jiongmet01
TRANSCRIPT
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INDUSTRIES IN TRANSTION:FREIGHT TRANSPORTATION INTERMEDIARIES
IN THE INFORMATION AGE
Jiong Songand
Amelia C. Regan
Metrans 2nd Annual Transportation ConferenceFeb. 2, 2001
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Outline
Traditional Freight Transportation Intermediary
Section IISection II
Section IISection II Cu rrent State and Evol u tion of the Ind u stry
Niche Markets -- Online Logistics Providers
Research Needs / Opport u nities
Predictions / C oncl u sions
Section ISection I
Section ISection I
Section IIISection III
Section IIISection III
Section IVSection IV
Section IVSection IV
Section VSection V
Section VSection V
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Traditional Freight Transportation Intermediary
Section II
Section II Cu rrent State and Evol u tion of the Ind u stry
Niche Market -- Online Logistics Providers
Research Needs / Opport u nities
Predictions / C oncl u sions
Section I
Section I
Section III
Section III
Section IV
Section IV
Section V
Section V
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Third Party Logistics
Third-party Logistics is simply the use of an outsidecompany to perform all or part of the firm s materialsmanagement and product distribution function.
-- Simchi-Levi (2000)
A relationship between a shipper and third party which,compared with the basic services, has more customizedofferings, encompasses a broad number of servicefunctions and is characterized by a long-term, moremutually beneficial relationship
-- Murphy & Poist (1998)
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Third Party Logistics
In-house LogisticsDepartment
Shipper
Transportation
IT support
Warehousing
Others
In-house Operation
Outsourced Operation
3PL
Shipper
Shipper
Shipper
Transportation
Warehousing
IT support
SCintegration
Others
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Characteristics of 3PL
Perform outsourced logistics activities
Process management / Multiple activitiesMore customized services
Mutually beneficial and risk-sharing relationship
Long-term commitments (1~ 3 years)
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Why is it needed?
Advantageso Cost reductiono Focus on core competencyo Improved efficiency, service and flexibilityo Industry-specific application
build-to-order systems and e-merchants
Disadvantageso Loss of controlo Impact on in-house workforce
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Traditional Freight Transportation Intermediary
Section IISection II Cu rrent State and Evol u tion of the Ind u stry
Niche Markets -- Online Logistics Providers
Research Needs / Opport u nities
Predictions / C oncl u sions
Section ISection I
Section IIISection III
Section IVSection IV
Section VSection V
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Current State-- Service Offerings
Dedicated Contract Transportation /Transportation Procurement
Inventory Management Logistics Management and ConsultingFreight Audit and Bill Payment Customs ServicesShipment Tracking and TracingReverse Logistics and Value-added Services
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Current State-- Market Size
34.2
39.6
46.0
54.0
1997 1998 1999 2000
3 PL market is growing
( $ Billions )
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Market Structure
< $20 mi llio n
$20 - 100 mi llio n
> $ 100 mi llio n
Ann ua lRe ven u e
Orange Courier
R egal Logistics
Cass InformationSystem
California Distribution
Bax Global Logistics
Menlo Logistics
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Current use of 3PL by industry
75.9
71.1
61.4
56.2
53.8
82.2
Percentage of 3PL u se in different ind u striesInd u stry
C omp u ter
C ons u mer
Retail
C hemical
Medical
Au to
Source "What's ahead for 3PLs Modern Materials Handling, April, 2000
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Current Industry Status
No commonly accepted terminology
Technologies increase visibility, efficiency and integration
The service menu is rapidly changing
New breed of companies are emerging
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Traditional Freight Transportation Intermediary
Section IISection II Cu rrent State and Evol u tion of the Ind u stry
Niche Markets -- Online Logistics Providers
Research Needs / Opport u nities
Predictions / C oncl u sions
Section ISection I
Section IIISection III
Section IVSection IV
Section VSection V
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Niche Markets Online Logistics Providers
Online Freight MarketplacesSpot market
Auction and RFQExchangeMeta-marketplaces
Application Service Providers (ASPs)Purchasing Consolidation Market Infomediaries
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The Freight Transportation Industry is IdeallySuited e-commerce
High Fragmentation of Shippers and CarriersMany IntermediariesComplex Supply Chains
