Third Party Logistics | Logistics | Distribution (Business)

Third Party Logistics

A presentation by Pratick Gayen

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Definitions
• Third Party Logistics (3PL): Outsourcing all or much of a
companies logistics operations to a specialized company

• Third Party Logistics Provider: A firm which provides multiple
logistics services for use by customers. Preferably, 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.

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Why Use 3PL?

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3PL Vs. Transportation Services

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Outsourcing - Industry Trends

Avoid Capital Expenditures Cut Costs Increase Flexibility (service/financial) Focus on Core Business Improve Service Lack of Scale Acquire Talent Avoid Labor Problems
Source: A.T. Kearney

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Profitability depends on Speed, Reliability and Visibility

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FY 2007 Fortune 500 Global 3PL Gross Revenues by Industry
Other $2.90 Insdustrial $18.8 Automotive, $26.7

Food $6.40

Healthcare Retailing $16.20 $2.80

Consumer Products, $2.20

Technology $22.20

Automotive Retailing Industrial

Technology Health Care Other

Consumer Products Food

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Customers of 3PL’s
Industry Automotive Technology Retailing Consumer Products Food and Grocery Healthcare Industrial and Elements Other Total Costs
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Global Costs $98.2 $156.4 $98.6 $13.6 $32.2 $38.4 $179.7 $63 $678.3

Domestic Costs $37.4 $77.4 $67.2 $13.3 $27.8 $34.0 $84 $25.3 $366.3
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Customers of 3PL’s
Percent of Fortune 500 Companies Using 3PL’s
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1-100 101-200 201-300 301-400 401-500 2002 2003

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Buyers of 3PL Services
Customer General Motors Wal-Mart Stores Ford Motor, HP Procter & Gamble General Electric Georgia Pacific, IBM PepsiCo, Sears Coca-Cola, Sara Lee, Target, Xerox General Mills Delphi, 11/04/09 10:17 PM Safeway # of 3PL’s Used 37 33 27 20 17 16 13 12 11 10

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Services Provided By 3PL’s

Lead Logistics 4% Integrated 9% International 9%

Other 5%

Transportation Mgt 21%

Private Fleets 7% Value Added 20% Warehousing 21% Intermodal 4%

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Top Providers
2003 Rank
1 2 3 4 5 6 7 8 9 10 11 12
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Est. Rev. ($M)
3PL 2007 Revenue
$8,300 $6,900 $6,400 $5,700 $4,800 $4,700 $4,600 $4,100 $4,000 $3,600 $3,100 $3,000
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Provider
Excel Kuehne & Nagel Schenker DHL P&O Nedlloyd TGP/TNT Panalpina UPS Supply Chain Nippon Express C.H. Robinson Menlo Worldwide NYK Logistics

10 Commandments of Outsourcing
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Develop a strategy for outsourcing Establish a rigorous provider selection process Clearly define expectations Develop a good contract Establish sound policies and procedures Identify and avoid potential points of friction Communicate effectively with your partner Measure performance and communicate results Motivate and reward provider Be a good Partner

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3PL Providers

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Thanks…
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