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Third Party Logistics
Sageer-S Roll No: 5

more mutually beneficial relationship´ -. has more customized offerings.Murphy & Poist (1998) .´ -. encompasses a broad number of service functions and is characterized by a long-term.Third Party Logistics .Definition ƒ ³Third-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) ƒ ³A relationship between a shipper and third party which. compared with the basic services.

Third Party Logistics ± Birds Eye View Outsourced Operation Shipper Shipper Shipper In-house Operation Transportation 3PL Warehousing IT support SC integration Shipper In-house Logistics Department IT support Transportation Warehousing Others Others .

Characteristics of 3PL ƒ Perform outsourced logistics activities ƒ Process management / Multiple activities ƒ More customized services ƒ Mutually beneficial and risk-sharing relationship ƒ Long-term commitments (1~ 3 years) .

Why is it needed? ƒ Advantages o o o o Cost reduction Focus on core competency ± Lean Organization Improved efficiency. service and flexibility Industry-specific application ± ³build-to-order´ systems and e-merchants ƒ Disadvantages o Loss of control o Impact on in-house workforce .

Current State .Service Offerings of 3PL ƒ Dedicated Contract Transportation / Transportation Procurement ƒ Inventory Management ƒ Logistics Management and Consulting ƒ Freight Audit and Bill Payment ƒ Customs Services ƒ Shipment Tracking and Tracing ƒ Reverse Logistics and Value-added Services .

ƒ Firms with a wide and/or complex distribution network. ƒ When a company is integrating activities of a takeover. Example: IBM. Example: Chevron Corp or British Petroleum. . ƒ Firms that do not focus on logistics as one of their core competencies.When 3PL providers may be used USAGE OF 3RD PARTY LOGISTICS (3PL). ƒ In the case of the creation of a new product group.

multi-level contacts. Selection . benefits.. Business Plan. PROCESS Awareness. Communication and motivation.3PL ± Steps to choose a Provider STEPS IN 3RD PARTY LOGISTICS (3PL).Investigate market trends. etc. Strategy. competency. inform employees.Sustain partnership via mutual financial costs and benefits. joined planning. SWOT Analysis. Market Research . Risks.Develop and compare logistics concepts. Timing. . vision.Build own competence or outsource. in particular service demands. Make or Buy. integrity. Outsource completely or partly. open information exchange.-Agreeing on mutual expectations using a set of performance metrics.Investigate possibilities. Phasing. Agreement.Costs. Evaluation and Renewal.Selecting partner based on market coverage.

Collaborative Network . cost Accounting and control. Auditing.3PL ± Type of 3 PL Providers and Examples ƒ Transportation Based: ± UPS Supply chain Services. Nistevo ± Internet Based . FedEX . Real-time Network Visibility . Fritz. Non Asset owners. Schneider Logistics. DSC. DHL. Hub Group ± Middle Man roles . Uti Integrated Logistics. Logistics management tools ƒ Information Based: ± Transplace. GE Information services ± Freight Payment . ± Subsidiaries of Major Divisions of large Transportation Firms ƒ Warehouse/Distribution Based: ± Ozburn-Hessey Logistic. Broker Services . Saddle Creek. Menlo Logistics. ƒ Financial Based: ± Cass information Systems. IBM SCM Services ƒ Forwarder Based: ± Kuehne & Nagel. ± Caterpillar logistics services.

specific packaging. Adapted from Wikipedia 10 . warehousing. and distribution (business)  Service developer  Advanced value-added services such as: tracking and tracing. or providing a unique security system  The customer adapter  Complete control of the company¶s logistics activities  Improves the logistics dramatically.Categories of 3rd Party Service Providers Four Categories of 3PL Providers  Standard 3PL provider  Pick and pack. but do not develop a new service  The customer developer  Highest level that a 3PL provider can attain with respect to its processes and activities  3PL provider integrates itself with the customer and takes over their entire logistics functions. crossdocking.

