Third Party Logistics

Providers (3PL)
Kyle Sera
Amy Irvine
Scott Andrew
Carrie Schmidt
Ryan Lancaster
Overview
 What are 3PL’s
 Why use them
 Tips for implementation of 3PL’s
 4PL’s
Types of 3PL Providers

 Transportation Based
 Services extend beyond transportation to offer a
comprehensive set of logistics offerings.
 Leveraged 3PLs use assets of other firms.
 Non-leveraged 3PLs use assets belonging solely
to the parent firm.
 Examples: Ryder, Schneider Logistics, FedEx
Logistics, UPS Logistics
Types of 3PL Providers
 Warehouse/Distribution Based
 Many have former warehouse and/or distribution
experience.
 Examples: DSC Logistics, USCO, Exel,
Caterpillar Logistics, IBM
Types of 3PL Providers

 Forwarder Based
 Very independent middlemen with forwarder
roles.
 Non-asset owners that provide a wide range of
logistics services.
 Examples: AEI, Kuehne & Nagle, Fritz, Circle, C.
H. Robinson, Hub Group
Types of 3PL Providers

 Financial Based
 Provide freight payment and auditing, cost
accounting and control, and tools for monitoring,
booking, tracking, tracing, and managing
inventory.
 Examples: Cass Information Systems, CTC, GE
Information Services, FleetBoston
Types of 3PL Providers

 Information Based
 Significant growth and development in this
category of Internet-based, business-to-
business, electronic markets for transportation
and logistics services.
 Examples: Transplace, Nistevo
Logistics?
 Logistics: Managing the flow of information
and goods inbound from suppliers and
outbound to customers.
 Why be good at this?
 Core competency?
Why Use 3PL’s?
 Save time
 Don’t need to invest in:
 Trucks
 Training
 Development
 Help expand
 New markets
 International
 No roads
Why Use Cont.
 Narrow your focus
 Allows you to focus on your strengths
 Don’t get spread too thin
 Reach more customers more effectively
 Can ensure delivery times
 can help a company run leaner
Management Focus
 Furthering your company
 Consider potential benefits and drawbacks
 3pl’s can increase profitability
 Can you be a 3PL to someone else?
Levels of Outsourcing
 Transactional Outsourcing: Based on transactions, with no
long term contracts and no bonding between the 3PL and the
outsourcing company.

 Tactical Outsourcing: Outsourcing on a long term basis with

negotiated contacts and integrated IT systems to facilitate free
information flow and create supply chain visibility.

 Strategic Outsourcing: Based on long-term relationships with

successful outcomes, 3PL companies become partners in supply
chain management and establish transactional transparency.
3PL Defined
 Can be ambiguous as there are many definitions
 Some say “all or a significant part”
 Some say “at least one part”
 Best definition is probably a combination:
 Businesses that provide one or many of the following
logistics services:
 Transportation Management

 Public/Contract Warehousing

 Distribution Management

 Freight Consolidation
As a Manager…
Which 3PL Provider Do I Choose?
 Inbound Logistics recognizes top 10
 Uses its readers to conduct vote
 Over 300 companies nominated with 3,000+
votes
 Top 3 this year:
 1) UPS Supply Chain Solutions
 2) Schneider Logistics
 3) C.H. Robinson
 How is a 3PL Differentiated From a
Transportation Provider?

 Transportation provider gets product from

point A to point B
 Could be considered a 3PL
 Just one function of logistics
 3PL provider assists in multiple functions
Successful Implementation of 3PL
 Why you want to select the right provider the first time
 Only about 65% of companies believe their provider is doing a
“good” job.
 55% of logistics outsourcing contracts end in 3-5 years

 The source had a list of 14 key tips for success, but we are going
to focus on the 5 most important issues.
Tips for Successful Implementation
1) Have an outsourcing strategy.
 Know what your outsourcing strategy is. It needs to be well thought
out and measured against in house solutions and capabilities.
 SWOT analysis. As a company you should understand the strengths,
weaknesses, opportunities and threats of outsourcing logistics, rather
than keeping them in house.

2) Do your homework.
 Do a comprehensive study
 Clearly document advantages, challenges, costs and benefits.
 Document expectations
 Set down expectations in clear terms and include current costs.
Tips Continued…
 Create a robust selection process.
 Invite companies in to give a formal presentation without giving
requirements. This can help document their strengths and weaknesses.
 Make a site visit to the 3PL, and talk with its existing customer.

3) Measure and review performance

 Have a efficient and accurate measurement system.
 Qualitative measures that focus on effectiveness and quantitative
measures that focus on efficient utilization.
 Have an efficient costing system
 This will help you to understand the costs involved in outsourcing.
 “Are we making money doing this?”
Tips Continued…
4) Create an Implementation Strategy
 Create a project plan road map
 Be clear who does what, create a project management team with
members from both organizations and review progress vs. planned
milestones.

5) Nurture the Relationship

 Both Parties must nurture the relationship to make outsourcing
successful.
 Create mutual trust, respect and a sense of integrity.
 4PL Providers
 Manage and direct the activities of multiple
3PLs, serving as an integrator
 Refinement on the idea of 3PLs
 4PLs are not asset based like 3PLs
 Assembles and manages the resources,
capabilities, and technology of its own
organization and other organizations to
design, build and run comprehensive supply
chain solutions
Transways Express 4PL
 One stop transport and logistics supplier
 Work with suppliers and customers
Questions?
Sources
 3PL definition:
http://accuracybook.com/glossary.htm
 Top 10 3PL providers:
http://www.inboundlogistics.com/3pl/awards.shtml
 Successful 3PL implementation:
http://logistics.about.com/od/thirdparty/a/uc041805a.htm
 Sangam, VK. (2006). Implementing Third Party Logistics. Retrieved
May 5th, 2006. From Massey University, About Business and Finance
website:
http://logistics.about.com/od/thirdparty/a/uc041805a.htm
 Red Prairie:
http://www.redprairie.com/Industry%20Solutions/Third%20Party
%20Logistics.aspx
 Class lecture slides:
http://logistics.about.com/od/thirdparty/a/uc041805.htm