3PL For the Indian Army

 Introduction

3PL or Third Party Logistics denotes the process of outsourcing of all or some of an organisations logistics functions or non-core operations to an agency which specialises in that particular sphere.Initially, 3PL focused on basic functions such as transportation, warehousing etc; however, with the passage of time and improvement in expertise, informative practices and information technology, the scope of functions being outsourced is increasing. As the basic functions become more and morespecialised,the range and services for 3PL are also expanding significantly, thus enabling the parent organisations to concentrate solely on their core functions.

In basic terms, outsourcing encompasses those functions and allied services that a company may be capable of doing on its own but would rather buy from others because of the inherent savings. A system analysis is undertaken by the organisation to determine the ideal function to be outsourced along with an in-depth assessment, comparative study and performance rating of the suppliers in the concerned field to arrive at a decision on the outsourcing. Subsequently, a comprehensive contract that covers the supply chain performance and definable parameters is then entered into by both parties.

Advantages Accrued

The main advantages for any organisation to opt for outsourcing are:

• Organisation focus on main competency is not compromised.
• Operating costs are reduced substantially due to reduction of manpower and associated benefits
• In-house resources are freed for other useful purposes, in consonance with the core functioning of the company.

Relevance of 3PL for the Indian Army

All the above mentioned reasons form the bedrock and are equally applicable to the armed forces as for any civil commercial organisation.Exploring the feasibility of outsourcing non-core operations and routine administration helps tooptimise defence expenditure besides saving combatant manpower and quantifiably reducing resource liability. In 2007, the Government of India agreed in principle to allow outsourcing of essential services of the armed forces on a case-to-case basis, for which the services would need to address the related security concerns before any function could be outsourced.

Areas Recommended for Outsourcing for the Indian Army

Keeping in view the non-core functions, the cost effectiveness in their outsourcing as also the availability of competent service providers certain functions that could be outsourced are:

• Vehicle repair and maintenance. At present the repair, maintenance, and overhaul of equipment/vehicles is the responsibility of the Corps of Electrical and Mechanical Engineers (EME). There is a considerable expenditure on training of technical personnel as also inventory holding costs in terms of spares and tool thereby further depleting the limited resource allocated to the army. Therefore, outsourcing maintenance, repair and overhauling of indigenous origin vehicles/equipment to Original Equipment Manufacturing (OEM), may be preferred option at least in cities where civilian facilities exist. All spares can be outsourced from the OEM directly since these are easily available in the open market, being civil end use items. Besides reducing the overall inventory carrying cost, it will also lead to a reduction in the associated manpower.
• Army Uniforms and Accessories. The clothing and general stores are supplied primarily by the OFB (Ordnance Factories Board), resulting in a situation wherein the army is a “captive customer” of these factories. These factories are the only agency mandated to manufacture and provide the requirements as projected by the army. This adversely affects quality concerns and is also a big drain on the allocated budget as rates quoted by the factories are generally higher than the market rates.Outsourcing of this function to major and established garment manufacturers in the civil would thus lead to a more cost effective system  besides leading to better user satisfaction..
• Catering Services.The army training establishments that impart training to all personnel of the army are generally located in major cities. As the strength of these institutes is viable, the requirement of day to day catering in these institutes can be outsourced, thereby permitting the combatant support staff to be relieved of these duties.
• Building and Maintenance.The responsibility for construction and maintenance of all types of buildings and roads besides the electric supply and infrastructure and other services, is the responsibility of the MES(Military Engineering Services). Construction of buildings, roads and other infrastructure and their maintenance can be outsourced to established companies who can then also take onthe routine maintenance as a part of the project contract. These aspects are now increasingly being outsourced to private contractors by the MES on a standalone basis.
• Training Facilities. Trainingin fields like IT and technical training which are available in the civil,is increasingly being done by outsourcing to competent firms. This has led to a considerable savings due to a reduction in running army training establishments thus leading to savings in resources and manpower. Technical trade training for the army is also being undertaken by ITIs (Industrial Training Institutes) and Polytechnics. Driving skills to combatants can be imparted by civil driving schools in a much shorter time frame and with equal competence. Development of software for various applications with adequate military inputs is also amenable to outsourcing. It would have the added advantage of up to date and latest software incorporation if outsourced, given the international standards and competence of the Indian IT sector.

Conclusion

The benefits of outsourcing are being realised by countries like the US, UK, Israel, Australia, Canada, France etc and they are increasingly outsourcing more and more non-core competencies. This has proved to be a highly cost-effective option and by outsourcing day-to-day administrative tasks, countries have made savings of 15 to 40 per cent on their defence expenditure. Since defence budgets are limited in almost all countries, it is imperative that the armed forces must look towards avenues which get the best value for limited resources and at reduced costs thus increasing the ‘bang for the buck’.

3PL is a cost effective and efficient way of freeing the armed forces of the shackles of routine administrative functions to enable them to concentrate on their major role. It is therefore the need of the hour that the forces engage better-equipped civilian LSPs (logistic service providers) who are experts in their respective fields to conserve own manpower, time and resources.Keeping in view the security concerns of the armed forces and with effective monitoring, outsourcing can help the Indian Armed forces concentrate on their primary role.The existing resource crunch and ever-depleting allocation of funds to the armed forces is a pointer to the need for acceptance of 3PL as an important tool for the Army.

The author is a Senior Fellow at CLAWS

Views expressed in the article are personal.

Bibliography.

1. E.U. Mulls, “Increasing Outsourcing for Logistics”, available at http;/www.Defencenews.m/story.php?i=EUR&s=ALL

 2. J. Woon Leanne, “New Zealand Defence-How Does It Stack Up?” Army Logistician, March-April, 2004

3. Michael Palairet, Manager of SAP Support Group, New Zealand Defence Forces

4. “Outsourcing Primary Medical Care in Israeli Defence Forces”, available online

5.Study by Chopra &Meindl, Literature of ICFA and study at Kellog’s under supervision of Chopra