Third party logistics (3PL) providers offer various integrated logistics services for customers. The 3PL industry has evolved from basic transportation and warehousing services to providing value-added services and taking on broader supply chain responsibilities. A 2008 survey found that the top services used were transportation, warehousing, and freight forwarding. While outsourcing provides benefits like cost savings and expertise, concerns include loss of control and security issues. Integrated logistics and green supply chain initiatives were emerging trends impacting the industry.

1. 3PL (Third Party Logistics) –
State of the Industry – 2008-2011
Aniruddha Ray
Amitesh Tyagi
Pervinder Singh Chawla
Saurabh Chaudhuri

2. Third Party Logistics - Definition
 “a firm [that] provides multiple logistics services for use by customers. Preferably, these
services are integrated, or bundled together, by the provider. Among the services 3PLs
provide are transportation, warehousing, cross-docking, inventory management,
packaging, and freight forwarding.”
-- Council of Supply Chain Management Professionals
 “Third-party Logistics is simply the use of an outside company to perform all or part of the
firm’s materials management and product distribution function.”
-- Simchi-Levi (2000)
 “A relationship between a shipper and third party which, compared with the basic services,
has more customized offerings, encompasses a broad number of service functions and is
characterized by a long-term, more mutually beneficial relationship”
-- Murphy & Poist (1998)
In the "PL" terminology, it is important to differentiate the 3PL from the:
 1PL, which are the actual shipper or the consignee,
 2PL, which are actual carriers such as YRC Worldwide, UPS, FedEx,
 4PL, which are consulting firms such as CPCS, SCMO, BMT, Deloitte, and Accenture.

3. Categories of 3PL Providers
Hertz and Alfredsson (2003) describe four categories of 3PL providers:
 Standard 3PL provider - Perform activities such as, pick and pack, warehousing, and
distribution (business) – the most basic functions of logistics. For a majority of these
firms, the 3PL function is not their main activity.
 Service developer - offer their customers advanced value-added services such as:
tracking and tracing, cross-docking, specific packaging, or providing a unique security
system. A solid IT foundation and a focus on economies of scale and scope will enable
this type of 3PL provider to perform these types of tasks.
 The Customer Adapter - Comes in at the request of the customer and essentially takes
over complete control of the company's logistics activities. The 3PL provider improves
the logistics dramatically, but do not develop a new service.
 The Customer Developer - The highest level of a 3PL provider with respect to its
processes and activities. Integrates itself with the customer and takes over their entire
logistics function. These providers will have few customers, but will perform extensive
and detailed tasks for them.

4. Third Party Logistics

5. Industry Evolution
 Supply Chain Co-ordination
Fourth Generation
( 2010 and beyond)  Process Re-design
 Consultant Mode
 Online freight marketplaces
Third Generation
( 2000 and beyond)  Web-based 3PLs
 Increased supply chain integration
 Asset-based companies
Second Generation
(1980s - 1990s)  Increased Service Offerings
 Transportation / warehousing
First Generation  Freight forwarders / brokers
(1970s - 1980s)  Shipper’s agents
Broader more integrated services

6. Global 3PL Market (from 2010 and
2012 3PL Study)

7. Use of 3PL by industry – 2000 Data
 Industry  Percentage of 3PL use in different industries
Computer 82.2
Consumer 75.9
Retail 71.1
Chemical 61.4
Medical 56.2
Auto 53.8
Source "What's ahead for 3PLs“ Modern
Materials Handling, April, 2000

8. 3PL Survey 2008 - Analysis Agenda
 Current State of the Market:
 Summarize the current use of 3PL services
 Examine why customers do/don’t outsource — to 3PL providers
 Identify customer needs
 How well 3PL providers are responding to those needs
 How customers select and manage 3PL providers
 Special Topics - Look into key issues relating to 3PL use –
 Provision of Integrated service offerings
 Green supply chain
 Supply chain Security

9. The 3PL Survey 2008 – 13th Edition

10. 3PL – Services Used

11. Why 3PL - Benefits
 Save Time
 Don’t need to invest in:
 Trucks,
 Training,
 Development
 Help expand to
 New markets
 International
 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

12. Why not 3PL – Risks and Concerns
 High Co-ordination costs
 Loss of internal logistics management capabilities
 Biased choice of service providers
 Leakage of sensitive data and information - Security
 Service degradation
 Less reliable? Longer order cycle time?
 Emergency response?
 Loss of control and representation
 Collaboration with Competitors – Knowledge Sharing
 Reduced contact with final customer
 3PL for outbound logistics interact with your customers, you become less
visible to your customers

