Fourth Party Logistics : The New Mantra
In today's industrial scenario, there has been an
unprecedented increase in customer's demand -for
better service and on-time deliveries at reduced cost.
This has put extra pressure on area of logistics and
supply chain management. The expectations of
customers from the suppliers are continually increasing.
This expectation and demand has been further
augmented by the proliferation of Internet and the web
based technologies and the emergence of the latest
phenomenon called convergence.
Traditionally, suppliers and big corporations have been
meeting the demands by increased inventory, speedier
transportation solutions, posting on-site service
engineers and many times employing a third party
service provider. Today they need to meet increased
levels of services due to e-procurement, complete
supply visibility, virtual inventory management and
requisite integrating technology. To meet these
demands, the general trend has been to outsource the
service providers-better known as third party service
providers. However, these service providers, many a
times, lack broad set of skills, integrating technologies,
strategies and global reach.
To build up this strength many third party service
providers are going for collaborations mainly with
consultancies and technology providers. Now
corporations are outsourcing their entire set of supply
chain process from a single organization which will
assess, design, make and run integrated
comprehensive supply chain solutions. This evolution in
supply chain outsourcing is called Fourth Party
Logistics-the aim being to provide maximum overall
benefit. Thus a 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
provider to deliver a comprehensive supply chain
solution. It leverages the competencies of third party
logistics providers and business process managers to
deliver a supply chain solution through a centralized
point of contact. As the fourth party logistics provider
caters to multiple clients, the investment is spread
across clients-thus taking the advantage of economies
of scale.
STAGES OF FOURTH PARTY LOGISTICS
SOLUTIONS
1.Reinvention
At the highest level of fourth party logistics, is
reinvention. Reinvention takes advantage of the
traditional supply chain management consulting skills,
aligns business strategy with supply chain strategy and
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is facilitated by technology that integrates and optimizes
operations both within and across participating supply
chains.
2.Transformation
The second level of fourth party logistics solutions is
transformation. It focuses on improving supply chain
functions. This includes sales and operation planning,
distribution management, procurement strategy and
customer support. Technological leadership and
excellence is leveraged with strategic thought, process
redesign and organization change management to
improve and integrate these supply chain activities by
bringing about the best breed solution.
3. Implementation
The fourth party logistics solution provider implements
recommendations for efficient use of supply chain
management . This includes business process
realignment, technology and system integration across
the client organization and service providers, and
transition of the operators to the delivery team.
4.Execution
The fourth party logistics provider takes the operational
responsibility for multiple supply chain functions and
processes. It covers transportation management,
warehouse operations, manufacturing, procurement,
supply chain, information technology, demand
forecasting, network management, customer service
management, inventory management and
administration.
In summary , the fourth party logistics responds
effectively to the broad complicated needs of today's
organizations by delivering a comprehensive supply
chain solution. This solution is focused on all elements
of supply chain management , continuously updated
and optimized technology and is tailored to specific
client needs.
With the advent of IT 's role, the effectiveness of fourth
party logistics can be greatly enhanced by implementing
systems at all levels-ERP, DSS - transactional and
functional. It provides current information allowing an
organization to redirect the product flow , if desired, and
forecasting the volumes . It also allows the user to track
performance accountability at all levels within supply
chain line while monitoring continuous performance
opportunities.
COST EFFECTIVENESS OF FOURTH PARTY
LOGISTICS
1. Revenue growth by enhanced product quality,
product availability, and improved customer service -all
facilitated by the application of leading technology.
2. Operating cost reduction can be achieved through
operational efficiencies, process enhancements and
procurements. Savings will be achieved by complete
outsourcing of supply chain functions and not just
selected components.
3. Fixed capital reductions will result from capital asset
transfer and enhanced asset utilization. The fourth party
logistics organization will own physical assets through
freeing up the client organization to invest in core
competencies.
CONCLUSION
Emergence of fourth party logistics is a new concept in
supply chain outsourcing . With the rapid advancements
of technologies, it will be easier to reap the benefits of
fourth party logistics concept. Thus fourth party logistics
is the future of supply chain management.
by Kaustubh Vats
SIBM Pune
5PAISA
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