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Lecture 05 : Logistics Services Providers — Transcript

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0:01[Music]
0:22[Music]
0:26so hello dear friends so welcome again
0:28to nptl online course course on
0:30Logistics and Supply Chain management so
0:32today we are into the fifth lecture that
0:35is on Logistics Services providers so
0:38I'm Dr vikas takur Department of
0:41humanities and social sciences IIT
0:43kakur so in this lecture we'll try to
0:47address uh the following points first
0:50we'll discuss about the logistic
0:51services provider and then what are the
0:54key components of uh these players and
0:56then why we need those players right why
0:59we are going for
1:01outsourcing partially or maybe fully
1:04right uh our Logistics operation to
1:06these players so depending upon whatever
1:09your requirements are we either you'll
1:11go for first party logistic services
1:13provider or second party or third fourth
1:15fifth party right so the latest is the
1:18sixth party Logistics service provider
1:20are also available right and then we'll
1:22discuss one small case study on this uh
1:26session so logistic service provider is
1:29is a company or organization that offers
1:32a range of logistic Solutions right and
1:35those logistic solution we already
1:37talked about maybe Transportation may
1:39maybe warehousing maybe storage maybe
1:42distribution management of goods and
1:44materials and maybe the reverse supply
1:46chain right so if uh particular
1:50organization who is oper operating uh
1:53the business in the market maybe are not
1:56good with the distribution setting up
1:58the distribution Channel Maybe are not
2:00having those many resources or maybe
2:02they they don't have that much expertise
2:05in that particular market right or they
2:07don't have access to that market right
2:10there are other reasons as well but
2:11basically these are few reasons then we
2:14need some partner who can do these
2:17operations on our company behalf right
2:21and we want that those operations should
2:23be done efficiently and effectively
2:25right so because we are maybe not
2:29competent enough in that field so it is
2:31better to go for outsourcing so just
2:34before starting I just want to give you
2:36very generic structure already we have
2:38discussed about this that this is our
2:41supply chain where we have suppliers
2:44first in that maybe suppliers of
2:46suppliers and then we have manufacturers
2:49in
2:51between and then we have a long
2:53distribution chain right and this chain
2:57may include your wholesalers distribu U
3:00retailers carry forward agents whatever
3:03right whatever structure uh the
3:05particular organization is following and
3:07finally we are reaching to the End
3:09customer so let's keep it very simple
3:11and we'll uh show it here like only four
3:15stakeholders right so already we
3:16discussed about all uh there may be so
3:19many different layers in that uh Network
3:22right so obviously from one point to
3:26other point we need your transportation
3:29services
3:30in between maybe sometimes we need the
3:33storage
3:34Services maybe we need the packaging or
3:38labeling Services as well sometimes or
3:41maybe finally the Fulfillment centers or
3:44distribution centers may be there right
3:47and then when we are again processing
3:50the returns then also we need the
3:53warehouses where we will keep the
3:56returns maybe we'll repair the returns
3:58we'll uh place the faulty components or
4:02maybe we'll again change the packaging
4:04or maybe just customer uh return that
4:07product because customer did not like
4:08that product so again we'll repackage
4:11that product and then we'll again keep
4:13that product on the shelf for the uh
4:16future sales right so this is very
4:18simple structure okay so these this
4:21structure we'll keep in mind when we'll
4:22go through these this whole session and
4:26because I want to highlight these
4:28basically special Services where if I'm
4:31am not as manufacturer expert in those
4:33services so obviously we'll try to look
4:37for someone who can do these services
4:39for our organization let's take very
4:42small example and I'm having a very
4:44small
4:46restaurant within a city okay so right
4:50now the structure is customers are
4:52visiting my restaurant and then they are
4:55taking the meal maybe breakfast maybe
4:57lunch maybe dinner as per their
5:00requirements right but now I can see
5:03that let's say imagine this restaurant
5:06is uh near by IIT kakur campus or maybe
5:10within campus as well right so because
5:13IIT kakur strength we need to keep
5:15somewhere on board we have 18 to
5:1920,000 people uh living within that
5:22campus right so now because I'm serving
5:26to those people so but the problem here
5:29is now if You observe the latest Trend
5:32in the restaurant industry we are hardly
5:34getting time to you know go especially
5:37to restaurant sit there for half an hour
5:40chitchat with the friends family and
5:42then again 1 hour or maybe 1 hour 30
5:44minutes we are taking the stuff whatever
5:46we want to take right so that much time
5:49we we are falling short of maybe there
5:51are special occasions we we are
5:53celebrating those occasion then we are
5:54sparing some time right but usually day
5:57routine life is like that we we are
5:59reaching late at home and then we want
6:02delivery at our doorstep right so now
6:05because I'm very small restaurant maybe
6:0715 to 20 people including me are working
6:10in that restaurant so right now only
6:13capacity what I can utilize within that
6:15restaurant is whosoever is visiting my
6:17restaurant but let's say I'm thinking
6:20let's provide the Doorstep Delivery
6:22right so people can come and or maybe
6:26use my uh uh platform uh whatever app if
6:31I have developed some app so they can
6:33use that app and place the order I'll
6:35provide the Doorstep Delivery right so
6:37obviously you are looking for further
6:39expansion of your business but then
6:42doing those deliveries let's say we are
6:44getting 100 or 120 deliveries per day so
6:48let's say to make those deliveries now I
6:50need five bikes and obviously five
