LBB International

Logistics forms the top category of business process outsourcing, amounting to a total of USD 179 billion in 2005 globally (BusinessWeek, januari 2006). The reduction of costs and increasing focus on core competences are key drivers for outsourcing logistics and supply chain management. The traditional model where companies manage their entire supply chain is rapidly abandoned (Moorst, A. van, and Wel, P. van, 2006). Other key drivers are increasing customer demand, increasing speed of services, improving supply chain management, reducing staff headcount, globalizing of supply chains, the lack of in-house skills, making fixed costs variable, lowering investments, improving quality and lowering risk of damage (Ploos van Amstel (2005), Eyefortransport (2005)).

4PL
The Fourth Party Logistics provider (4PL) is a supply chain integrator that organises people – process – technology of its own organisation with complementary service providers to deliver a harmonious supply chain performance. It has two important functions, namely: supply chain redesign and supply chain coordination. The 4PL model is able to yield significantly more shareholder value than traditional 3PLs. The table below provides an overview of the key differences.

Table 1: 4PL versus 3PL

	Principles	4PL	3PL
1	Value Adding	Arms-length control in fast growing market	Taking over of non-core activities
2	Role	An extension of client	Contractor
3	Logistics requirements	Neutral, single interface between supplier and/or customer	Biased position, logistics operator
4	Knowledge & experience	Injected into the client	Injected into the 3PL
5	Improvements	Continuous improvements	One-off low hanging fruits only
6	Supply Chain Control	Internal	External
7	Business model	Cost + Performance	Transaction based

Source: © 2008 LBB International

3PL
The Third Party Logistics (3PL) is a provider of third-party logistics execution and improvement of specific supply chain functions, such as transportation, freight forwarding, warehousing, value added services, etc. He can use his own or someone else assets.

Procurement
Procurement includes all activities required in order to get the product from the supplier to the company’s destination. It encompasses the purchasing activities (all activities resulting in an invoice), the physical supply (transportation, storage, handling) as well as category management (retail & wholesale).

Three major trends can be observed in the outsourcing of procurement. First of all due to a focus of companies on their core business, non-core activities are being outsourced. This has resulted in an increase in importance of the procurement functions as well as an increase of the procurement activities under a procurement division. Labour intensive technical drawings and administration (reporting, analysis) are more and more being outsourced to cheap labour countries such as India. As companies source global, arms-length control of suppliers in far destination have become very important. This has resulted in the emergence of regional procurement teams. These regional procurement teams can be outsourced to procurement specialists such as LBB Teams in Malaysia.

References
Business Week, Januari 2006
Moorst, A. van, en Wel, P. van (2006), Strategische sourcing, offshoring, nearshoring en bestshoring, Outsource Magazine
Ploos van Amstel, W., Van Goor, A.R. (2001), Van logistiek naar supply chain management, Kluwer
Eyefortransport (2006b), European 3PL Market Report, Eyeforttransport.com, Brussels, Belgium
Rushton, A., Walker, S. (2007), International logistics and supply chain outsourcing: from local to global: Kogan Page, London.
Craig, T. (2003), 4PL versus 3PL-A business process outsourcing: option for international supply chain management