Third Party Logistics

Providers (3PL)
3 PL
 Third-party logistics (3PL) service providers
are companies who provide a range of
logistics activities for their clients. These are
companies independent from the buyers and
sellers but takes over some of their logistics
function.
3PL Defined
 Businesses that provide one or many of the following
logistics services:
 Transportation Management

 Public/Contract Warehousing

 Distribution Management

 Freight Consolidation
Types of 3PL Providers

 Transportation Based
 Services extend beyond transportation to offer a
comprehensive set of logistics offerings.
 Examples: UPS Logistics
Transportation

Customs
Incoming Point of Sale/
Materials Consol. De-
Point of Use/
Or Center con
Customers
Products Cente
Outsourced
r

Activities:
Transport arrangement
Customs clearance
Shipment visibility
Carrier mgmt / rate mgmt
Benefits:
Shorter cycle time
Lower freight costs
Visibility of pipeline inventory
I
Types of 3PL Providers
 Warehouse/Distribution Based
 Many have former warehouse and/or distribution
experience.
 Examples:Caterpillar Logistics, IBM
Contract Warehousing

Incoming Bulk Distribution Customers

Products Warehouse Center Retailers

Outsourced In-house

Activities:
Labor & supervision
Receiving, storage, shipping
Benefits:
Lower capital investment
Lower fixed/variable cost ratio
Focus to the core
Professional service
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: GE Information Services,
Logistics Financial Services

Customers /
Supplier Manufacturers Distributors Retailers

Activities: Benefits:
Inventory finance (factoring,) Reduced cost of capital
Distribution finance (asset based Improved cash flow
lending, receivable finance) Reduced capital investment
Payment solutions ,
Leasing
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
 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
 Risks of Out-sourcing
Logistics
 Loss of internal logistics management capabilities
 Biased choice of service providers
 Leakage of sensitive data and information
 Service degradation
 Less reliable? Longer order cycle time?
 Emergency response?
 Loss of control and representation
 Reduced contact with final customer
 3PL for outbound logistics interact with your customers, you
become less visible to your customers

13
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