre for any organisation. Though it’s one of the very important functions/departments, people still view this as a cost centre. The main two KPI of any supply Chain manager is to bring down costs & improve efficiency. So, the supply chain head has to continuously work on decreasing costs and increase the efficiency (time to market).
So, most of the companies look for using 3rd party in some subsets of the supply chain. Maybe it is the last mile or the transportation or warehousing or the first mile. To ensure the business runs & operates smoothly, the SCM head would identify the gaps/process where they can outsource the processes for better costs and bring up efficiency. Many of the processes in the companies are based on seasons, demand and other external factors. In such cases it is always to ensure that such costs can be controlled by using a third party who is a specialist in the process, offering competitive rates and solutions you are looking for. This also helps that the process cost becomes variable and not a fixed cost thus enabling you to bring down costs substantially when the requirements are low.
Few companies however look for outsourcing the entire logistics activities and focus themselves on their core work where their expertise is. Which means the company focuses on the business and its growth rather than logistics. Also, many companies look to outsource the complete activities in the other countries where they are not present as the requirement was to handle the complete logistics from customer clearance to warehousing to distribution to the end customer. The companies who are involved in handling all these activities are termed as 3PL companies. So, the outsourcing of logistics activities to third-party logistics service providers (3PL) has become a common practice by many companies. Third party logistics (3PL) has been gaining importance in most places in the world. Companies across industries and around the world regard logistics and supply chain management as key components of their overall business success.
As said, there are typically two types of 3rd parties involved in logistics.
- Where you have a third party just handling one of the activities of logistics. There are termed more as vendors.
- Where the companies have outsourced to a 3PL company to handle their activities.
The Third-party Logistics market in India can be divided into segments based on the logistics function, which includes transportation, warehousing, freight forwarding and value-added services. Third party logistics providers can apply economies of scale to deliver the products more quickly, reduce inventory with more frequent deliveries and track inventory in warehouses more effectively.
The 3PL market in the country is expected to be more than 48000–50000 crore by 2020. This is growing in double digits. Third party logistics is the practice of outsourcing your logistics solutions to a reliable logistics and transportation company. 3PL essentially would mean taking care of the total operations including global shipping, handling the distribution & transportation, ensuring compliance of regulatory and safety requirements, use of advanced technology and taking care of manpower requirements to handle the above. Their job is also to ensure regular reports are provided to their customers time to time. A 3PL company would actually be a partner who are experts and they invest in technology and they ensure adoption of the Industry best practices. 3PLs also help to achieve critical goals related to services, cost and customer satisfaction. They also share the major drives for growths, challenges & key trends in the marketplace.
With Omnichannel becoming more and more important for companies due to the growing mobile commerce market and online commerce. The objective here is to ensure that the end customer gets the same experience in a retail store or if they order online. The requirement here is to ensure an integration of offline and online logistics to maximise the availability and efficiency. The role of a 3PL here would be to bring out efficiencies, high visibility, reverse logistics & ensure high customer satisfaction as well as updating on future trends in the marketplace.
Third party logistics now forms an integral part of any logistics and supply chain either it’s just a part of the total logistics or its agreement with the 3PL player for outsourcing the complete logistics depending on the requirement of the company. This is always a win-win situation as you focus on your core business growth and the 3rd party takes care of your logistics working on core objectives of reducing costs, enhancing efficiency, high customer satisfaction and helping you keep abreast of the latest trends and challenges in the marketplace. 4PL & 5PL companies are also catching momentum globally which is essentially taking third-party to a step further containing logistics strategies, freight strategies, business planning, analytics, control tower and handling complete supply chain from production to delivery respectively. This is gaining attraction and would be the future requirements for many companies in the market. Companies in Automotive, Pharma, FMCG, Consumer products, Retail and Mobile phones are the major users in the country.
References:
https://www.warehouseanywhere.com/resources/3pl-vs-4pl-logistics-definition-and-comparison/
