Transcript Slide 1

Parcel Industry Overview
Jerry Hempstead
Observations
Comments
Issues
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Transportation Strategy
SCMN 4780
KIA Motors Logistics Program
Mercedes Hernandez Garner
Observations
Comments
Issues
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Transportation Strategy
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Wiring Harness Decision
Assumptions
Calculations
Recommendation
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Transportation Strategy
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Third Party Logistics (3PL)
3PL
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Transportation Strategy
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3PL Industry Objective
Logistics
Service
Provider
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Third
Party
Logistics
Firm
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Shipper
Transportation Strategy
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Third Party Logistics Defined
THIRD PARTY LOGISTICS is an industry to which a shipper
(owner of transported goods) outsources various elements of
the supply chain to perform some / all logistics management
functions including inbound freight, customs, warehousing,
order fulfillment, distribution and outbound freight.
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Initiated in 1980s when companies began looking for opportunities
to improver logistics performance.
FedEx drew attention to 3PL service by offering JIT delivery
FedEx success in 3PL marketplace opened it up to competition
Initially primarily domestic coverage, 3PL industry is now global in
character with a revenues approaching $150 billion in NA
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Transportation Strategy
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3PL Industry Characteristics
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3PL Outsourcing Opportunity
For the shipper …
1. To acquire skills / resources not available internally
2. To achieve competitive advantage through outside
expertise
3. To allow company to focus on its core competencies
4. To improve operational productivity and customer
service
5. To improve business process efficiency
6. To avoid making capital expenditures
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Types of 3PLs
There are three types of third party logistics providers:
1. Asset Based – 3PL companies that use their own trucks,
warehouses and personnel to operate the client’s business
2. Management Based – 3PL companies that provide the
technological and managerial functions to operate the logistics
functions of their clients, but do so using the assets of other
companies and do not necessarily own any assets
3. Integrated Providers – 3PL companies that can either be asset
based or management based that supplement their services with
whatever services are needed by their clients
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Transportation Strategy
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3PL Application to Industry
1. Computers
2. Retail
3. Chemicals
4. Medical
5. Automotive
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Top 10 Services Outsourced to 3PL
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Freight payment & auditing
Warehouse operations
Carrier selection & rate negotiation
Logistics information systems
Shipment planning
Fleet management
Packaging
Customer relations
Customer order processing & fulfillment
Total supply chain (logistics) management
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Transportation Strategy
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Top 10 Global 3PL Companies
# 3PL Company
HQ Location
1 UPS Solutions
Atlanta, GA
$
8.90
35,000
100
2,000
4,600
2 C. H. Robinson
Eden Prairie, MN
$
8.60
8,000
100
n/a
n/a
3 Expeditors International
Seattle, WA
$
5.60
12,600
110
n/a
n/a
4 DHL Logistics
Bonn, Germany
$
4.80
185,000
2,500
45
10,500
5 Uti Worldwide
Long Beach, CA
$
4.50
20,500
260
1,250
1,825
6 Kuehne & Nagel
Schindellegi, Switzerland
$
3.90
53,000
500
n/a
n/a
7 Catapillar Logistics
Morton, IL
$
3.50
12,000
130
n/a
n/a
8 DB Schenker
Essen, Germany
$
3.20
62,000
500
n/a
n/a
9 Penske Logistics
Reading, PA
$
3.00
9,600
150
2,300
4,100
$
3.00
14,800
240
n/a
10 Panalpina World Transport Basel, Switzerland
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Revenue
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Employees
Warehouses
Tractors
Trailers
n/a
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3PL Provider Differentiation
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Focus on shipper business performance and value
Employ performance measures
that track shippers specific
business
objectives
Emphasize flexibility and
responsiveness to changing
supply chain conditions
Open flow / exchange of information (transparency)
Target strategic (long-term) solutions
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Transportation Strategy
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3PL Industry – Gap Issues
Service Issues
Lack of continuous improvements
Service levels not realized
IT capabilities insufficient
Cost reductions not realized
Lack of project management skills
Unsatisfactory transition during implementation
Lack of global capabilities
Benefits not achieved in a timely manner
Promising services they do not have
Lack of business process integration
Lack of industry-specific knowledge
Inability to form meaningful / trustful relationships
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Shipper
46%
46%
43%
36%
35%
31%
30%
25%
25%
26%
20%
12%
3PL
19%
31%
31%
34%
17%
25%
21%
18%
n/a
26%
11%
13%
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Shipper Benefits Attributed to 3PLs
Measureable Benefits
Logistics Cost Reduction
Inventory Turn Improvement
Logistics Fixed-Asset Reduction
Order Fill Improvement Rate
Order Accuracy Improvement
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2011 Survey
13%
9%
25%
79%
87%
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3PL Industry Status
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Shippers continue to increase use of 3PL outsourced services
Demand for transactional / operational logistics services greater
than demand for strategic management value-added services
3PL industry revenue will continue to grow at a 10%+ rate per
year, almost 5 times the growth rate of US GDP
International logistics management is largest growth sector
Joint gainsharing contracts have not taken hold
Typically, 3PLs rank its relationship with shippers higher than the
reverse but the gap is closing
A significant logistics talent gap exists for both 3PLs and shippers
4PLs (integrate resources / capabilities / technology) in demand
Strategically, nearshoring is growing opportunity for 3PL services
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Transportation Strategy
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