6:53Riders who will ride the bike and will
6:55deliver the orders right and those
6:57orders are uncertain when it will come
6:59right and then accordingly we'll do that
7:02so getting these many resources these
7:05are kind of fixed uh your uh investment
7:09right getting these many resources again
7:12you need 7 to 8 lakhs right so that
7:15means this much money is required and
7:18this is very huge amount for a small
7:20restaurant so the very simple way out is
7:24let's collaborate with sui let's
7:27collaborate with zomato and then deliver
7:31the order at doorstep and using our
7:34capacity fully right so even now you are
7:39looking for outsourcing partner because
7:41you want to avoid this fixed cost so
7:44let's say within campus only maybe we
7:47are covering 3 km area or maybe 3 to 5
7:49km area so still I feel that because
7:53whatever kitchen area I'm having I'm not
7:56able to utilize the full capacity and my
7:58resources Manpower so let's expand this
8:01delivery process to another 15 to 20
8:04kilm so again if you want to go for that
8:07you need not to think about that only
8:09you need to care about that that you
8:11need to procure that much raw material
8:13let's the rest of the distribution thing
8:16will be taken care by your delivery
8:18partner which may be sui or J or maybe
8:21any other local player right if you are
8:23not deploying your separate Network
8:26right dedicated Network so these are the
8:29some of the examples when we'll discuss
8:31this session we'll use these examples
8:33I'll refer these examples right so what
8:37are the key components of services
8:39offered by your logistic services
8:41providers First is transportation either
8:45that is their headache now whether which
8:47type of uh Transportation mode they will
8:50use Road air or rail or through ship
8:53they will transport your material that
8:54is one kind of services you can get from
8:57them fright forward you are moving your
9:00uh stock from one point to other point
9:02you can use these Services custom
9:03brokerage if you are you know shipping
9:06your product overseas or you are
9:08crossing the state boundaries Interstate
9:10boundaries so those many things customs
9:13duties and all the documentation these
9:15players can take care right then
9:18Inventory management if you're take
9:20Outsourcing the process of inventory I
9:22don't want because I'm very small
9:24restaurant I don't want to take care or
9:27I even I'm not expert how I should
9:28manage my inventory how many dinners I
9:31need to prepare tomorrow right how many
9:33lunch plates I need to serve let's
9:36Outsource this function and some agency
9:39will forecast will find out the demand
9:42patterns automatically we'll arrange the
9:44raw material inventory and then they
9:47will fulfill the order as well that
9:48depends upon what type of solution you
9:51want right so these Logistics players
9:54will provide you that customized tailor
9:56solution to you and then if you want
9:58packaging they will do the packaging
10:00also labeling packaging and separately
10:02if you want to implement any
10:04technological solution maybe you want to
10:07uh track the movement of the goods you
10:09want to track the uh final delivery
10:12whether it has happened with the uh
10:15final customer or uh you want to track
10:17the payment cycle right so that those
10:19kind of softwares also uh you can uh
10:22just Outsource and you those players
10:25will uh prepare the platform for you
10:27then the next point is customiz ization
10:30these logistic service providers will
10:32provide you the customized solution
10:34depending upon your requirement then
10:37maybe location maybe volume and then if
10:40special handling requirements are there
10:42like we talked about if kind of fragile
10:44items you are handling if you are
10:46handling electronic components then you
10:48need to take care in that way if you are
10:51carrying food with you you you have to
10:53be conscious about the hygiene of that
10:55right so those many things you need to
10:57consider
10:59so yes then again the next point is
11:03expertise and experience because these
11:05players are specially dedicated you can
11:06see a huge list is there these all are
11:09international players right who are
11:11doing Logistics Transportation wound all
11:14those activities overseas and then you
11:17will approach them obviously you are
11:18approaching expert in that way right as
11:21a restaurant owner maybe I'm very
11:24limited in my knowledge how I can root
11:27my distribution in a best possible way
11:30because if I'm getting one order I'm
11:33just rushing to fulfill that order maybe
11:35I'll my bike rider will travel 15 kilm
11:38will deliver that if I'm having that
11:40strong platform integrated technological
11:43platform where if I can combine two or
11:45three or four orders so that means I can
11:48somewhere increase the efficiency I can
11:52because same cost will be there whether
11:54I'm carrying one packet of food or I'm
11:56carrying 10 packets of food but that
11:58will only happen if you have that idea
12:01that within that time you are you are
12:03going to get orders for 10 packets of
12:06food right so if you have expertise in
12:09that so this these players will provide
12:12you those kind of solutions Global reach
12:14so let's say if today we are operating
12:18here only we are uh operating in India
12:20only and then the next day now you are
12:23thinking that let us explore we have
12:25some chances in means at least in Asian
12:28market we can go and we can explore
12:30right but then again the point comes
12:33then because we are expert in
12:34manufacturing something let's say we are
12:36manufacturing home appliances we are
12:38manufacturing refrigerator right we are
12:40expert in manufacturing that but we
12:42don't have access to the foreign market
12:44how we set up the distribution Network
12:46distribution network is very very you
12:49know important thing strategic decision
12:51as well as carries huge cost right so
12:55then if there is someone who is already
12:59expert in that and they have branches
13:01over all over the world right so then
13:04immediately we can approach them and we
