Third Party Logistics Providers (3PL)

3 PL Third-party logistics (3PL) service providers

are companies who provide a range of logistics activities for their clients. These are companies independent from the buyers and sellers but takes over some of their logistics function.

3PL Defined Businesses that provide one or many of the following

logistics services: Transportation Management Public/Contract Warehousing Distribution Management Freight Consolidation

Types of 3PL Providers

Transportation Based Services extend beyond transportation to offer a

comprehensive set of logistics offerings. Examples: UPS Logistics

Transportation

Consol.Center

Point of Sale/Point of Use/Customers

IncomingMaterialsOr Products

Outsourced

Activities:Transport arrangementCustoms clearanceShipment visibilityCarrier mgmt / rate mgmt

Benefits:Shorter cycle timeLower freight costsVisibility of pipeline inventoryI

De-conCenter

Customs

Types of 3PL Providers

Warehouse/Distribution Based Many have former warehouse and/or distribution

experience. Examples:Caterpillar Logistics, IBM

Contract Warehousing

BulkWarehouse

DistributionCenter

IncomingProducts

CustomersRetailers

Outsourced In-house

Activities:Labor & supervisionReceiving, storage, shipping

Benefits:Lower capital investmentLower fixed/variable cost ratioFocus to the coreProfessional service

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: GE Information Services,

Logistics Financial Services

Manufacturers DistributorsSupplierCustomers /Retailers

Activities:Inventory finance (factoring,)Distribution finance (asset based lending, receivable finance)Payment solutions ,Leasing

Benefits:Reduced cost of capitalImproved cash flowReduced capital investment

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 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

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Risks of Out-sourcing Logistics

Loss of internal logistics management capabilities Biased choice of service providers Leakage of sensitive data and information Service degradation

Less reliable? Longer order cycle time? Emergency response?

Loss of control and representation Reduced contact with final customer

3PL for outbound logistics interact with your customers, you become less visible to your customers

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