2. 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.
3. 3PL Defined
Businesses that provide one or many of the following
logistics services:
Transportation Management
Public/Contract Warehousing
Distribution Management
Freight Consolidation
4. Types of 3PL Providers
Transportation Based
Services extend beyond transportation to offer a
comprehensive set of logistics offerings.
Examples: UPS Logistics
5. Transportation
Customs
Incoming Point of Sale/
Materials Consol. De-
Point of Use/
Or Center con
Customers
Products Cente
Outsourced
r
Activities:
Benefits:
Transport arrangement
Customs clearance Shorter cycle time
Shipment visibility Lower freight costs
Carrier mgmt / rate mgmt Visibility of pipeline inventory
I
6. Types of 3PL Providers
Warehouse/Distribution Based
Many have former warehouse and/or distribution
experience.
Examples:Caterpillar Logistics, IBM
7. Contract Warehousing
Incoming Bulk Distribution Customers
Products Warehouse Center Retailers
Outsourced In-house
Activities: Benefits:
Labor & supervision Lower capital investment
Receiving, storage, shipping Lower fixed/variable cost ratio
Focus to the core
Professional service
8. 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,
9. Logistics Financial Services
Customers /
Supplier Manufacturers Distributors Retailers
Activities: Benefits:
Inventory finance (factoring,) Reduced cost of capital
Distribution finance (asset based Improved cash flow
lending, receivable finance) Reduced capital investment
Payment solutions ,
Leasing
10. Why Use 3PL’s?
Save time
Don’t need to invest in:
Trucks
Training
Development
Help expand
New markets
International
No roads
11. 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
12. Management Focus
Furthering your company
Consider potential benefits and drawbacks
3pl’s can increase profitability
13. 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
13
14. 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.
15. 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?”
16. 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.
17. 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