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4PL: The Evolution of Supply Chain Outsourcing
Fourth Party Logistics: The Evolution of Supply Chain Outsourcing
NIls Peters
e-Business Seminar
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4PL: The Evolution of Supply Chain Outsourcing
Outline1. Outsourcing: Third Party Logistics
W hy outsourcingOutsourcing logistics functions, but which?
2. Fourth Party Logistics(4PL)Definition Example3 types of 4PL
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4PL: The Evolution of Supply Chain Outsourcing
Outline3. Technology in the next generation of Supply
Chain Outsourcing
4. Supply Chain Value Proposition Revenue Enhancement Operating Cost ReductionWorkingCapital ReductionFixed Capital Reduction
5. Potentials and Constrains
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4PL: The Evolution of Supply Chain Outsourcing
0% 10% 20% 30% 40% 50% 60% 70% 80%
Reduce Operating Costs
Improve Customer service
Gain resources not available
Increase productivity and efficiency
Improve company focus
Make capital funds available
Share risks
Advantages expected from outsourcing
1. Outsourcing: Third Party LogisticsWhy outsourcing
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4PL: The Evolution of Supply Chain Outsourcing
2. Fourth Party LogisticsDefinition
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4PL: The Evolution of Supply Chain Outsourcing
4PL only work wirth interlectual capital and computers
Bird‘s eye view of supply chainto seek integrationto minimize inventory coststo improve efficiencyand to reduce lead times
2. Fourth Party LogisticsExample
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4PL: The Evolution of Supply Chain Outsourcing
Synergy Plus operating model
Solution Integrator model
Industry Inovator model
2. Fourth Party Logistics3 Types of 4PL
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4PL: The Evolution of Supply Chain Outsourcing
Partnership between 4PL – 3PL to market supply chain solutions
Capabilities and market reach of both partners are combined
The 4PL provides: technology, supply chain strategy skills, capability to go to market, and program management expertise
2. Fourth Party Logistics3 Types of 4PL
Synergy Plus operating model
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4PL: The Evolution of Supply Chain Outsourcing
Core Model: 4PL operates comprehensive supply chain solutions for a single client.
Solution encompasses resources, capabilities and technology of the 4PL with complementary service providers
2. Fourth Party Logistics3 Types of 4PL
Solution Integrator model
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4PL: The Evolution of Supply Chain Outsourcing
4PL develops and runs a supply chain solution for multiple industry players with focus on sychronization and collaboration
this model provides the greatest benefits, however it is complex and a great challange
2. Fourth Party Logistics3 Types of 4PL
Industry Innovator model
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4PL: The Evolution of Supply Chain Outsourcing
Outsourcing logistics functions requires intensified communicationand information exchange between the parties involved.
This virtual business environment enables companies to optimize
forecasting, order processing, production and distribution
collaboratively with suppliers and service providers in the sense
of integrated supply chain management.
3. Technology in the next generation of supply chain outsourcingTechnology
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4PL: The Evolution of Supply Chain Outsourcing
The key distinction between 4PL and current approaches to supply chain outsourcing is a unique ability to deliver value to client organizations across the entire supply chain.
4. Supply chain value proposition
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4PL: The Evolution of Supply Chain Outsourcing
Supply ChainValue
Enhancement
ProfitabilityEnhancement
Invested Capital
Reduction
Revenue Enhancement
Operating Cost
Reduction
Working Capital
Reduction
Fixed Capital Reduction
4. Supply chain value proposition
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4PL: The Evolution of Supply Chain Outsourcing
Supply ChainValue
Enhancement
Profitability Enhancement
InvestedCapital
Reduction
Revenue Enhancement
Operating Costs
Reduction
Working CapitalReduction
Fixed CapitalReduction
Driven byenhanced product quality,availability andimproved cutomer service
Revenue Enhancement
With the 4PL focusing on the entire supply chain dramatic customer service improvements can be attained.
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4PL: The Evolution of Supply Chain Outsourcing
Supply ChainValue
Enhancement
Profitability Enhancement
InvestedCapital
Reduction
Revenue Enhancement
Operating Costs
Reduction
Working CapitalReduction
Fixed CapitalReduction
Driven throughoperational efficiencies,process enhancement andprocurement savings
Operating Costs Reduction
Savings will be reached through economies of scale
by outsourcing the complete supply chain.
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4PL: The Evolution of Supply Chain Outsourcing
Supply ChainValue
Enhancement
Profitability Enhancement
InvestedCapital
Reduction
Revenue Enhancement
Operating Costs
Reduction
Working CapitalReduction
Fixed CapitalReduction
Realized throughinventory reductions andreduced order to cash times
Working Capital Reduction
The proactive use of technology to manage orders throughout the pipeline will minimize the amount of inventory required
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4PL: The Evolution of Supply Chain Outsourcing
Supply ChainValue
Enhancement
Profitability Enhancement
InvestedCapital
Reduction
Revenue Enhancement
Operating Costs
Reduction
Working CapitalReduction
Fixed CapitalReduction
Will result fromcapital asset transfer andenhanced asset utilization(by shifting the supply chain to the 4PL)
Fixed Capital Reduction
This will allow the client to invest in its core competencies.
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4PL: The Evolution of Supply Chain Outsourcing
Economies of Scale
Reduced Supply Chain costs
Increased flexibility
Combines the advantages of in- and outsourcing
Manufacturers can focus on core competencies
Improved customer service
Reduced capital requirements
5. Potentials and constrainsBenefitsBenefits of the 4PL Concept
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4PL: The Evolution of Supply Chain Outsourcing
Customer relationships should not be dismissed on basis of efficiency
Strict functional organization structure hinders integrated Supply Chains
Resistance to change – the biggest obstacle to implementation of new approaches
Loosing sight of original core-concept of SCM due to loss of controll
5. Potentials and constrainsProblemsProblems of the 4PL Concept
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4PL: The Evolution of Supply Chain Outsourcing
Discussion
Presentation byNils Peters
e-Business SeminarProf. Dr. H. H. Siedentopf
University of Applied SciencesHamburg
Resources soon available at:www.hiplus.de
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