Logistics has become an integral part of supply chain management. Five
years ago, the core focus of supply chain management was streamlining
material movement within the factory and ensuring that the right material
was in front of the machine at the right time. There was very little
focus on the logistical movement of material since most of the supply came
from suppliers who were located in and around the factory. This, in fact,
used to be a central premise of Just-In-Time Manufacturing that stated
that material suppliers had to be located within a few miles of the
assembly line, so they could supply material in smaller quantities and
more frequently.
Today, the entire manufacturing environment has been completely
transformed. Globalization and outsourcing has created a scenario where
critical parts and many sub-assemblies are being manufactured in different
parts of the world and then shipped into the manufacturing location. To
be competitive, manufacturers have realized that they need to get these
parts assembled in countries where the cost of labor is significantly
lower than in the United States. This trend has forced companies to
invest in their logistics to ensure that their shipped materials arrive on
time. Over time, Logistics has also branched into several unique areas of
focus including warehousing, purchasing, shipment tracking and inventory
management.
This trend has also introduced a new entity in logistics management called
the third party logistics provider or 3PLs. These firms specialized in
outsourced logistics services, where they manage the shipment pick and
delivery on behalf of the manufacturer and ensure that the consignment is
shipped through the most optimal route, taking both cost and time into
consideration. 3PLs are also able to provide economies of scale, since
they can combine multiple orders across different customers into a single
shipment. 3PLs can also decide on alternate routes for shipments in case
of delays at various receiving locations.
3PLs have also started to offer their customers various sophisticated
services including bar coding, track and trace capabilities and inventory
hubs.
Bar-coding involves the process of labeling consignments with machine
readable bars that can be scanned at the point of origin, in transit
location and final destination. This allows for easier transactions and
handling of goods.
Track and trace involves the tracking of shipments as it moves from one
logistics point to another. This information is then fed back into a web
interface that can be accessed by customers. Track and trace systems can
perform highly complex calculations like computing re-routing of shipments
in case of delays, sending alerts to various users and monitoring
real-time shipment information.
nventory hub management or 3PL managed inventory is a specialized form of
logistics management where the 3PLs store inventory on behalf of their
suppliers. This inventory is usually stored in hubs that are located near
the manufacturing facility. When parts are required of suppliers in
international locations, 3PLs pick and ship the parts into the inventory
hub. These parts are held until required by the manufacturer.
Some of the prominent 3PLs today are Ryder, Hanjin Logistics, Penske
Logistics, ZIM Logistics, BAX Global, UPS and FedEx. Between them, they
account for billions of dollars worth of material
