Download - 3rd party logistic
Third Party Logistics
Presented by Vikram Kumar
September 19, 2013
Definition
• “Third-party Logistics is simply the use of an outside company to perform all or part of the firm’s materials management and product distribution function.”
-- Simchi-Levi (2000)
THIRD PARTY LOGISTICS is an industry to which a shipper (owner of transported goods) outsources various elements of the supply chain to perform some / all logistics management functions including inbound freight, customs, warehousing, order fulfillment, distribution and outbound freight. •Initiated in 1980s when companies began looking for opportunities to improver logistics performance. •FedEx drew attention to 3PL service by offering JIT delivery•FedEx success in 3PL marketplace opened it up to competition •Initially primarily domestic coverage, 3PL industry is now global in character with a revenues approaching $150 billion in NA
Third Party Logistics Defined Third Party Logistics Defined
Cont..
• 3PLs are external suppliers that perform all or part of a company’s logistics functions, including:– Transportation– Warehousing– Distribution– Financial services
• Terms contract logistics and outsourcing are sometimes used in place of 3PL.
Third Party Logistics
In-house Logistics Department
Shipper
Transportation
IT support
Warehousing
Others
In-house Operation
Outsourced Operation
3PL
Shipper
Shipper
Shipper
Transportation
Warehousing
IT support
SC integration
Others
Why Use 3PL?
Advantages & Disadvantages
• Advantageso Cost reductiono Focus on core competencyo Improved efficiency, service and flexibilityo Industry-specific application – “build-to-order” systems and e-merchants
• Disadvantageso Loss of controlo Impact on in-house workforce
Characteristics of 3PL
Types of 3PL
• There are three types of third party logistics providers:
1. Asset Based – 3PL companies that use their own trucks, warehouses and personnel to operate the client’s business
2. Management Based – 3PL companies that provide the technological and managerial functions to operate the logistics functions of their clients, but do so using the assets of other companies and do not necessarily own any assets
3. Integrated Providers – 3PL companies that can either be asset based or management based that supplement their services with whatever services are needed by their clients
Third Party Logistics Provider
A firm which provides multiple logistics services for use by customers.
These services are integrated or “bundled” together by the provider.
These firms facilitate the movement of parts and materials from suppliers to manufacturers and finished products from manufacturers to distributors and retailers.
Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging and freight forwarding.
Types of 3PL Provider
• Transportation-Based
• Warehouse/Distribution-Based
• Forwarder-Based
• Financial-Based
• Information-Based
Third Party Logistics
10 Commandments of Outsourcing
1. Develop a strategy for outsourcing
2. Establish a rigorous provider selection process
3. Clearly define expectations
4. Develop a good contract
5. Establish sound policies and procedures
6. Identify and avoid potential points of friction
7. Communicate effectively with your partner
8. Measure performance and communicate results
9. Motivate and reward provider
10. Be a good Partner
3PL Vs. Transportation Services
FY 2003 Fortune 500 Global 3PL Gross Revenues by Industry
Consumer Products, $2.20
Healthcare$2.80
Food $6.40
Insdustrial $18.8 Other $2.90
Automotive, $26.7
Technology $22.20 Retailing $16.20
Automotive Technology Consumer Products
Retailing Health Care Food
Industrial Other
Costs stated in Billion's of Dollars
Customers of 3PL’s
Industry Global Costs
Domestic Costs
Automotive $98.2 $37.4
Technology $156.4 $77.4
Retailing $98.6 $67.2
Consumer Products $13.6 $13.3
Food and Grocery $32.2 $27.8
Healthcare $38.4 $34.0
Industrial and Elements $179.7 $84
Other $63 $25.3
Total Costs $678.3 $366.3
Customers of 3PL’s
Percent of Fortune 500 Companies Using 3PL’s
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1-100 101-200 201-300 301-400 401-500
2002
2003
Need for Collaborative Relationships
• Supply chain relationships are most effective when collaboration occurs.
• Collaboration is facilitated by the ability of the supply chain partners to readily access and exchange information over the Internet.
Seven Laws of Collaborative Logistics
Current State -- Service Offerings
• Dedicated Contract Transportation / Transportation Procurement
• Inventory Management
• Logistics Management and Consulting
• Freight Audit and Bill Payment
• Customs Services
• Shipment Tracking and Tracing
• Reverse Logistics and Value-added Services
Buyers of 3PL Services
Customer # of 3PL’s Used
General Motors 37
Wal-Mart Stores 33
Ford Motor, HP 27
Procter & Gamble 20
General Electric 17
Georgia Pacific, IBM 16
PepsiCo, Sears 13
Coca-Cola, Sara Lee, Target, Xerox
12
General Mills 11
Delphi, Safeway 10
Services Provided By 3PL’s
Transportation Mgt21%
Private Fleets7%
Intermodal4%
Warehousing21%
Value Added20%
International9%
Integrated9%
Other5%
Lead Logistics4%
Industry Evolution
Third Generation( 2000 and beyond)
First Generation(1970s - 1980s)
Second Generation(1980s - 1990s)
Broader more integrated services
Transportation / warehousing
Freight forwarders / brokers
Shipper’s agents
Non asset-based companies
Asset-based companies increased service offerings
Online freight marketplaces
Web-based 3PLs
Increasing supply chain integration
Top Providers Est. Rev. ($M)
2003 Rank Provider 3PL 2003 Revenue1 Excel $8,300
2 Kuehne & Nagel $6,900
3 Schenker $6,400
4 DHL $5,700
5 P&O Nedlloyd $4,800
6 TGP/TNT $4,700
7 Panalpina $4,600
8 UPS Supply Chain $4,100
9 Nippon Express $4,000
10 C.H. Robinson $3,600
11 Menlo Worldwide $3,100
12 NYK Logistics $3,000