13:07can have access to the international
13:09market not only Market if we have some
13:12overseas suppliers vendors who are
13:14supplying material to us and maybe
13:17better quality material we are getting
13:19maybe cheaper material we are getting
13:21maybe on time we are getting the
13:22material right so or we are struggling
13:25with the local players for getting all
13:26those things right so then we can
13:29immediately we can contact find those
13:31overseas players and these logistic
13:33services providers will help us to get
13:35the raw material on time so
13:37technological integration so uh because
13:41these are experts they have warehouse
13:43management systems uh software solutions
13:46they have GPS software solution RFID
13:49technology for packaging cloud-based
13:51platforms now these uh these are the
13:54Technologies which will help to increase
13:57the transparency in the uh supply chain
14:00right so Logistics distribution whenever
14:02wherever your product is what is the
14:04information whether that product is
14:06finally consumed or still in the uh
14:08maybe on the Shelf of that shop right so
14:12uh that inventory also you can track at
14:14that time packaging once it is destroyed
14:16you can find out okay finally it is
14:18consumed right so this way you can
14:21manage the inventory as well risk
14:23management because you are getting those
14:26services from these suppliers uh
14:28logistic Serv providers so they this
14:31this is their headache to you know carry
14:33the Fright from one location to other
14:36location if anything goes wrong they are
14:38providing you the insurance services as
14:40well right and if anything is wrong
14:44maybe in the root they will
14:45automatically they will divert their
14:47pilots or uh whosoever is Distributing
14:50their vehicle in that way so that your
14:53product reaches at the right point right
14:56location right now let's say even
14:59uh because because of the let's say
15:02natural disaster or weather conditions
15:04so you are somewhere stuck in on the
15:06road right so even because you are stuck
15:09somewhere in the road that is not your
15:10headache because you have outsourc your
15:13warehousing as well so now those
15:15warehouses Storage Center Distribution
15:17Center they need to maintain the
15:19inventory if there is any fluctuation in
15:22the demand your material is getting
15:24delayed those many you know disruption
15:27also can be absorbed by using the
15:29services of these logistic services
15:31providers cost efficiency when we talk
15:34about logistic services provider or
15:36Outsourcing the first very basic element
15:38is why we are going for outsourcing is
15:40to reduce the cost and already I dis
15:43discussed with you if I'll go for you
15:45know uh investing into five or 10 bikes
15:48to deliver my food packets so that much
15:51money is required I don't want to do
15:53that let's give some share of my profit
15:56to the third party and I can maximize is
15:59my share as well because earlier I maybe
16:01I am I was serving only 100 customers
16:04now I getting the reach to maybe 500
16:06customers so in that way I will also
16:08maximize my uh market share continuous
16:12Improvement because these players are
16:14already in the market they have
16:16developed the kpis how they can be more
16:19efficient right so they are already
16:21tracking all these points so getting
16:24services from these specialized players
16:28uh we need not to bother about the
16:30performance Matrix they will take care
16:31of all those things so let's go with
16:35this video link she'll help you to
16:38understand the this is the advertisement
16:41by logistical company so here I have
16:43included some uh video links you guys
16:46can just quickly go through these videos
16:48and then we'll uh continue our uh
16:51discussion on the topic so let's explore
16:54what are the various uh reasons for
16:56outsourcing Logistics right the first
16:59one is to avoid the fixed capital
17:02expenditure like I told you if you want
17:04to set up your distribution Network so
17:06those many resources are required in
17:09case of restaurant maybe you need bikes
17:12maybe you need 10 more manpower and
17:15maybe you need it platform where you can
17:18record uh your orders you can process
17:21your orders maybe then you need a bigger
17:25uh raw
17:26material uh storage house house right
17:30these many things you need so because
17:34I'm very small restaurant still I'm
17:36thinking of expanding my business how
17:39the industry will take it how the market
17:41will take customers will take it that is
17:43another point right there is risk if
17:45I'll go for investing all this and then
17:48I want that there should be my own uh
17:52exclusive Showroom on exclusive supply
17:54chain distribution Network right the uh
17:57then if some something goes wrong in
17:59your expansion strategy then what you
18:02will do with those uh you know assets
18:05right which you have acquired so that is
18:08one thing second is you can cut the cost
18:11how you can cut the cost because when
18:14you are expanding your business you are
18:16not sure about the demand when you are
18:19not sure about the demand the big
18:20question that comes is whether the
18:23economies of
18:25scale can be utilized or not that
18:29if you are hiring 10 manow 10 bikes
18:34whether all the time you are utilizing
18:36those resources if you are utilizing
18:38only for 3 hours in a day so what you
18:40will do with rest of 21 hours right so
18:43that is the extra cost so that you need
18:47to take care increase flexibility
18:49flexibility in terms of maybe we talked
18:51about restaurant in IIT where 18 to
18:5420,000 people are living including
18:57students staff faculty right so maybe
18:59more than that so let's say now next uh
19:042 months there is break so this this
19:07population this size will definitely
19:09customer size will reduce to uh
19:11somewhere around 2 to 3,000 right so in
19:15that way 2 to 3,000 so how you will your
19:19supply chain will be your distribution
19:21network will be flexible then those
19:23resources what you will do with those
19:24resources at that time for 2 months or