13. Service Offerings
 Basic Service Providers
 Warehouse management
 Order processing , Order fulfilment
 Transportation carrier selection
 Value-added Service Providers:
 Shipment/Order consolidation
 Import/export Customs
 Logistics information systems (EDI, reporting)
 Fleet management/operations (e.g. cross-docking)
 Product assembly/installation
 Logistics Integrators:
 Full responsibility for key supply chain operations
 replenishment/order-filling policies
 product returns
 customer spare parts inventory replenishment
 Rate negotiation

14. 2008 - Customer Experience with 3PL

15. Trend 1 - Integrated Logistics –
The Good and The Bad

16. Trend 1 - Integrated Logistics with IT

17. Integrated Logistics – State as of 2008

18. Trend 2 - Green Supply Chain
 Uncertainty about “Green” –
 What is it and How to attain it
 Will it result in cost savings or cost escalation
 Green Action Plan –
 Getting Educated (what, how etc)
 Measure the environmental impact of current SCM
 Identify Change Levers
 Embark on Business Case supported initiatives

19. Green SCM – Solutions Suggested
SUGGESTIONS
 Improve Transportation Efficiency
 Improve Equipment
 Change Packaging
 Shift Modes
 Optimize Networks
 Retrain Drivers
 Move towards Greener Buildings

20. Trend 3 - Security –
Collaboration and Importance

21. Security – Concerns and Way Ahead

22. Security - Suggestions

23. 3PL Study 2012 – Key Trends Now
 3PLs Value Creation Increase but so does InSourcing - 64% report increase
in 3PL Usage, 24% are returning to InSourcing.
 Consolidation of 3PL Providers – 58% users are consolidating 3PL partners
(based on value-add)
 Logistics Spending is Consistent – 12% of Revenue and 48% on
Outsourcing.
 Transportation Spend Dominates - 56% on transportation and 39% on
warehouse
 The Success Rating Perception Gap Remains – 88% users and 94% 3PL
providers are happy with performance. But 33% users feel there is scope of
more innovation.
 The IT Gap Remains - 54% of shippers are satisfied with 3PL IT capabilities.
93% indicate that ITcapabilities are a necessary element of 3PL expertise.
 New 3PL Selection Criteria - Fuel efficiency and carbon emissions are
becoming more important.

24. Thank You

25. 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
Value Added Services Focus to the core
Traffic/transportation Professional service

26. Supplier Hub / Regional Fulfillment
Center / Regional Distribution Center
Incoming
Materials Bonded Mfg site/
Or Warehouse Point of Use
Products
Outsourced
Activities: Benefits:
Same as contract warehouse
Lower capital investment
Customs clearance
Focus to the core
Freight consolidation
Delayed payment of duties and taxes
Shipment visibility
Pay (for material) on production
Inventory ownership
Visibility of pipeline inventory
Order fulfillment
Value Added Services

27. Shipment Consolidation and
Transportation
Customs
Incoming Point of Sale/
Materials Consol. De-con
Point of Use/
Or Center Center
Customers
Products
Outsourced
Activities: Benefits:
Transport arrangement Shorter cycle time
Customs clearance Lower freight costs
Freight consolidation Visibility of pipeline inventory
Shipment visibility Inventory consolidation
Carrier mgmt / rate mgmt
Merge in transit

28. Product Returns / Technical Services
Repair centers
Customers
Product
Return
Center OEM Warranty
Fulfillment
Outsourced
Activities: Benefits:
Testing / screening Centralization of inventory
Warranty program mgmt Lower capital investment
Inventory ownership Focus to the core
Warehousing and inv mgmt Reduced reverse logistics costs
Fulfillment Speedy response to customers
Depot repair mgmt

29. Critical Parts / Service Parts Logistics
Repair centers
Customers
Tier 1
Tier 2 Tier 2 Tier 2
Tier 3 OEM Warranty
Fulfillment
Outsourced
Activities: Benefits:
Failed parts replacement Centralization of inventory
Warranty program mgmt Lower transportation cost
Inventory ownership Improved visibility of inventory
Warehousing Lower capital investment
Depot repair mgmt Better after-sales service support
Visibility and Track&Trace

30. Logistics Financial Services
Customers /
Supplier Manufacturers Distributors Retailers
Activities: Benefits:
Inventory finance (factoring, Reduced cost of capital
LOC) Improved cash flow
Distribution finance (asset based Reduced capital investment
lending, receivable finance)
Payment solutions (COD)
Leasing

31. Total Logistics Management
Incoming Bulk Distribution Customers
Products Warehouse Center Retailers
Outsourced
Activities: Benefits:
Logistics planning Reduced total logistics costs
Network optimization Global visibility
3rd vendor mgmt Single logistics solution and contact
Information technology Focus to the core
Supply chain visibility Reduced investment in logistics