Third Party Logistics Providers (3PL)

Kyle Sera Amy Irvine

Scott AndrewCarrie Schmidt

Ryan Lancaster

Overview

What are 3PL’s 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

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

Types of 3PL Providers

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’s?

Save time Don’t need to invest in:

Trucks Training Development

Help expand New markets International

No roads

Why Use Cont.

Narrow 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 3pl’s 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 Continued… 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 Continued…

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 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

Questions?

Sources 3PL definition:

http://accuracybook.com/glossary.htm Top 10 3PL providers:

http://www.inboundlogistics.com/3pl/awards.shtml Successful 3PL implementation:

http://logistics.about.com/od/thirdparty/a/uc041805a.htm Sangam, VK. (2006). Implementing Third Party Logistics. Retrieved May

5th, 2006. From Massey University, About Business and Finance website:http://logistics.about.com/od/thirdparty/a/uc041805a.htm

Red Prairie:http://www.redprairie.com/Industry%20Solutions/Third%20Party%20Logistics.aspx

Class lecture slides:http://logistics.about.com/od/thirdparty/a/uc041805.htm