19:27more than two months summer break right
19:29so that is another very uh big challenge
19:32for the small players so the best thing
19:35is you Outsource this to someone who is
19:38going to deliver on your behalf today if
19:41you are delivering 100 orders they will
19:43charge you for 100 orders tomorrow if
19:45you are delivering thousand orders they
19:47will charge you for th000 orders right
19:49so Focus On Core Business now because my
19:51core business is I'm very good with the
19:53cooking so why the hell I'm going for
19:56transportation if I'm uh very good with
19:59this cooking only and I don't have
20:02knowledge of Transportation okay even
20:04I'm not aware about there is some kind
20:06of system who can track my package
20:09packaging you if you can apply the
20:11barcoding and all that then it will help
20:14you to you know uh ensure the quality of
20:16the product you can analyze the
20:18inventory these many things I cannot
20:20understand right so better I can focus
20:23only on cooking let us someone else will
20:26do that for us right and we are happy
20:29with that much maybe uh with the Core
20:32Business only improve Services because
20:34these are the specialist players
20:36obviously their services level no one
20:38can match at least we cannot match who
20:40are not from that industry lack of scale
20:43I already discussed what will happen if
20:45you are suddenly reducing from 18 to
20:4820,000 uh people on board to maybe 2 to
20:513,000 students only right or maybe
20:54people then acquired Talent when you are
20:57going for outsourcing the specialist
20:59obviously you have the expertise right
21:03so you have the right talent and labor
21:05related problems if you will deal with
21:08the transportation industry is a kind of
21:10industry where every day strikes are
21:12happening every day Union issues and all
21:14those things are there so I don't want
21:16to get into that so how I can do that
21:18just to avoid that and maybe I can
21:20Outsource that so this is the small
21:23survey done by inbound. logistics
21:25company and they say that that what we
21:29are Outsourcing actually we are
21:30Outsourcing most of those function which
21:33are which are not our core competency or
21:36which is not our USP right which are
21:38very routine activities this
21:40transportation of the material storing
21:42the material is anyhow is not going to
21:45add Direct Value for the customer unless
21:47we are not talking about the Doorstep
21:49Delivery obviously Doorstep Delivery is
21:51adding value to customer they are
21:53leveraging that but other things whether
21:56you are storing 10 units or you are
21:58storing in 100 units as a customer why
22:00should I bother right I want my product
22:03if you'll not give me my product I'll
22:05take it from someone else very simple
22:07right so it is your problem so that
22:10means we are we are not Outsourcing the
22:13Strategic and customer facing we cannot
22:16give this function at least to the third
22:19vendor on our behalf because we want to
22:22deal and we want to control the customer
22:24directly so if you'll talk about the
22:27share of these uh Outsourcing uh
22:29Partners so domestic Transportation
22:3283% warehousing 66% internal
22:35Transportation 63% so customer brokerage
22:3946% so these all are the list of various
22:43you know Logistics functions which you
22:45can Outsource even if you are talking
22:47about I don't want to care about my
22:49inventory only thing I'll care is as
22:52long as I am into that business my
22:54inventory should be there so it is
22:55inventory management 70% people they are
22:59thinking entrepreneurs they are thinking
23:01Industries are thinking that let us not
23:03bother about the inventory someone else
23:05will do that whenever we need material
23:07on our production line they should be
23:09responsible for providing that right or
23:12sometimes maybe Customer Support
23:14Services I cannot handle the calls I
23:16cannot handle the platform if anything
23:18goes wrong I cannot handle if the
23:20customer is canceling the order and
23:22payment is already done who will do that
23:24because I'm only good in cooking right
23:27so I don't know all those things right
23:30so let us uh hand over this this
23:34particular function to other parties who
23:36can who are expert in that and can do in
23:39a better way so this is very simple
23:41example to understand the industry this
23:44Logistics services provider first party
23:46Logistics provider only two parties are
23:48there one is producer another one is who
23:51is getting uh that product right so if a
23:54farmer is delivering eggs to grocery
23:56store this is first party Logistics no
23:58one is involved in that second party
24:01Logistics is kind of Career Services
24:03people right or any agency who is
24:05delivering your packet on your behalf so
24:07now farmer is producing eggs here and
24:10one career partner is there who is
24:12delivering the this these eggs to the
24:15grocery store or wherever you are uh
24:18locating it third party Logistics
24:21Services they this is a kind of
24:23Fulfillment company who is having their
24:26own fleets and then they are what they
24:29are collecting eggs from the Farmer they
24:31are storing those in their distribution
24:33centers and then in the end as per the
24:36requirement sending those to the
24:38Fulfillment uh grocery store fourth
24:41party Logistics is the next version
24:43where uh they are providing the lead
24:46Logistics kind of services everything is
24:48included in that right so they are
24:50handling your third party vendors also
24:53now third party vendors you just
24:55remember the first example we talked
24:57about where we I talked about the
25:00complete distribution Network where uh
25:03Transportation was one function
25:04warehousing was another function
25:06packaging may be another function
25:08distribution may be another function
25:09right so now fourth party Logistics if
25:12I'm Outsourcing all those things to
25:14different vendors they will take care of
25:17all those vendors right so they will uh
25:21consider all the vendors they will
25:22whatever is required means this is a
