Outstanding Chapter 5

• Outsourcing Logistics functions


  A means to save time, effort and money for retailers by using Second Party Logistic providers (2PL), Third Party Logistic providers (3PL) or Fourth Party Logistics providers(4PL)
• Reasons retailers outsource logistics


  • Spend huge levels of time, effort and money working with manufactures, suppliers, wholesalers and customers (across the supply chain)
  • Save time, effort and money
• Type of Logistics Services Provider


  • TPL (Retailer uses their own transport)
  • 2PL (Retailer outsources Transport only)
  • 3PL (Retailer outsources additional logistics functions like warehousing, inventory management, IT)
  • 4PL (Uses a company that acts as a middleman between other logistic service providers to optimize the whole logistics function)
• 3PL


  A service that allows retailers to outsource operational logistics functions that include warehousing, communication and Inventory management (in addition to transport)
• Other activities that can be outsourced


  • Labelling/packaging
  • Product returns
  • Assembly installation
  • Orders processing
• Benefits of using Outsourcing


  • Saves the retailer money (e.g. not having to purchase and maintain trucks, warehouses, staff)
  • Saves the retailer time (e.g. not having to manage drivers, routes)
  • Provides the retailer expertise, knowledge and resources they may not have
  • Allows the retailer to scale up or down as needed
  • Reduces risks for the retailer (e.g. labour strikes)
  • Improves customer experience (e.g. fast shipping)
• Cons of using a 3PL provider


  • Lesser control over the delivery process
  • Larger upfront investment
  • Communication issues (e.g. 3PL may not give the retailer enough attention)
• Fourth Party Logistics (4PL) providers


  Manage all logistics functions with the purpose of providing the client (retailer) with a "fully integrated logistics function"
• How 4PLs differ from 3PLs


  • The 4PL acts as a single company between the retailer and multiple 3PL service providers
  • The 4PL manages all aspects of the retailer's logistics functions
  • A contract or joint venture is set up between the 4PL and the retailer
• Fifth-party logistics (5PL)


  Manage a businesses' logistics functions and all elements of their supply chain, often specializing in big data and leveraging technology to drive efficiency