www.emil.gatech.

edu

WELCOME

Moderator Speaker

Dr. John Vande Vate C. John Langley Jr., Ph.D.

Executive Director, EMIL Prof, of Supply Chain Management
Georgia Institute of Technology Georgia Institute of Technology

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For More Information

‰ Webinars
− Latin American Logistics Excellence – May 18, 2006
• Register at www.emil.gatech.edu
− Managing Asian Logistics – July 2006
− A True Life Story from the RFID Frontline – September 2006
‰ EMIL Program Information & Deadlines
− Information: www.emil.gatech.edu
− Application Deadline: August 2006
‰ Manufacturing Business Technology (MBT)
− http://www.mbtmag.com

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“Tenth Annual Third Party Logistics Study:

Views from the Customers”
C. John Langley Jr., Ph.D.
Professor of Supply Chain Management
Georgia Institute of Technology

March 21, 2006

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Webinar Agenda

‰ Introduction and 10-Year Perspective

‰ Logistics Outsourcing Practices
‰ 3PL Service Offerings and Capabilities
‰ Technology Enablement
‰ Management and Relationship Issues
‰ Customer Value Framework
‰ Future Industry Trends

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Introduction and 10-Year Perspective

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Tenth Annual Third Party Logistics Study Research Objectives

3PL Study Sponsors

‰ Strategic Assessment of Use of 3PLs

‰ Understand Customer Perspectives

‰ Investigate Leading Topics

‰ 3PL Industry Assessment for the Future

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Industry Segments and Response Rates and Geographies Studied

7.0% 8.4% 13.6%

Automotive
Automotive Chemical
Chemical Consumer
Consumer Products
Products

13.9% 20.9% 6.1%

Food
Food and
and Beverage
Beverage High-Tech/Electronics
High-Tech/Electronics Industrial
Industrial Mfg.
Mfg.

6.7% 4.1% 4.3%

Pharma
Pharma and
and Medical
Medical Retail
Retail and
and Apparel
Apparel Telecommunications
Telecommunications

7,775 Companies e-Mailed – Spring/Summer 2005

Sent to Chief Logistics Executive
1,091 Surveys Returned - 14% Response Rate

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Special 3PL Workshops and Focus Group Sessions

‰ Key Sessions Held With Industry Executives

− Boston, Massachusetts – session at Capgemini’s Accelerated

Solutions Environment
− Western Europe – two focus groups held with key European logistics

executives
− Asia-Pacific – workshop held in Singapore for Asian executives having

logistics responsibilities
‰ Purposes of ASE, Workshop, and Focus Group Sessions
− Individual perspectives relating to the 3PL industry

− Identify and discuss key industry themes, trends, and issues

− Use feedback from executives to help with interpretation of 2005 study

results
− Incorporate findings into study publication

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Factors Perceived Important by

Logistics Executives, 1996-2005

1996 2005
Factor North
America North America All Regions
Pressure to reduce cost 87% 96% 91 - 100%
Pressure to enhance
65 80 74 - 84
customer service
Globalization 58 80 63 - 90
Develop new information
47 82 81 - 96
technologies

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Logistics Outsourcing Practices

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Factors Responsible for Decision to Use 3PL Provider

North Western Asia- Latin

Factor
America Europe Pacific America
Cost 72% 74% 71% 65%
Service 61 55 51 64
Focus on corporate core competencies 29 40 43 38
Industry experience 27 16 20 26
Unique services available from 3PL provider 24 14 17 10
Asset reduction 22 30 31 30
Access to capable information technologies 16 10 20 9
Seasonality or surges in logistics activity 16 21 9 20
Corporate philosophies encourage outsourcing 12 10 17 16
Need for “change agent” 3 4 3 3
Labor problems 2 7 6 7
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Number of 3PL Providers Used

82
80
73 Most Users Involve
70 67
64 From One-Five 3PLs
60
50
40

30
Percent of Respondants

20 17 16
14 15
12
10
8 8
10 6 6
2
0
0
One to Five Six to Ten Eleven to More than
Fifty Fifty

North America Western Europe

Asia-Pacific Latin America 12
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Current (2005) vs. Projected (3-5 Years) Logistics

Expenditures Directed to Outsourcing

100%
2005
77% 2008-2009
80% 69% 70%
63%
59% 63%
51% 53%
60% 52%
44%

40%

20%

0%
North Western Asia-Pacific Latin America South Africa
America Europe
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Non-User Respondents:
Rationale for Not Using 3PL Services

Logistics is a Core Competency 35%

Logistics Too Important to Outsource 23%

Costs Would Not Be Reduced 36%

Control Would Diminish 41%

We Have More Expertise 23%

Service Levels Would Not be Realized 31%

0% 10% 20% 30% 40% 50%

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3PL Service Offering and Capabilities

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Outsourced Logistics Services

(North America Results – 2005)
Percent Percent
Logistics Service Outsourced Logistics Service Outsourced
Outbound Transportation 78% Product Returns and Repair 18%
Warehousing 63 Inventory Management 17
Customs Brokerage/Clearance 63 Product Assembly/Installation/Mfg 16
Inbound Transportation 58 Reverse Logistics & Waste Disposal 16
Freight Forwarding 56 Information Technology 15
Transportation Management 49 Rate Negotiation 14
Freight Bill Auditing/Payment 45 Fleet Management 13
Cross-Docking/Shipment Consolidation 39 LLP/4PL Services 11
Order Fulfillment/Distribution 29 Materials Management 10
Consulting Services 23 Inventory Ownership 8
Procurement of Logistics 23 Order Entry/Processing/Customer Svc 7
Carrier Selection 19 Customer and Supplier Compliance 5
Product Marking/Labeling/Packaging 18 Factoring (Trade Financing) 2