25:24kind of company which is connecting all
25:26those vendors with me okay so this is
25:30fourth party Logistics fifth party
25:32Logistics is who is going to handle my
25:35complete supply chain they will produce
25:37they will find the raw material I'm good
25:40at maybe uh with the with coming up the
25:43new product new design like what
25:45Phillips is doing right now Philips if
25:47you see they are not having any
25:49manufacturing most of the uh home
25:53appliances flip is manufacturing they
25:55are having co-manufacturers
25:59right so co-manufacturer means they are
26:01providing different different designs to
26:03those co-manufacturers they they are
26:06providing what are the specification for
26:08the components required for making that
26:10let's say they are the very common is
26:13maybe iron you are using at home maybe
26:15juicer mixer grinder you are using at
26:17home so what this Philips player is
26:19doing he is deploying all the uh
26:23co-manufacturer to produce at different
26:25locations right now those
26:27co-manufacturers are taking care of all
26:29the raw material suppliers right they
26:31are taking care of the distribution
26:33Network in the end flips what they are
26:35doing they are paying for the product
26:36even packaging labeling everything they
26:38are doing right so in the end the final
26:41product juicer mixer grinder is coming
26:44to my warehouse from where I will create
26:47the demand and then I'll finally
26:49distribute right so this is how it is
26:51happening as fifth party Logistics
26:54quickly we'll go through first party
26:56Logistics I told you only two of
26:58organizations are there only two parties
27:00are involved and uh you can see first
27:05party Logistics provider transports item
27:07from stock to shelves so here only
27:10producer is there and then finally we
27:12are delivering to the uh store room so
27:15in this type of relationship the
27:16suppliers manages their own inventory
27:18storage and delivery so when supplier is
27:21managing everything we have certain
27:24obviously challenges right so you have
27:26your own distribution Network your own
27:28transportation uh Network and
27:31warehousing everything you you will take
27:33care right so as a as a restaurant owner
27:36now I want to liberas all those things
27:39right if I'm the very simple concept
27:41here is who are following first party
27:43Logistics is because if I'll Outsource
27:45to swii or J so obviously those people
27:48are also making a margin out of that so
27:51why not I should make margin out of that
27:53right so that is very simple concept but
27:55making margin out of that is I I already
27:58discussed so many different challenges
28:00so let's talk about the components of
28:02thir part first party Lo Logistics first
28:05is ownership and control obviously when
28:07you have complete integration you have
28:10full control right directly from your
28:13production unit it is going to the store
28:16so that means quality you can control
28:18ownership also you can control but once
28:20you are Outsourcing it to some other
28:23manufacturing unit so then they are
28:25controlling quality obviously you have
28:27some uh checks to ensure the quality but
28:30still still you cannot control 100% so
28:33in-house operation if you are first
28:35party Logistics then all in-house
28:37operations you are doing you have your
28:39own fleets warehouses so that much fixed
28:41investment you make to uh make right so
28:45uh vertical integration already I talked
28:47about when you start acquiring your
28:49suppliers you will be suppliers of your
28:52on product right so I want to acquire
28:55all the suppliers I want to expand my
28:57supply chain distri ution so that I
28:59should have full control I don't want uh
29:02distribution Network wholesaler
29:04Distributors retailers I don't want I
29:05want type of maybe Dell Supply Chain
29:08where they are directly interacting with
29:10the customer recording their uh whatever
29:13configuration they want and then
29:15processing and then finally delivering
29:17the laptop or whatever product you want
29:19to purchase benefit of first party
29:22Logistics already discussed greater
29:25control over Quality Security and
29:27customer Services because directly you
29:29are interacting with them because that
29:31is your your baby your business is your
29:34baby so in that way you want to take
29:36care of your baby yourself you don't
29:38want to uh Outsource it challenges
29:41already I told first is a limited
29:43resources in terms of that much uh
29:46Transportation facility warehousing
29:48facilities are required right and then
29:51Transportation fleets warehouses
29:52technology system is another thing
29:54because if somehow you can manage the
29:56distribution Network somehow you can
29:58store the products right but technology
30:01is something is maybe uh you are not
30:04very much relevant with that so you need
30:06some someone it manager or engineer who
30:10can you know manage that platform for
30:12you risk management because you only are
30:15integrating all the functions in your
30:17organization you are responsible whether
30:19delays are happening on the roads
30:21whether it is happening because of
30:22shortage of inventory or any disaster is
30:25happening in the supply chain so in that
30:28way you you only responsible for that
30:31quickly we'll go through the second
30:33party Logistics now we have in between
30:35one player who is collecting the
30:37material and shipping that material to
30:39the market right so this is asset based
30:42uh carrier who is having the
30:44transportation mode if it is
30:45transportation second party Logistics
30:48right so they will be collecting and
30:51then they will be Distributing so
30:53quickly we'll go through the components
30:55so uh service scope uh in Spec they are
30:59operating in specific areas like maybe
31:01Transportation if you're talking about
31:04Transportation second party Logistics
31:05they will provide you all the solution
31:07related to Transportation if you are
31:09asking for warehouse second party
31:11Logistics they will take care of your
31:13wehousing operations if you talk about
