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First published by Safeducate in 2014.
Publishers: Safeducate
 MBA in Supply Chain management
Papers to be studied :
1. Core Concepts of SCM
2. Operational, Strategic & Implementation Issues in
Supply Chain Management
3. Supply Chain Performance Metrics and Modelling
4. Logistics Management
5. Recent Trends in Supply Chain Management

Paper 5 : Recent Trends in Supply Chain Management

Modules : A. Extended Enterprise Concepts Integration of Supply Chain

B. Re-engineering the Supply Chain
C. Bull-whip effect and its management
D. Outsourcing & Postponement Decision Flexibility of Supply Chain
E. 3PL & Cross Docking integration of Supply Chain Entities
F. Role of CRM and Knowledge Management in SCM
G. IT-enabled Supply Chain Management
H. e-Procurement E-commerce
I. Performance Measurement in Supply Chain Reverse Logistics
J. Green Logistics

Module : 3PL and Cross Docking

3PL Logistics
 Outline

 The internet
 Electronic commerce
 E-commerce definitions
 Economics of e-commerce
 Product design
 E-procurement
 Online catalogues
 Rfqs and bid packaging
 Internet outsourcing
 On-line auctions
Outline - Continued

 Inventory tracking
 Inventory reduction
 Warehousing for e-commerce
 Just-in-time delivery for e-commerce
 Scheduling and logistics improvement
 Coordinated pickup and delivery
 Logistics cost reduction
Third Party Logistics Providers (3PL)
 Overview

 What is 3PL
 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?

 Save time
Don’t need to invest in:
Trucks
Training
Development
 Help expand
New markets
International
No roads
 Why Use 3PL?

 Narrows 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
 3PLs 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 for Successful Implementation

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 for Successful Implementation

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 Service 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
 3PL Advantages

 Economies of scale and increased flexibility

 Improve service performance levels
 Release capital from sale of assets
 Release running costs
 Concentrate on core business activities
 3PL Disadvantages

 Relinquish control, ownership, and expertise

 Loss of integration between sales and supply
 Changeover costs and operational problems
 Loss of dedicated in-house staff
 Sacrifice key service differentiation
Challenges in 3PL Industry
Other challenges

 Shortage of skilled manpower

Issues of 3PL Logistics

 Trend in almost every industry:

 A decline in bulk orders and shift toward smaller
inventory modules
 Burden of sorting full pallet SKUs and merging them into
multi-SKU pallets increases
 This should be considered while signing a contract with
any company
Cross-Docking
Cross-Docking

 A supply chain strategy

 Inbound Materials are
--Directed to outbound doors and are directly loaded into
outbound trucks
Or “Staged” for a very brief time period before loading
 Inbound product flow is synchronized with outbound
product flow to essentially eliminate storage of inventory
Cross-Docking

 Can accomplish significant reductions in total costs and

in lead times in a supply chain
 “Cross docking facilities (CF)” act as Transfer points
Cross-Docking

 Cross-docking can turn warehouses into transfer nodes

rather than storage into transfer nodes, rather than
storage nodes
Applicability of Cross-Docking Has Increased

 Fierce competition in all industries, especially retail

 Cooperating with supply chain partners to reduce the

system partners to reduce the system-wide costs

 Internet allows companies to communicate among each

other communicate among each other
--In real time
--at costs lower than
Types of Cross-Docking

 Pre-allocated supplier consolidation

 Pre-allocated cross-docking operator (CDO)

consolidation

 Post-allocated CDO consolidation

--Pre-allocated: Destination is determined at the supplier
-- Post allocated: Destination is determined at the cross-
dock facility
Types of Cross-Docking

 Supplier consolidation: The supplier builds the final

(possibly multi SKU) pallets that (possibly multi-SKU)
pallets that will be shipped to the final destinations

 COD Consolidation: The final pallets are built by the

CDO at the cross docking facility
When is Cross-Docking Applicable?

 Products with predictable , high demand and high cubic

volume flow

 Perishable products

 Ex: Supermarket chain ASDA partnered with Kimberly-

Clark, the paper industry giant which supplies high-
cube, low-value products such high cube, low value
products such as toilet tissue and paper towels
Prerequisites of Cross-Docking

 Total commitment and continuous monitoring at all

times by all parties involved

 Effective communication between parties

 Perfect coordination of material flows

 Perfect quality requirement

 Sharing the costs and benefits of cross docking:

Industries in which Cross-docking is
applied

 Retail industry: Wall mart, Sears and Canadian Tyre

Industries in which Cross-docking is
applied

 Third party logistics companies: companies specially

LTL companies
Industries in which Cross-docking is
applied

 Automotive Industries:
 Toyota distribution centers in California: reduced lead
time of the parts from Japan to the customers from 25
days to 11 days

 Mitsubishi motor manufacturing of America:

Crossdocking facility adjacent to assembly point in
illinois; material arrive most 2 hours prior to production
schedule supporting JIT (Just in time) at the plant
Industries in which Cross-docking is
applied

 Good year Great Britain:

 Leading tyre manufacturer in the world
 Made transition from a traditional supply chain to
modern cross docking system
 Increased its service level
 Decrease its inventory
 Releasing warehouse space
 Reducing labor cost
 Eventually reduced its operation cost by 12 percent
Industries in which Cross-docking is
applied

 Telecom and communication industry

 Apparel industry
Bibliography
Bibliography

 http://www.capgemini.com/resource-file-
access/resource/pdf/3pl_study_report_web_version.pdf
 http://www.ahrmm.org/ahrmm/education/programs_and_events/best_ahrmm/07_chi
cago/files/Moving_Warehouse_Distribution_Center_Cross_Docking_Brandt_Stewart.
ppt
 http://www2.isye.gatech.edu/~spyros/courses/IE6202/Fall-2002/Crossdocking.ppt
 http://w3.uniroma1.it/francesco.filippi/tdml/download/Lezioni/05%20Cross-
Docking%20Distribution%20Center%20(DC).ppt
 http://classes.bus.oregonstate.edu/fall-06/ba457/10am%20presentations/3pl.ppt
 http://classes.bus.oregonstate.edu/fall-
06/ba457/noon%20presentations/Third%20Party%20Logistics%20(3PL).ppt
 http://w3.uniroma1.it/francesco.filippi/Mastermar/download/04%20Cross-
Docking%20Distribution%20Center%20%28DC%29.pdf
Thank You!