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Technology Enablement

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3PL Technology Expectations and Perceptions

100 ‰ IT Capabilities are key

89 to the 3PL provider
80
80
selection process
‰ While important, 3PL IT
60 expertise is relied upon
in only 1 out of 3
40
40 relationships
34
Percent of Respondants

‰ 3PL customers’
20 satisfaction levels with
3PL technology
services has great
0
IT Capabilities are Rely on 3PL Satisfied with 3PL Having the "right room for improvement
necessary for 3L providers for IT provider's IT software" is major
providers Leadership capabilities competitive
advantage

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Management and Relationship Issues

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3PL Provider Roles

3PL’s Mostly thought of as

80% “Tactical Service Providers”
70%
60%
50%
40%
30%
20%
10%
0%
Tactical Service Logistics Strategist Supply Chain
Provider Integrator

North America Western Europe Asia-Pacific Latin America

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Two-Tiered Relationship Structure

Relationship Relationship Traditional Service
Attributes Structure Outsourcing Terms Attributes
• Fourth-Party • Broad supply chain expertise
• Partnership Joint
Logistics Provider • Deep industry domain & consultative skills
Venture
(4PL) • Advanced technology capability
• Value Based
• Business process outsourcing, beyond logistics
• Risk Sharing
• Lead Logistics • Project management & provider coordination
• Few Partners
Provider (LLP) • 3PL technology integration
• Long Term (5+ years)
• Innovation & continual improvement
• Common Core Values
• Supply Chain
• Alignment & Trust
Manager (SCM)
• “Coopetition” Strategic

• Contractual • Third-Party • Traditional logistics services

• Fixed & Variable Logistics Provider • Modular product offerings
•Transaction (3PL) • Focused cost reduction & service improvement
Oriented • Operating excellence
• Short Term • Logistics Service • Niche services
Tactical
(1 to 5 years) Provider (LSP) 21
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Customer Value Framework

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Customer Evaluation of Outsourcing Success

100%

80%

60%

40%

20%

0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

North America Western Europe Asia-Pacific Latin America

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Quantifiable Measures of 3PL Success

North Western Latin

Cost/Benefit Asia-Pacific
America Europe America

Logistics cost reduction 11% 10% 11% 10%

Fixed logistics asset reduction 8% 20% 33% 14%

From From From From

Order fill rate (%)
91.6 to 93.9 86.6 to 92.7 91.5 to 95.8 77.5 to 83.9

Average order-cycle length From From From From

change (days) 9.3 to 7.0 6.3 to 4.3 6.3 to 4.1 16.0 to 8.0

Inventory turns* 7.1 to 8.2 10.0 to 9.3 28.3 to 29.7 14.5 to 14.3

Cash-to-cash cycle From From From From

reduction (days) 41.4 to 36.9 37.1 to 33.3 31.0 to 26.2 33.7 to 30.9

Service level improvement

62% 67% 64% 77%
(percent “yes”) 24
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Areas for 3PL Provider Improvement

‰ Service level commitments not realized

‰ Time and effort spent on logistics not reduced
‰ Cost reductions have not been realized
‰ Cost “creep” and price increases once relationship has commenced
‰ Unsatisfactory transition during implementation stage
‰ Inability to form meaningful and trusting relationships
‰ Lack of on-going improvements and achievements in offerings
‰ Lack of strategic management and/or consultative/knowledge based
skills
‰ Lack of global capabilities
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Future Industry Trends

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Next Generation of Logistics Outsourcing Models

Key Attributes Geographic Coverage

• Speed of Implementation
• Knowledge Transfer Global Supply Chain
• Shared Risk & Reward Advanced Integrators
• Comprehensive Solution Services
• Project Management
• Single Point of Lead Logistics Pan-Regional Integrators
Contact (4PL)

• Enhanced Capabilities Value-Added Multiple Locations

• Broader Service Offerings (Third Party Logistics) (intra or inter regional)

• Focused Cost Basic Services Location(s)

Reduction Specific
(Logistics Service Providers)

• Resident Client Infrastructure

Knowledge Insourcing
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Future Industry Trends
‰ Continued expansion, acquisition
and consolidation of 3PL industry
‰ Improved customer-needs
alignment
‰ Two-tiered relationship models
(strategic and tactical)
‰ Continued expansion of service
offerings across supply chain,
and broad-based business
process outsourcing
‰ Increasing importance on
repeatable and leveraged
solutions
‰ Increased efforts to update,
enhance, and improve 3PL
provider-user relationships
‰ Expansion of global markets
and needed services
‰ Increased adoption of shared
service networks and
“coopetition” strategies with
traditional competitors
‰ Need for relationship
reinvention, mechanisms for
continual improvement, and
solution innovation
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Thank You Very Much !!!

“Tenth Annual 2005 Third Party Logistics Study:

Views from the Customers”

For Further Information:

www.3PLstudy.com
www.tli.gatech.edu

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 www.emil.gatech.edu

For More Information

‰ Webinars
− Latin American Logistics Excellence – May 18, 2006
• Register at www.emil.gatech.edu
− Managing Asian Logistics – July 2006
− A True Life Story from the RFID Frontline – September 2006
‰ EMIL Program Information & Deadlines
− Information: www.emil.gatech.edu
− Application Deadline: August 2006

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