Selecting A 3PL

The company that is selected should be able to fulfil all the logistics requirements and that can only be assured if every requirement is communicated to potential companies. The RFI should include a detailed description of the areas to be outsourced. This will usually include:

•The scope of the contract, including locations, facilities, departments.

•Information on volumes involved; number of deliveries, warehouse sizes, number of items, etc.

•The logistics tasks are to be performed, e.g. warehousing, transportation, etc.

•The level of performance required.

After the bids have been received by a company from the prospective 3PL’s, an evaluation would take place where a multi-discipline team will review each bid based on a pre-defined set of criteria. These will include some of the following.

•Does the 3PL provide the services required?

•Does the 3PL have the technology required to perform the tasks required?

•Does the company have the required warehouse space, dock capacity, warehouse personnel, etc.?

•Is the 3PL financially sound?

•Are the 3PL’s geographical locations suitable to cover the network?

•Does the 3PL have the flexibility to respond to changes?

•Are the 3PL’s environmental policies compatible?

•Are the costs of the services detailed enough for comparison to other bids?

•Are the customer references acceptable?

•Is the 3PL a good cultural fit?

The selection team will usually review each of the bids based on the criteria and give each bidder a score. Depending on the importance of each criteria, a weighting can be given which gives more importance for one or more criteria in the selection process. Once the selection team has evaluated the bids, management will often select the top two or three companies for site visits, face to face interviews and more detailed reviews of financial records. Once a company has been identified contract negotiations would follow before a final agreement could be reached.

Source : Martin Murray by  About.com guide

5 Steps to improving your 3PL relationships

Many of the problems companies experience stem from jumping into the contract prematurely without a solid understanding of the ramifications. With this in mind, our first tip is to slow down and take the steps to get outsourcing right before you start any work.

To do this properly, we recommend the five-step implementation approach that is profiled in the book Vested Outsourcing: Five Rules That Will Transform Outsourcing. The book goes into detail on each of the five crucial steps companies and service providers can take to create a successful 3PL relationship:

1. Lay the foundation

2. Understand the business

3. Align interests

4. Establish the agreement or contract

5. Manage performance

When taken individually, these steps can offer shippers and service provider’s valuable insight into current operations. However, they tend to work best when implemented as a process for outsourcing by allowing companies to implement a true collaborative 3PL relationship where the company outsourcing and the service provider have a vested interest in the other’s success.

All too often, companies dust off an existing Statement of Work, rush to competitive bid, and give the service provider three months or less to transition the work—we’ve seen many that only allow for a four-week transition.

The great thing about the five-step framework is that it can be used during a request for proposal (RFP) or with an existing supplier to improve a relationship. Skipping steps usually results in a poorly conceived business outsourcing agreement or worse—a total disconnect in what the service provider is doing versus what the customer actually needs

By Kate Vitasek, Pete Moore, and Bonnie Keith,

University of Tennessee Faculty Members

February 24, 2011

3PL

A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides a one stop shop service to its customers of outsourced (or "third party") 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 that can be scaled and customized to customer’s needs based on market conditions and the demands and delivery service requirements for their products and materials.

Among the services 3PLs provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding.

For example, hypermarket players tend to be more focus on retail business, the warehouse and logistics division are sub contract to 3PL provider.  3PL would in turn have a few warehouses (e.g. food and beverages warehouses, furniture warehouse, apparels warehouse, perishable warehouse for vegetables and poultry/meat etc.)  that received and stored different goods for the hypermarket. 3PL would manage all the warehouses and ensure the right products and quantities are sent to the hypermarket chains.

Besides, 3PL also able to control a new product launch, meaning to say a manufacturer/trader intend to push for a new product (e.g. Tropicana twister). He will negotiate with the 3PL on volume, terms and charges (% fee on volume  park at 3PL warehouse). 3PL will in turn approach hypermarkets (Carrefour, Tesco etc.) and agents (stores, convenient shops etc.) to distribute the Tropicana twister . 3PL will manage the Tropicana twister in term of brand awareness and pricing.

There are 3  type of 3PL :-

i) Asset based (3PL companies use their own truck, warehouses and personnel to operate their business)

ii) Management based (3PL companies provide the technological and managerial functions of their clients, but do not necessary own any asset)

iii) Integrated based (can be either be asset based or management based to supplement their services with whatever services needed by their clients

Reverse logistics

Reverse logistics stands for all operations related to the reuse of products and materials. It is "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics. The reverse logistics process includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business. Normally, logistics deal with events that bring the product towards the customer. In the case of reverse, the resource goes at least one step back in the supply chain. For instance, goods move from the customer to the distributor or to the manufacturer

 Handling product returns back through the pipeline - in an effective and cost-efficient manner -helps manufacturers to enhance customer satisfaction, achieve greater cost reductions, and when possible, recover some of the products' value.