1980s) y Freight forwarders / brokers y Shipper¶s agents Broader more integrated services .1990s) y Non asset-based companies y Asset-based companies increased service offerings y Transportation / warehousing First Generation (1970s .Industry Facts Third Generation ( 2000 and beyond) y Online freight marketplaces y Web-based 3PLs y Increasing supply chain integration Second Generation (1980s .3PL .

40% 507.60 1.3 Logistics Costs 1.8 20.1 162.50% 14.80% 12.8 231.7 2.641.624.798.7 26 1.10% 15. Costa Rica. El Salvador.070.10 136. Nicaragua.40 1. Honduras. and Panama.3PL.00 14.10 393.1 Total *Includes Belize.90 39.738.071.6 97. Guatemala.782.00% 3PL Revenue 128.5 930.80% 9.9 15.60 1.50% 12.00 6.Market Size Estimates (2009 ) Global Logistics Costs and Third-Party Logistics Revenue (US$ Billions) Region North America Europe Asia Pacific South America Central America* Australia United Arab Emirates (Dubai) 2009 GDP 16.272.90% Regions/Countries 58.00 16.8 Remaining 6.10% 10.00 11. Copyright © 2010 Armstrong & Associates.9 27. 12 .779. Inc.591.3 136.6 9.70 2.180.7 Logistics (GDP %) 9.

1 3PL Segment Domestic Transportation Management ± Asset Based (1) Domestic Transportation Management ± Non Asset Based International Transportation Management Value-Added Warehousing and Distribution Software Total (1) Primarily dedicated contract carriage. Copyright © 2010 Armstrong & Associates.3PL/Contract Logistics Market 2009 Gross Revenue/Turnover ($ Billions) 9.1 27. Inc.8 3.3PL.4 31.0 107. 13 .8 35.

ƒ Specific modes of transport which may be subject to the on-demand model include (but are not limited to) the following: ± FTL or Full Truck Load ± Hotshot (direct.On-Demand Transportation On-Demand Transportation--A relative new term coined by 3 PL Providers to describe their brokerage. ad-hoc. sometimes also referred to as Best Flight Out (commercial airline shipping) ± International Expedited Adapted from Wikipedia 14 . exclusive courier) ± Next Flight Out. and "flyer" service offerings. On-Demand Transportation is a niche that continues to grow and evolve within the 3PL industry.

which are actual carriers such as YRC Worldwide.Overlapping Terminologies In the "PL" terminology. which are consulting firms such as CPCS. UPS. ƒ 2PL. FedEx. Overlapping 3PL can also be 2PL at the same time in the following cases: ƒ when a shipping line owns a freight forwarder ƒ when an airline owns a general sales agent (GSA) ƒ when a freight forwarder owns trucks or a warehouse ƒ when a courier company owns planes Adapted from Wikipedia 15 . Deloitte. SCMO. it is important to differentiate the 3PL from the: ƒ 1PL. BMT. ƒ 4PL. which are the shipper or the consignee. and Accenture.

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Niche Markets ± Online Logistics Providers ƒ Online Freight Marketplaces ± Spot market ± Auction and RFQ ± Exchange ± Meta-marketplaces ƒ Application Service Providers (ASPs) ƒ Purchasing Consolidation Market ƒ Infomediaries .

Tracking . Customer Service and Issue Resolution ƒ Does not own physical freight distribution assets ƒ Does not employ Truck drivers or warehouse personnel ƒ Consists of a team of Domain Experts ƒ Accumulated Industry experience and expertise ƒ Information technology assets ƒ Hands on involvement of transportation of product Examples .Non Asset-based Logistics Providers A New Model in 3PL Operations Non asset Based Logistics Provider ƒ Advancement in technology ƒ Increase in Supply chain Visibility ƒ Increase in Inter company communications ƒ Consultation on Packaging / Transportation ƒ Freight Quoting.Choice Logistics and DTS (Diversified Transportation Services ) 18 . financial settlement ƒ Auditing .