Third Party Logistics (3PL)

3PL 1
 3PL Industry Objective

Logistics
Service Third Party Shipper
Provider Logistics
Firm

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 Third Party Logistics Defined
THIRD PARTY LOGISTICS is an industry to which a shipper
(owner of transported goods) outsources various elements of
the supply chain to perform some / all logistics management
functions including inbound freight, customs, warehousing,
order fulfillment, distribution and outbound freight.
•Initiated in 1980s when companies began looking for opportunities to
improver logistics performance.
•FedEx drew attention to 3PL service by offering JIT delivery
•FedEx success in 3PL marketplace opened it up to competition
•Initially primarily domestic coverage, 3PL industry is now global in
character with a revenues approaching $150 billion in NA

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3PL Industry Characteristics

4
 3PL Outsourcing Opportunity
For the shipper …
1.To acquire skills / resources not available internally
2.To achieve competitive advantage through outside
expertise
3.To allow company to focus on its core competencies
4.To improve operational productivity and customer
service
5.To improve business process efficiency
6.To avoid making capital expenditures

5
 Types of 3PLs
There are three types of third party logistics providers:
1. Asset Based – 3PL companies that use their own trucks, warehouses
and personnel to operate the client’s business
2. Management Based – 3PL companies that provide the technological
and managerial functions to operate the logistics functions of their
clients, but do so using the assets of other companies and do not
necessarily own any assets
3. Integrated Providers – 3PL companies that can either be asset based
or management based that supplement their services with whatever
services are needed by their clients

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 3PL Application to Industry

1. Computers
2. Retail
3. Chemicals
4. Medical
5. Automotive

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 Top 10 Services Outsourced to 3PL
1. Freight payment & auditing
2. Warehouse operations
3. Carrier selection & rate negotiation
4. Logistics information systems
5. Shipment planning
6. Fleet management
7. Packaging
8. Customer relations
9. Customer order processing & fulfillment
10. Total supply chain (logistics) management

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 Top 10 Global 3PL Companies
Warehouse
 # 3PL Company  HQ Location Revenue Employees s Tractors Trailers
$
1 UPS Solutions Atlanta, GA 8.90 35,000 100 2,000 4,600
$
2 C. H. Robinson Eden Prairie, MN 8.60 8,000 100 n/a n/a
$
3 Expeditors International Seattle, WA 5.60 12,600 110 n/a n/a
$
4 DHL Logistics Bonn, Germany 4.80 185,000 2,500 45 10,500
$
5 Uti Worldwide Long Beach, CA 4.50 20,500 260 1,250 1,825
Schindellegi, $
6 Kuehne & Nagel Switzerland 3.90 53,000 500 n/a n/a
$
7 Catapillar Logistics Morton, IL 3.50 12,000 130 n/a n/a
$
8 DB Schenker Essen, Germany 3.20 62,000 500 n/a n/a
$
9 Penske Logistics Reading, PA 3.00 9,600 150 2,300 4,100
Panalpina World $
10 Transport Basel, Switzerland 3.00 14,800 240 n/a n/a

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 3PL Provider Differentiation
• Focus on shipper business performance and value
• Employ performance measures
that track shippers specific business
objectives
• Emphasize flexibility and
responsiveness to changing
supply chain conditions
• Open flow / exchange of information (transparency)
• Target strategic (long-term) solutions

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 3PL Industry – Gap Issues
Service Issues Shipper 3PL
Lack of continuous improvements 46% 19%
Service levels not realized 46% 31%
IT capabilities insufficient 43% 31%
Cost reductions not realized 36% 34%
Lack of project management skills 35% 17%
Unsatisfactory transition during implementation 31% 25%
Lack of global capabilities 30% 21%
Benefits not achieved in a timely manner 25% 18%
Promising services they do not have 25% n/a
Lack of business process integration 26% 26%
Lack of industry-specific knowledge 20% 11%
Inability to form meaningful / trustful relationships 12% 13%

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 Shipper Benefits Attributed to 3PLs

2011
Measureable Benefits Survey
Logistics Cost Reduction 13%
Inventory Turn Improvement 9%
Logistics Fixed-Asset
Reduction 25%
Order Fill Improvement Rate 79%
Order Accuracy Improvement 87%

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 3PL Industry Status
• Shippers continue to increase use of 3PL outsourced services
• Demand for transactional / operational logistics services greater
than demand for strategic management value-added services
• 3PL industry revenue will continue to grow at a 10%+ rate per
year, almost 5 times the growth rate of US GDP
• International logistics management is largest growth sector
• Joint gainsharing contracts have not taken hold
• Typically, 3PLs rank its relationship with shippers higher than the
reverse but the gap is closing
• A significant logistics talent gap exists for both 3PLs and shippers
• 4PLs (integrate resources / capabilities / technology) in demand
• Strategically, nearshoring is growing opportunity for 3PL services
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