Page 108 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 5: Procurement and Manufacturing Strategies

3. Cost reduction goals are not realized, as the service provider does not own the objectives. Notes
4. Cost “creep” up and price increases occur due to lack of a proper monitoring system at the
service provider’s end.

5. Improvements and achievements too are lacking.
6. Control of outsourced functions has diminished.
7. Consultative, knowledge-based skills are lacking.
8. Technology capabilities are not being delivered.

9. Time and effort spent on logistics not reduced.

5.2.3 Fourth Party Logistics Provider (4PL)

The Fourth Party Logistics Provider (4PL) is a new-fangled concept in Outsourcing. A 4PL forms
an alliance between multiple 3PL service providers, technology providers and management
consultants. A 4PL provider is a Supply Chain integrator who assembles and manages the
resources, capabilities and technology of its own organization with those of complementary
service providers.

LSCM Alliances 3PL + 4PL = 7PL

The progress of 4PL solutions leverages the capabilities of 3PL providers, technology service
providers and business process managers to deliver a comprehensive supply chain solution all
the way through a centralized point of contact. The 4PL will integrate the client’s supply chain
activities and supporting technologies across these “best of breed” service providers with the
potential of its own organization.

3PL + 4PL = 7PL

The expression 7PL was coined by the Value Logistics Group and is a concept describing the
developing trend of 3PL and 4PL combined. Through this service, the client has one service
provider that oversees the whole logistics chain.

The 7PL Concept

7PL is the combination of 3PL and 4PL into one (3PL + 4PL = 7PL). One service provider can now
provide a client with both 3PL and 4PL services with a complete 7PL solution to clients and can
undertake turnkey projects for its clients where all services and activities are provided for,
under one roof.

5.2.4 E-Procurement

E-procurement or electronic procurement is sometimes called supplier exchange. It is the business-
to-consumer, business-to-government, or business-to-business sale and purchase of supplies
and services over the web. Normally, e-procurement websites let registers users look for buyers
or sellers of goods and services. Depending on the type of site, the buyers or sellers may invite
bids. Transactions can be initiated and completed online. E-procurement software can even
automate certain buying and selling processes. Companies that use e-procurement services can
control their parts inventories better, reduce overhead, and make their manufacturing cycles
more efficient.

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