Friday, 30 May 2014
layers of logistics
I have recently been intrigued by the concept of logistics.
Don't ask me why.
Third party logistics, to be precise.
But let's start at the beginning. The term logistics comes from the Greek logos, meaning "speech, reason, ratio, rationality, language, phrase", and more specifically from the Greek word logistiki, meaning accounting and financial organisation. The word logistics, of course, and perhaps that's why I am so drawn to it, has its origin in the French verb loger; to lodge.
It started being bandied around as a 'thing', by the military. They needed to supply and maintain arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, military officers with the title Logistikas were responsible for financial and supply distribution matters.
Logistics started being used as a business concept in the 1950s. It was around then, post-war, that supplying businesses with materials became more complex and more globalised. So then a new fancy pants job was created: supply chain logisticians. They were all about having the right quantity of the right item at the right place for the right price. That's a lot of rights.
So just going back to the start and the ideal of logos. Logistics are really all about communication. And communication, of necessity, involves other people, unless you are communing with the other personalities in your mind...and even then...it IS still communication.
So logistics = communication and relationships.
It fascinates me that these business concepts proliferate and I hear them and think, nah, no idea, I'm a French teacher, what would I know about logistics. And granted, if anyone actually IN logistics read this, they are probably saying oh là là, stick to the French letters and leave the logistics up to us.
Communication, relationship and trust.
From the outside looking in, that's what it's all about.
So when I heard the term, THIRD PARTY LOGISTICS, or TPL or even 3PL, its little fancy acronyms, I did think, now this is where the trouble starts. Or where the negotiation and trust and ease start, perhaps. Depending on your baggage. And communication. And honesty.
Because whenever you bring in a third party, you're increasing the need for trust.
So. Third party logistics is about outsourcing and trusting who you outsource. Third party logistics involves using an outside organisation to execute logistics activities that have been traditionally performed within the organisation itself. Some examples of this are warehousing, transportation management and freight consolidation.
It appears that there are layers of logistics. Of course. You can't get to 3PL without 1 and 2PL. Surely.
So First Party Logistics refers to a situation where the shipper, such as a manufacturing firm delivering to customers or a retailer picking up cargo from a supplier, dictate the origin and the destination of the cargo and it is all handled in-house. Sole provider. Handling it. Perhaps well, perhaps, fraught. Certainly lonely.
Second Party Logistics are the ones providing a transport service over a specific segment of a transport chain, so by sea or rail or a trucking company. They are probably taking cargo from a distribution centre to a port terminal. Here, we start allowing another to share the journey.
Then there's the third party who are a bit like intermediaries who are the connection between the shipper and the rail company, for example. So, freight forwarders, courier companies.
Now, apparently, there is 4PL, the companies who oversee the overseeing....or more pertinently, perhaps, streamline the logistics and oversee the overall supply chain and ensure that best practice is being adhered to and that their client is making lots of money. Or at least, the money they have the potential to make.
There are whispers of 5PL and some kind of crow-barring of e-business into the mix. I think that's just trend analysts playing with our minds.
Because really, it does all still boil down to how we work with others and what we tell them we need and what we expect them to supply and how efficiently that all goes down.
Possibly, the way that is going to work in the 3PL world, is when parties act simultaneously in their own best interests and in the best interests of the group.
And in order to do this, businesses seeking a 3PL relationship need to think about what their needs actually are, before they seek a provider. What is the desired outcome? What will they put up with and what is an absolute line in the sand?
Sometimes it is necessary to stray from the fixed idea one party might have in how supply is going to happen. But the end result still has to be mutual benefit, not one party feeling compromised and bewildered at the turn of events.
When choosing a potential partner...3PL partner that is...there is apparently a recommended selection process:
Product type. Can the 3PL handle what you need them to handle...are there fragile, precious aspects which need to be considered?
Geography. Can the 3PL handle distance?
Service. Does this occur when and in the way you need it?
I didn't ever imagine that I would be writing or thinking about Third Party Logistics. And yet here I am, fascinated.