Third Party Logistics Providers (3PL)Kyle Sera Amy Irvine Scott AndrewCarrie SchmidtRyan Lancaster

OverviewWhat are 3PLsWhy use themTips for implementation of 3PLs4PLs

Types of 3PL ProvidersTransportation BasedServices 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 ProvidersWarehouse/Distribution BasedMany have former warehouse and/or distribution experience. Examples: DSC Logistics, USCO, Exel, Caterpillar Logistics, IBM

Types of 3PL ProvidersForwarder BasedVery 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 ProvidersFinancial BasedProvide 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 BasedSignificant growth and development in this category of Internet-based, business-to-business, electronic markets for transportation and logistics services. Examples: Transplace, NistevoTypes 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 3PLs?Save timeDont need to invest in:TrucksTrainingDevelopmentHelp expandNew marketsInternationalNo roads

Why Use Cont.Narrow your focusAllows you to focus on your strengthsDont get spread too thinReach more customers more effectivelyCan ensure delivery timescan help a company run leaner

Management FocusFurthering your companyConsider potential benefits and drawbacks3pls can increase profitabilityCan you be a 3PL to someone else?

Levels of OutsourcingTransactional 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 DefinedCan be ambiguous as there are many definitionsSome say all or a significant partSome say at least one partBest definition is probably a combination:Businesses that provide one or many of the following logistics services:Transportation ManagementPublic/Contract WarehousingDistribution ManagementFreight Consolidation

As a ManagerWhich 3PL Provider Do I Choose?Inbound Logistics recognizes top 10Uses its readers to conduct voteOver 300 companies nominated with 3,000+ votesTop 3 this year:1) UPS Supply Chain Solutions2) Schneider Logistics3) C.H. Robinson

How is a 3PL Differentiated From a Transportation Provider?Transportation provider gets product from point A to point BCould be considered a 3PLJust one function of logistics3PL provider assists in multiple functions

Successful Implementation of 3PL

Why you want to select the right provider the first timeOnly about 65% of companies believe their provider is doing a good job.55% of logistics outsourcing contracts end in 3-5 yearsThe 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 Implementation1) 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 studyClearly document advantages, challenges, costs and benefits.Document expectationsSet down expectations in clear terms and include current costs.

Tips ContinuedCreate 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 performanceHave a efficient and accurate measurement system.Qualitative measures that focus on effectiveness and quantitative measures that focus on efficient utilization.Have an efficient costing systemThis will help you to understand the costs involved in outsourcing.Are we making money doing this?

Tips Continued4) Create an Implementation StrategyCreate a project plan road mapBe clear who does what, create a project management team with members from both organizations and review progress vs. planned milestones.5) Nurture the RelationshipBoth Parties must nurture the relationship to make outsourcing successful.Create mutual trust, respect and a sense of integrity.

4PL ProvidersManage and direct the activities of multiple 3PLs, serving as an integratorRefinement on the idea of 3PLs4PLs are not asset based like 3PLsAssembles 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 4PLOne stop transport and logistics supplierWork with suppliers and customers

Questions?

Sources3PL definition:http://accuracybook.com/glossary.htmTop 10 3PL providers:http://www.inboundlogistics.com/3pl/awards.shtmlSuccessful 3PL implementation:http://logistics.about.com/od/thirdparty/a/uc041805a.htmSangam, 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.htmRed Prairie:http://www.redprairie.com/Industry%20Solutions/Third%20Party%20Logistics.aspxClass lecture slides:http://logistics.about.com/od/thirdparty/a/uc041805.htm