31:16order fulfillment they will record your
31:18customers order they will process your
31:20customers order they will deliver the
31:22product to your customer so order
31:23fulfillment cycle they will take care if
31:26they are working as fright forward
31:28company right so they will take care of
31:30that comp component only so that means
31:32they are providing the customized
31:34solution as per your requirement today
31:36if you are requiring only let's say
31:38transportation services you can
31:39Outsource that tomorrow you want to
31:41extend maybe second party Logistics into
31:44your warehousing as well because you are
31:46also increasing uh your customer uh
31:49potential Market you are expanding so
31:51that way you want to expand so then you
31:53can utilize the these second party
31:55logistic player into different segments
31:59so uh when you have the second party
32:02Logistics you have better integration
32:04right you can share quickly your
32:06information okay and you can align your
32:08processes which will lead to efficiency
32:11and Effectiveness now scalability and
32:13flexibility like I I told you the
32:15example if for next two months only
32:192,000 to 3,000 people will be there in
32:21the campus right so at during that time
32:24what you will do with your distribution
32:26Network so because now I am delivering
32:29maybe th000 orders so I told you they
32:31will charge for th000 so you can scale
32:34up or you can scale down so they will
32:36provide you the flexible solution they
32:38will not say that minimum these many
32:40orders if you'll process only then
32:41otherwise we will charge high so already
32:44that is very
32:45clear technological integration they are
32:48pro if you are taking transportation
32:50management system they will help you to
32:52you know get the best Roots Roots
32:54optimization will be there proper
32:56vehicle capacity will be used if
32:58utilized if you are talking about
33:00warehouse management system so they will
33:02take care of your inventory they can
33:05help you with the tracking and
33:06visibility tools which will help you you
33:08know to track your inventory on the way
33:11third party Logistics this is now
33:13complete Services they are providing
33:15other than transportation services they
33:16are providing The Brokerage customer
33:19brokerage services and warehousing
33:22distribution value adding activities
33:24like packaging labeling kitting all
33:27those Services they are providing you
33:29can just see so maximum share is
33:32transportation management 22% and then
33:35they are providing your bear housing
33:36activities which is adding almost 21%
33:39then value adding activities 19% right
33:42so this these three functions are
33:44carrying the maximum weightage then
33:46Intermodal uh Services they are
33:48providing they are running their own
33:50fleets right and then lead Logistics is
33:53complete kind of solution and intermodel
33:55they will Define if your transportation
33:57requires maybe Road Transportation then
34:00ship Transportation then air also so
34:02they will all uh do all these things for
34:05you so you can see third party Logistics
34:07which will take care of your packaging
34:10warehousing and transportation so
34:12manufacturer is left out and Market is
34:14left out which will cover in fourth
34:16party Logistics so 90% of Fortune 500
34:19companies are using third party
34:21Logistics service so now you just
34:23imagine how big this third party
34:25logistic industry is right
34:29so Hitachi is very Ned player in that
34:32and they are providing a very different
34:35basket of services if you want
34:37procurement logistic services related to
34:39procurement storing the raw material
34:42Shifting the raw material they will
34:43provide you those kind of services if
34:45you want production logistic services
34:47within your production man manufacturing
34:49also if you want someone else should
34:51handle your all the material handling
34:54shifting from maybe uh production flow
34:57to the disp area to outgoing quality
34:59control area the Hitachi will provide
35:02you those Services as well if you are
35:04looking for reverse logistic services
35:06they will provide you the reverse
35:07Logistics sales related they will
35:10forecast the sales they will maintain
35:11the inventory for you in the market and
35:14then they will handle the logistics part
35:16as well collaborative Logistics is
35:18another very good uh example how Hitachi
35:21is doing in the same industry there if
35:24you have maybe uh uh limited order so
35:27you are not able to utilize the full
35:30capacity of the container which is
35:31taking your product right so Hitachi is
35:35collaborating maybe with two or three
35:37different uh vendors and then they are
35:40consolidating the uh product so
35:44comprehensive Services you are getting
35:46under third party Logistics including
35:48everything whatever we talked
35:50about because we are Outsourcing to
35:53expert again we can leverage their
35:55expertise their resources their in
35:57infrastructure and if you want to expand
35:59the market without giving a second
36:01thought you can expand it so scalability
36:04and flexibility will be there if today
36:06demand is for 10,000 products you supply
36:09using the same network 10,000 products
36:11tomorrow if only you are selling 5,000
36:14no issues they will take care of that as
36:16well 500 no issues they will take care
36:18of that as well right so that
36:20scalability and flexibility is very very
36:22important once because if you are
36:25thinking of investing that much
36:27infrastructure and something goes wrong
36:29right then what you will do with that
36:31infrastructure you you may not be able
36:33to utilize that infrastructure right
36:35later on so because these players are
36:38doing these kind of services for so many
36:41different organizations not only same
36:43industry different industry so maybe one
36:45facility if designed for maybe
36:47automobile industry is not utilized
36:49properly they can utilize it for some
36:51fmcg industry right so uh that way we
36:55can uh they are not they are hard