High Search CostsSignificant Opportunities for Economies of Scale
Several Models Emerging
Online Logistics Providers-Opportunity
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Spot market Auction and RFQExchangeMeta-marketplaces
Application Service Providers (ASPs)Purchasing Consolidation market Infomediaries
Niche Markets Online Service Providers
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Spot market Auction and RFQExchangeMeta-marketplaces
Application Service Providers (ASPs)Purchasing Consolidation market Infomediaries
Niche Markets Online Service Providers
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Spot market Auction and RFQExchangeMeta-marketplaces
Application Service Providers (ASPs)Purchasing Consolidation market Infomediaries
Niche Markets Online Service Providers
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Spot market Auction and RFQExchangeMeta-marketplaces
Application Service Providers (ASPs)Purchasing Consolidation market Infomediaries
Niche Markets Online Service Providers
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Spot market Auction and RFQExchangeMeta-marketplaces
Application Service Providers (ASPs)Purchasing Consolidation market Infomediaries
Niche Markets Online Service Providers
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Spot market
Auction and RFQExchange
Application Service Providers (ASPs)
Purchasing Consolidation market Infomediaries
Niche Markets Online Service Providers
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Spot market
Auction and RFQExchange
Application Service Providers (ASPs)
Co-opsInfomediaries
Niche Markets Online Service Providers
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Traditional Freight Transportation Intermediary
Section IISection II Cu rrent State and Evol u tion of the Ind u stry
Niche Markets -- Online Logistics Providers
Research Needs / Opport u nities
Predictions / C oncl u sions
Section ISection I
Section IIISection III
Section IVSection IV
Section VSection V
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Recent ResearchGeneral market examination
o Lieb and Randal (1999)
o Lieb and Peluso (2000a, 2000b)Contracts and relationships
o Leahy, Murphy & Poist (1995)o Sankaran & Charman (2000)
Decision-making processeso Menon, McGinnis & Ackerman (1998)o Lim (2000)
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Behavioral ModelsCarrier and Shipper behavior models
o Carrier selectiono Contract designo Contract negotiation
3PL provider s behavioro Service offerings
o Carrier selectiono Contract designo Contract negotiation
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Online Freight MarketplacesIntegrated and Time Sensitive Optimization Problems
o Dynamic and stochastic routing and scheduling systemso Dynamic inventory management systemso Combined inventory-routing modelso Real-time bidding and freight matching algorithmso Optimal pricing strategies for intermediaries and carrierso Optimal bidding strategies for shippers
Simulation-based analysis of costs and benefits toshippers, carriers and 3PLs under competing businessmodels
o Is it a zero sum game? Who wins? Who loses? How much?
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Section IISection II Evol u tion and Cu rrent State of the Ind u stry
Niche Markets -- Online Logistics Providers
Research Needs / Opport u nities
Predictions / C oncl u sions
Section ISection I
Section IIISection III
Section IVSection IV
Section VSection V
Traditional Freight Transportation Intermediary
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Predictions and ConclusionsThe total market for freight transportation intermediaries is stillgrowing with the boom of e-commerce;The conventional 3PLs will not fade, but will face with the competitionfrom the online logistics providers;The companies have to combine the logistics expertise with advancedtechnology to evolve;Strategic alliance and merge/acquisition will be important to obtaincomprehensive and intergrated supply chain solution capability;Small carriers and niche carriers will benefit from increased access toshippers and reduced search costsMedium sized and Large carriers may resist and try to continuebusiness as usual or simply become e-commerce enabled using current business modelsThe 120+ on-line freight marketplaces will be reduced to less than 10leaders and a few successful niche players in near future.
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Predictions and ConclusionsThe freight transportation industry has historically been slow tochangePersonal relationships will continue to be important despite a
growing acceptance of web based interactionsThe potential benefits of IT are hugeMajor industry changes will come the question is how soon
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End