THIRD PARTY LOGISTIC

PRESENTED BY

Third-Party Logistics (3PL): Definitions

3PLs are external suppliers that perform all or part of a companys logistics functions, including:
o o o o

Transportation Warehousing Distribution Financial services

Terms contract logistics and outsourcing are sometimes used in place of 3PL.
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Third Party Logistics

Outsourced Operation Shipper Shipper Shipper In-house Operation

Transportation

3PL

Warehousing IT support SC integration

Shipper
In-house Logistics Department IT support Transportation Others Others

Warehousing

Third-Party Logistics (3PL): Types of 3PL Providers

Transportation-Based Warehouse/Distributio n-Based Forwarder-Based Financial-Based Information-Based

Chapter 11

Management of Business Logistics, 7th Ed.

Third-Party Logistics (3PL): Types of 3PL Providers

Transportation-Based
o

Services extend beyond transportation to offer a comprehensive set of logistics offerings.

Leveraged 3PLs use assets of other firms. o Nonleveraged 3PLs use assets belonging solely to the parent firm.
o
Chapter 11 Management of Business Logistics, 7th Ed.

Transportation-Based
EXAMPLES
UPS DHL FedEx

Third-Party Logistics (3PL): Types of 3PL Providers

Warehouse/Distributio n-Based
Many, but not all, have former warehouse and/or distribution experience. o Transition to integrated logistics has been less complex than for the transportation based providers.
o

Chapter 11

Management of Business Logistics, 7th Ed.

Warehouse/Distribution-Based
EXAMLPES
DSC Logistics USCO Caterpillar Logistics

Third-Party Logistics (3PL): Types of 3PL Providers

Forwarder-Based
Essentially very independent middlemen extending forwarder roles. o Non-asset owners that capably provide a wide range of logistics services.
o

Chapter 11

Management of Business Logistics, 7th Ed.

Forwarder-Based
EXAMPLE
AEI, Kuehne & Nagle, Fritz, Circle, C. H. Robinson, and the Hub Group are examples of forwarder-based 3PLs.

Third-Party Logistics (3PL): Types of 3PL Providers

Financial-Based
o

Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory.

Chapter 11

Management of Business Logistics, 7th Ed.

Financial-Based
EXAMPLE
Cass Information Systems, CTC, GE Information Services, and FleetBoston are examples of financialbased 3PLs.

Third-Party Logistics (3PL): Types of 3PL Providers

Information-Based
o

Significant growth and development in this alternative category of Internet-based, business-to-business, electronic markets for transportation and logistics services.

Chapter 11

Management of Business Logistics, 7th Ed.

Information-Based
EXAMPLE
Transplace and Nistevo are examples of information-based 3PLs.

Third-Party Logistics Research Study: Industry Details

Outsourced logistics services include:
o o o o o o

Warehousing (73.7%) Outbound transportation (68.4%) Freight bill auditing/payment (61.4%) Inbound transportation (56.1%) Freight consolidation/distribution (40.4%) Cross docking (38.6%)

Chapter 11

Management of Business Logistics, 7th Ed.

Current use of 3PL by industry

Industry
Computer Consumer Retail Chemical Medical Auto
Source "What's ahead for 3PLs Modern ITS, UC Irvine Materials Handling, April, 2000

Percentage of 3PL use in different industries

3PL INDUSTORY EVALUTION

Third Generation ( 2000 and beyond) Online freight marketplaces Web-based 3PLs Increasing supply chain integration Non asset-based companies Asset-based companies increased service offerings Transportation / warehousing Freight forwarders / brokers Shippers agents

Second Generation (1980s - 1990s)

First Generation (1970s - 1980s)

Broader more integrated services

Functions of 3PL and multiactors logistical co-operation

CLASSIFICATION of 3PL providers

customer developer Service developer customer adapter Standard 3PL provider

Purpose or reasons of 3PL:

Cost savings Focus on Core Business Improve quality Access to talent Capacity management Reduce time to market Risk management Scalability Creating leisure time

Benefits and drawbacks of 3PL

Concentration on the basic activity (core competence) Use of the best methods and experience Increase of competitiveness Cost-cutting and application of high technologies

Drawback
Demand risk Inventory risk Financial risk

Factors
Globalization of supply and distribution chains and globalization of trade Management of logistics chains Consumer pressure level of effectiveness Use as a business model of the organization