Transcript 3.03 3PLs

Third Party Logistics
Types of Third Party Providers
Asset-Based
Services Offered Through Use of Supplier's Assets
Often Dedicated Services (Contract Carriage, Warehousing)
Management-Based
Non-Asset-Based
Act as Coordinators/Consultants
Strength is Information
Integrated
Asset-Based
Service Beyond Capacity of Assets
Administrative
Non-Asset-Based, Focus on Administrative Services
Freight Bill Auditing/Payment
Claims Management/Adjustment
Third Party Logistics
Asset-Based Third Party Providers
Own Their Own Equipment
Advantages
Provide Name Recognition
Financial Strength
Equipment Availability
Have In-House Expertise
Ability to Handle Emergencies
Disadvantages
Internal Politics
Lack of Management Commitment from Parent
Difficult to Ensure Customer of Neutrality
Third Party Logistics
Management-Based Third Party Providers
Do Not Invest in Equipment
Contract with Other Companies
Advantages
Flexibility in Dealing with Carriers
Frequently Have Excellent Information Systems
Neutral Provider Ensures Serving Customer's Best Interest
Disadvantages
Lack of Name Recognition
Unknown Financial Stability
Lack of Expertise
Difficult to Handle Emergencies
Third Party Logistics
Functions Outsourced to Third Party Providers
Category
Freight Bill Payment
Shipment Consolidation
Direct Transportation Service
Custom Brokerage
Warehouse Management
Freight Forwarding
Carrier Selection
Tracking/Tracing
Measure Carrier Performance
Rate Negotiation
Re-labeling /Re-packaging
Order Fulfillment
Product Returns
Reverse Logistics
IT System Operation
Percentage of Firms Citing Usage
2000
2001
2002
2003
43
53
63
72
43
49
49
66
49
61
56
62
40
41
67
62
56
59
42
60
44
45
59
53
29
43
51
51
33
44
51
47
29
37
47
38
21
25
23
38
24
33
33
34
21
25
23
30
26
20
16
21
Third Party Logistics
Major Users of Third Party Logistics
Buyers of 3PL Services
# of 3PLs Used
General Motors
37
Wal-Mart Stores
33
Ford Motor, Hewlett-Packard
27
Procter & Gamble
20
General Electric
17
Georgia-Pacific, IBM
16
Du Pont, Home Depot
14
Altria Group, PepsiCo, Sears Roebuck
13
Coca-Cola, Sara Lee, Target, Xerox
12
General Mills
11
Delphi, Safeway
10
Colgate-Palmolive, Deere, Kroger, Lucent Tech
9
Dow, Exxon, Honeywell, IP, Kmart, Weyerhaeuser
8
Third Party Logistics
Impact of 3PL Use on Firms
Category
Negative
Employee Morale
22
Logistics Costs
10
Customer Satisfaction
6
Systems Development
10
Logistic Service Levels
1
Supply Chain Integration
2
No Impact Positive
45
33
14
77
29
65
47
43
14
85
35
63
Third Party Logistics
3PL Cost Benefits to Firms
Percent of Respondents
3PL Service
Reporting Benefits
Warehouse Management
30
Rate Negotiation
16
Shipment Consolidation
14
Freight Bill Payment
30
Direct Transportation Service
14
Fleet Management/Operations
8
Carrier Selection
6
Freight Forwarding
Third Party Logistics
3PL Service Benefits to Firms
Percent of Respondents
3PL Service
Reporting Benefits
Warehouse Management
22
Order Fulfillment
11
Freight Bill Payment
9
Direct Transportation Service
9
Fleet Management/Operations
9
Tracking/Tracing
7
Third Party Logistics
Reasons for Using Third Party Providers
Category
Labor Cost Savings
Specialization
Reduce Asset Use
Inadequate Resources
Transportation Cost Savings
Expanding Workload
Lack of Flexibility
Importance Rank
2.08
1
2.29
2
2.36
3
2.43
4
2.54
5
2.54
5
4.07
7
1= Most important; 5 = Least Important
.
Third Party Logistics
Reasons for Not Using Third Party Providers
Category
Loss of Management Control
Company Policy Dictate
Waiting for Industry Trends
Lack of Specialized Vendors
Organizational Resistance
Human Resource Problems
Importance Rank
1.62
1
3.44
2
3.59
3
3.67
4
3.74
5
4.04
6
1 = Most important; 5 = Least Important
Third Party Logistics
Problems with Using Third Party Providers
Category
Service Level Consistency
Management Control
Customer/Vendor Relations
Company Policy Restraints
Company Employee Relations
Departmental Resistance
Importance Rank
3.33
1
3.42
2
3.82
3
3.95
4
4.10
5
4.13
6
1 = Major Problem; 5 = Not a Problem
Third Party Logistics
Suggestions for First Time 3PL Users
• Develop key performance indicators and targets and
incorporate them into the 3PL contract
• Carefully develop internal logistics costs before meeting
with potential providers
• Seek broad company inputs at the RFP Stage
• Solicit multiple RFPs and closely check references
• Be sure the cultures of the two organizations are similar
• Don’t give up complete control of your supply chain to
the provider
Third Party Logistics
Suggestions for First Time 3PL Users
•
Select only the services you really need
•
Make sure you understand the technology issues before
proceeding to the contract stage
•
Prepare to change you assumptions after the startup
•
Move slowly before signing the contract
•
Retain your own links with carriers
•
Manage your provider very closely
Carrier
Selection
Criteria
Third Party
Logistics
Selection Criteria
Transit Time Reliability/Consistency
Door to Door Transport Rates/Cost
Total Door to Door Transit Time
Willingness to Negotiate Rates
Financial Stability of Carrier
Equipment Availability
Frequency of Service
Pickup and Delivery Service
Freight Loss and Damage
Shipment Expediting
Quality of Operating Personnel
Shipment Tracing
Willingness to Negotiate Services
Scheduling Flexibility
Line Haul Service
Claims Processing
Quality of Carrier Salesmanship
Specialized Equipment
Importance
Score
Rank
1.301
1
1.405
2
1.551
3
1.611
4
1.807
5
1.878
6
1.892
7
1.899
8
2.037
9
2.054
10
2.108
11
2.118
12
2.162
13
2.267
14
2.389
15
2.338
16
2.635
17
3.476
18 .