Reverse Logistics activities include:

•Transportation of returned product back to distribution centre

•Processing returned merchandise for reasons such as damage, seasonal, restock, salvage, recall, or excess inventory

•Disposing of returned goods

•Recycling packaging materials and reusing containers

•Reconditioning, remanufacturing, and refurbishing products

•Hazardous material programs

•Asset recovery

Transportation cross-docking(Part III)

Transportation cross-docking supports the consolidation of deliveries from different supplying warehouses into common shipments to a customer or to another receiving warehouse. This consolidation can take place at one or more intermediate warehouses along the route to the destination; you can forward the goods at intermediate warehouses without needing to store or pack them (in essence, moving the goods “across the dock” from receiving to shipping).

The following illustration shows the data flow for cross-docking of sales orders:

Implementation Considerations

In Customizing, you must:

·        Specify which plants can act as cross-docking warehouses

·        Assign storage locations to each supplying plant to represent the stock at each cross-docking warehouse

·        Assign MRP areas to cross-docking storage locations to prevent stock at intermediate warehouses from being considered as available for planning

SAP delivers preconfigured movement types for cross-docking. However, you can create additional movement types in Customizing for Materials Management.

You can define cross-docking partners in Customizing for Partner Master Data. This specifies the storage locations in the source warehouse to be used when cross-docking goods are posted to a cross-docking target warehouse. If the system detects such a partner in a delivery document, it assigns the appropriate cross-docking goods movement type to the document.

The decision as to whether a shipment requires cross-docking can be made in one of the following places:

·        SAP CRM system during transportation route determination

·        A BAdI in the ERP system

·        The warehouse system

The cross-docking information determined in SAP CRM and the ERP system is passed as a proposal to the warehouse system, which can make the final decision about the next cross-docking steps

Source SAP.com

Retail cross docking (Part II )

 

 In retail practice, cross-docking operations may utilize staging areas where inbound materials are sorted, consolidated, and stored until the outbound shipment is complete and ready to ship.

• Streamlines the supply chain from point of origin to point of sale
• Reduces handling costs, operating costs, and the storage of inventory
• Products get to the distributor and consequently to the customer faster
• Reduces, or eliminates warehousing costs
• May increase available retail sales space.

• Potential partners don't have necessary storage-capacities
• or an adequate transport fleet to operate Cross-Docking
• Need of adequate IT-Systems
• Possibility of violation of secrecy

• Cross-docking is dependent on continuous communication between suppliers, distribution centers, and all points of sale.
• Customer and supplier geography—particularly when a single corporate customer has many multiple branches or using points
• Freight costs for the commodities being transported
• Cost of inventory in transit
• Complexity of loads
• Handling methods
• Logistics software integration between supplier(s), vendor, and shipper
• Tracking of inventory in transit

Source from wiki

Cross Docking in Warehouse (Part I)

The term cross docking refers to moving product from a manufacturing plant and delivers it directly to the customer with little or no material handling in between. Cross docking not only reduces material handling, but also reduces the need to store the products in the warehouse. In most cases the products sent from the manufacturing area to the loading dock has been allocated for outbound deliveries. In some instances the products will not arrive at the loading dock from the manufacturing area, but may arrive as a purchased product that is being re-sold or being delivered from another of the companies manufacturing plants for shipment from the warehouse.

Many companies have benefited from using cross docking. Some of the benefits include:

•Reduction in labor costs, as the products no longer requires picking and put away in the warehouse.

•Reduction in the time from production to the customer, which helps improve customer satisfaction.

•Reduction in the need for warehouse space, as there is no requirement to storage the products.

Types of Cross Docking

There are a number of cross docking scenarios that are available to the warehouse management. Companies will use the type of cross docking that is applicable to the type of products that they are shipping.

•Manufacturing Cross Docking – This procedure involves the receiving of purchased and inbound products that are required by manufacturing. The warehouse may receive the products and prepare sub-assemblies for the production orders.

•Distributor Cross Docking – This process consolidates inbound products from different vendors into a mixed product pallet, which is delivered to the customer when the final item is received. For example, computer parts distributors can source their components from various vendors and combine them into one shipment for the customer.

•Transportation Cross Docking – This operation combines shipments from a number of different carriers in the less-than-truckload (LTL) and small package industries to gain economies of scale.

•Retail Cross Docking – This process involves the receipt of products from multiple vendors and sorting onto outbound trucks for a number of retail stores. This method was used by Wal-Mart in the 1980's. They would procure two types of products, items they sell each day of the year, called staple stock, and large quantities products which is purchased once and sold by the stores and not usually stocked again. This second type of procurement is called direct freight and Wal-Mart minimize any warehouse costs with direct freight by using cross docking and keeping it in the warehouse for as little time as possible.

•Opportunistic Cross Docking – This can be used in any warehouse, transferring a product directly from the goods receiving dock to the outbound shipping dock to meet a known demand, i.e. a customer sales order.

Products Suitable for Cross Docking

There are materials that are better suited to cross docking than others. The list below shows a number of types of material that are more suited to cross docking.

•Perishable items that require immediate shipment

•High quality items that do not require quality inspections during goods receipt

•Products that are pre-tagged (bar coded, RFID), pre-ticketed, and ready for sale at the customer

•Promotional items and items that are being launched

•Staple retail products with a constant demand or low demand variance

•Pre-picked, pre-packaged customer orders from another production plant or warehouse

By Martin Murray