36:57bothering about whether the particular
36:59plan will uh get the success that
37:02success or not right Global reach
37:04already we discussed about they have
37:06Global Network Transportation partner
37:08distribution Channel throughout the
37:10world you just think of expanding your
37:12business overseas they are ready with
37:15the buffet of services they have and
37:17Technology integration again because
37:19they are taking care of your full supply
37:21chain so they will handle your
37:23transportation related services and
37:25Warehouse Management Services these data
37:28analytics will help you to you know
37:31because they are directly interacting
37:32with the market as well they will help
37:34you to analyze the trends in the market
37:37will help you to you
37:39know uh Define your demand very uh in
37:43know in a very uh you can say refined
37:46way so that you can take care of your
37:48full distribution
37:51Network cost saving obviously we
37:54discussed it the very first reason why
37:56we are going for outsourcing is cost
37:58saving because we don't want to invest
38:00into fixed assets setting up that
38:03complete chain so we are going for
38:05outsourcing risk management now
38:07everything third party is handling
38:09warehousing inventory anything goes
38:11wrong with the inventory that is their
38:13problem anything goes wrong with the
38:15distribution network with the
38:17transportation Network or uh maybe
38:20during ship during air transportation
38:22any damage is happening to the product
38:24that is their responsibility right once
38:26it it is dispatched from our
38:28manufacturing unit for us the business
38:30is over right so next they will take
38:33care of this now the fourth party
38:36Logistics is a complete solution from
38:39one end to the customer end and then
38:42they are taking care of the third party
38:44Logistics if you have two three third
38:47party Logistics maybe for warehousing
38:49separate Transportation separate or
38:52others maybe handling the international
38:54uh Transportation shipments so they will
38:56take care of all those those things now
38:58the the best Advantage the best point
39:01under fourth party Logistics is as a
39:04service provider or product provider you
39:07are getting Single Stop solution single
39:09invoice so you can streamline everything
39:12no when only one player is involved from
39:15suppliers of suppliers to End customer
39:18so that means quick information sharing
39:20will be you will be more efficient you
39:22are getting the correct information
39:25without any you know inflation in the
39:28information or without any uh if you can
39:32say deviation in the exact information
39:34so that getting accurate information on
39:37time because only single player is
39:39involved and like you can see so these
39:42fourth party Logistics they are doing
39:45the logistics company packaging
39:46warehousing
39:48Transportation okay so they are taking
39:51care of your third party Logistics
39:53because you can consolidate everything
39:55and analyze so then it will help you to
39:58you know configure your demand function
40:01as well that uh in that efficient way so
40:05you can use their Erp systems iot
40:07devices just to get that uh real
40:10information data so that you can apply
40:13your uh analysis tools and get the uh
40:16benefit out of the because you you can
40:18make uh information based decisions
40:22right so in that way you will be more
40:24accurate so these fourth party Logistics
40:27ICS are providing you the uh customized
40:30solution as per your requirement right
40:33if Philips is
40:34outsourcing Manu even manufacturing
40:37because they are maybe not good with the
40:38manufacturing they don't want to invest
40:40into manufacturing kind of thing so they
40:42are Outsourcing that but on the other
40:44hand havl
40:46is they are USP is how efficiently and
40:49with quality they are making their uh
40:52mcbs rccbs so they all the electrical
40:55Solutions so they have their own
40:57manufacturing facilities but they maybe
40:59they are not very good with the
41:00distribution Network so they want
41:02another package right so Philips is not
41:05good maybe they don't want to go into
41:07that they want to control the quality
41:09and branding of the product uh and just
41:12the innovation in that product whatever
41:13they are doing so rest thing will be
41:15taken care by your fourth party
41:17Logistics right so again the
41:20technological integration will be at the
41:22highest level because fourth party
41:24Logistics actually they are not carrying
41:26any assets they are in ating everything
41:28all the players in one chain right so
41:30they are one stop solution where they
41:33are providing you the you are they are
41:36solving all your problems related to
41:39distribution so risk management will be
41:42in better way right because now it is
41:44the responsibility of your fourth party
41:46Logistics in that way your distribution
41:48network will be more resilient and will
41:51ensure the continuity you will not be
41:53stock out in the market you will not be
41:55having enough mean over stock in the
41:57market right so that you can avoid so
42:00again fourth party Logistics continuous
42:02Improvement you can ensure because these
42:04players they are they are having fixed
42:07their kpis and they have developed that
42:09metrix and continuously working on how
42:11they can drive more efficiency reduce
42:14cost and enhance the customer
42:15satisfaction right so that uh the exact
42:19feedback you can get from the customer
42:21through these uh fourth party Logistics
42:23players Global reach obviously again the
42:27same point uh we will have to uh we'll
42:31have the access to the foreign markets
42:33as well and then we this fourth party
42:36logistic player will help you to get the
42:38uh Market insights and uh those insights
42:41will be obviously helpful in uh planning
42:44the future whether you are going for
42:45expansion strategies or you are going to
42:48maybe diversify into some other industry
42:50so that only you can do if you are
42:53having that much uh you know promise in
42:56that market uh potential you are looking
