section b group 9 3pl
TRANSCRIPT
-
8/22/2019 Section B Group 9 3PL
1/12
Growing pains forlogistic
outsourcers
Submitted by:Group 9
-
8/22/2019 Section B Group 9 3PL
2/12
Third Party Logistic Providers 3 PLs
$100 billion industry
Determined to save money and to focus on corebusiness
Market of 3 PLs grow at a CAGR of 10 + %
3 PLs are hard pressed due to increasingcustomer demands
Shrinking profit margins and inadequate ROI
Increasing pressure from related transportbusiness
-
8/22/2019 Section B Group 9 3PL
3/12
Current Scenario of Market
-
8/22/2019 Section B Group 9 3PL
4/12
The world of 3 PLs
Help reduce
Capital spending
Working capital
Personnel cost
Offer customers 15 to 20% saving on warehousing andtransportation cost
Promised to reduce customer delivery cycle by 10 to 25 %
Help the companies to move their inventories twice as fast ascompared to in house logistics
Customer demands cross border integration from 3 PLs
Use IT to optimize flow of information
Potential savings are frequently larger for information relatedlogistics costs than for asset related logistics.
-
8/22/2019 Section B Group 9 3PL
5/12
-
8/22/2019 Section B Group 9 3PL
6/12
Tougher World for LogisticProviders
Average ROI (7-8%) is well below WACC
Reasons for low ROI are
Over payment for acquisitions
Delays in capturing integration benefits
Flawed contractual relationship
Transparent cost structure
Low renewal rates (~ 40%) Difficulty in attaining economies of scale
Contract by contract approach
-
8/22/2019 Section B Group 9 3PL
7/12
-
8/22/2019 Section B Group 9 3PL
8/12
A h B ild L di
-
8/22/2019 Section B Group 9 3PL
9/12
Approaches to Build Leading3PL
1. Offering more value Improve supply chain design skills focus on
industries with reducible assets and informationrelated costs
Ignore companies which regard logistics as a coresuccess factor Master the specifics of the industry supply chain
match supply and demand flows with cost andperformance
Develop strong IT systems Expand range of services example integrated
logistics and trade forwarding Enhanced regional and global scope
A h t B ild L di
-
8/22/2019 Section B Group 9 3PL
10/12
Approaches to Build Leading3PL contd.
2. Structural Scale Advantages Build scale advantages that will be harder for competitors
to duplicate example UPS Use same warehouse and transportation assets to serve
many customers Larger volumes enable to consolidate and renegotiate
freight purchases at better rates and spread back-officeand IT costs over large customer base
Increased density by using shared networks Link several participants in one network
Standardizing and integrating various IT systems Setting priorities Negotiations for sharing benefits and fixed network costs
A h t B ild L di
-
8/22/2019 Section B Group 9 3PL
11/12
Approaches to Build Leading3PL contd.
3. Pursuing consolidation- 3 PL market is fragmented
- M&A could help 3 PL improve their economics
- M&A offered limited economies of scale in immediateterm but offers integration benefits in long run
- Multi client user network can be used if the mergedcompanies had customers in the same sector
- 2 groups for industrial consolidation
- Group 1: developing strong regional position in number ofsectors e.g., Exel, DHL
- Group 2: dominate one sector in single region e.g., TDG,microlog
-
8/22/2019 Section B Group 9 3PL
12/12
Thank You