Importance of 3pl

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Executive Summary
The performance of the logistics system has a major impact on cost structures, revenues, service quality, and competitiveness in Australian industry. Logistics activities have been evolving rapidly in response to changes such as globalization, general industry restructuring, new production processes, and technological advances.

Many firms, government agencies and joint industry/government bodies are developing programs to improve logistics performance in Australia. The initiatives include the Freight Transport Logistics Industry Action Agenda.

This report develops a broad framework for analyzing logistics activities in Australia. This report will also look at the importance of Third Party Logistics to the Australian business. We will also look at the emergence of the 3PL in Australia and what benefits do the businesses get by adopting the 3PL.

The most significant supply chain trend that is affecting business in Australia.

Ever increasing competition in today’s global markets, introduction of new products with shorter lifecycles, faster dissemination and proliferation of information and heightened expectations of customers have forced enterprises to invest in, and focus attention on, entire supply chains. Today, some companies are extending their reach outside of traditional supply chain boundaries to engage in activities that go beyond their own sphere of control. To do this, they organise competitive networks of enterprises to develop and access supply chain capabilities for those organisations that are part of such value-adding networks. The scope of this research report covers aspects ranging from in-house logistics, with a focus on productivity, cost-savings and functional excellence, to various outsourcing business models.

The modern concept of logistics incorporates activities (e.g. transport, storage), which date back to the earliest forms of organised trade (Lambert et. al. 1998, p. 5). The term was initially developed in the context of military activities in the late 18th and early 19th centuries. A key element of logistics, the trade-off between transport and inventory costs, was formally recognised in economics at least as early as the mid 1880s (Langley 1992, pp. 19-20).

The concept of logistics has evolved over time in response to factors such as changes in the business environment. Grunnet (1996, p.32) notes that the focus was inventories in the 1950s, distribution in the 1960s, production in the 1970s, purchasing/production/sales in the 1980s, and business process in the 1990s. Logistics can be defined as that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customer’s requirements.

There are many different types of logistics service providers (LSP’s). Prime Assed Provider, Third Party Logistics Provider or Outsourcing (3PL), Lead Logistics Provider (LLP), Fourth Party Logistics Provider (4PL), Joint Service Company (JCS) and Virtual Network Consortium are some of the key types of LSP’s.

Out of these types of LSP’s, Third Party Logistics or Logistics Outsourcing is the most important and becoming most popular amongst the businesses in Australia. 3PL can be defined as a supply chain practice where on or more logistics functions of a firm are outsourced to a 3PL provider. Typical outsourced functions are: inbound freight, customs and freight consolidation, public warehousing, contract warehousing, order fulfilment, distribution and management of outbound freight to the clients customers.

Significance of Logistics Outsourcing to Australia
The Bureau of Transport Economics (BTE) estimates that the gross value added of logistics activities in Australia was around $57 billion in 1999-2000. This was equivalent to 9 per cent of GDP,...
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