42:59for so this is the fifth party Logistics
43:02the last label uh where uh all the
43:06players are integrated and all third
43:09party logistic service providers are
43:11also there and this fifth party logistic
43:14is aggregating all the uh requirements
43:17from the customer and then whatever it
43:20is not now your responsibility to
43:22Outsource even they will take care you
43:24will Outsource to fifth party Logistics
43:26and then they will will see okay
43:27distribution network will be handled by
43:30this player logistic services maybe
43:32Hitachi will do maybe warehousing will
43:35uh contact with the uh maybe uh your
43:38delivery or maybe will final customer
43:41delivery will be done by delivery or DHL
43:43or whatever you want to pick right so
43:46this is fifth party Logistics we are
43:48manufacturer also part of fifth party
43:50Logistics Market is also part of fifth
43:53party Logistics like the example Philips
43:55I coted so most of the
43:57um appliances they are manufacturing
43:59even manufacturers are uh
44:02co-manufacturers are there who are
44:03manufacturing on their behalf and then
44:05final Market is also handled so what is
44:07your function now as as the owner of
44:10that brand you are just branding your
44:12product you are just coming with new
44:14ideas you have new ideas just you will
44:16say this product I want and that will be
44:19uh done through all these players fifth
44:21party will take care of everything so
44:23just uh uh you can just conclude here
44:26for first party Logistics Direct
44:28Delivery and then Transportation
44:30companies will be there in the second
44:32party third party logistic service
44:34provider will be there fourth party
44:36complete supply chain solution plus
44:38logistic services and fifth party full
44:41Services expert Logistics services
44:43provider right sixth party is the next
44:46Generation uh Logistics player who will
44:49be utilizing AI machine learning and all
44:52that where earlier you were designing
44:54your product and handing over those
44:57product to the co-manufacturer to
44:59manufacture and distribute in the market
45:01now next level is where I I'll just say
45:04I just want to go into that industry so
45:07my artificial intelligence machine
45:09learning will prepare the best possible
45:113D design and we just look for that
45:13design what changes we want and then
45:16they will finalize the CH changes and
45:19we'll develop the physical prototype
45:21we'll check it we'll test it and if it
45:23is okay any recommendations are coming
45:25from the market feedback are from the
45:27market automatically it will be taken
45:29care through iot system where we can
45:32record all the information so very
45:34quickly we'll go through this case study
45:36of Alexia which is having it services
45:39for Indian players as well and you can
45:41see they are providing end logistic
45:43Solutions including Transportation
45:45distribution warehouse INF Factory
45:47Logistics and value adding Services more
45:50than 300 clients they are having the
45:52worth of the company is 35 billion INR
45:55and they are operating in 60 million
45:57square fet area warehouses more than
46:0010,000 uh Vehicles they have deployed
46:03and they are serving to more than 17K
46:06PIN codes so operational locations you
46:09can see more than 500 plus but the
46:11problem they were facing they identified
46:13you can go through the full case but
46:15just I'm I have picked related to this
46:18session only they identified that
46:20improper vehicle allocation means they
46:22were not utilizing the full capacity of
46:25the vehicle if a truck can carry 10 ton
46:28somewhere they were carrying 7 tons
46:31sometimes 5 tons 8 tons so full capacity
46:33was not utilized and also the root
46:36planning was not done properly they were
46:38not using the latest technology GP GPS
46:41technology or RFID Technologies right to
46:44you know plan their routing and all that
46:46thing so they were uh in that they were
46:51lacking so what they they clearly
46:53defined that and then they defined what
46:55actual cost should be how they can uh
46:58ensure the optimal utilization of that
47:02uh you know uh capacity of the uh your
47:05containers and then roots and then mode
47:08of transportation in so we should be in
47:11very objective way we should decide
47:13right all those things so there should
47:15be some system uh software solution who
47:18is doing that on our behalf and we
47:21automatically we can take care of all
47:23those things so you can just see the
47:25result they saved six .7 lakhs in one
47:28month and they optimized load space and
47:31Route which will you know definitely add
47:34to their efficiency so quickly results
47:36you can see cost saving
47:398.4% after this and 650 ton uh carbon
47:43footprint they reduced and increase in
47:46vehicle space utilization is 25% which
47:49is which is very you know uh large space
47:53they were not utilizing so uh here we
47:56can can conclude that so any expansion
48:00strategies you need right so you need
48:03not to think about the distribution
48:04Network so in that way you can just say
48:07that I'm just thinking that now my
48:09restaurant should operate within 50
48:11kilomet how I can there are so many
48:13players right how I can collaborate with
48:15those players so even if I'm having very
48:18maybe only one hotel so that hotel is
48:21not visible to everyone the tourist who
48:24are coming there I can just uh you know
48:26collaborate with make my trip with go AO
48:29with so many other platforms are there
48:32right so simple way these third party
48:35logistics vendor they are providing us
48:38the tailored Solutions as per your
48:41requirement as per requirement of the
48:42product they are also helping you with
48:44the information how you should you know
48:47modify your product and how you should
48:49deliver that product to the End customer
48:51so that customer in the end should feel
48:54satisfied delighted right so that's all
48:56from my side in this session so these
48:59are the references and textbooks you can
49:02refer thank you very much

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