Third Party Logistics

Providers (3PL)
Kyle Sera
Amy Irvine
Scott Andrew
Carrie Schmidt
Ryan Lancaster

Overview
What

are 3PLs
Why use them
Tips for implementation of 3PLs
4PLs

Types of 3PL Providers

Transportation Based

Services extend beyond transportation to offer a

comprehensive set of logistics offerings.
Leveraged 3PLs use assets of other firms.
Non-leveraged 3PLs use assets belonging solely
to the parent firm.
Examples: Ryder, Schneider Logistics, FedEx
Logistics, UPS Logistics

Types of 3PL Providers

Warehouse/Distribution Based

Many have former warehouse and/or distribution

experience.
Examples: DSC Logistics, USCO, Exel,
Caterpillar Logistics, IBM

Types of 3PL Providers

Forwarder Based

Very independent middlemen with forwarder

roles.
Non-asset owners that provide a wide range of
logistics services.
Examples: AEI, Kuehne & Nagle, Fritz, Circle, C.
H. Robinson, Hub Group

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: Cass Information Systems, CTC, GE
Information Services, FleetBoston

Types of 3PL Providers

Information Based

Significant growth and development in this

category of Internet-based, business-tobusiness, electronic markets for transportation
and logistics services.
Examples: Transplace, Nistevo

Logistics?
Logistics:

Managing the flow of information

and goods inbound from suppliers and
outbound to customers.
Why be good at this?
Core competency?

Why Use 3PLs?

Save

Dont need to invest in:

Trucks
Training
Development

Help

time

expand

New markets
International

No roads

Why Use Cont.

Narrow

Allows you to focus on your strengths

Dont get spread too thin

Reach

your focus

more customers more effectively

Can ensure delivery times

can help a company run leaner

Management Focus
Furthering

your company
Consider potential benefits and drawbacks
3pls can increase profitability
Can you be a 3PL to someone else?

Levels of Outsourcing

Transactional Outsourcing: Based on transactions, with no

long term contracts and no bonding between the 3PL and the
outsourcing company.

Tactical Outsourcing: Outsourcing on a long term basis with

negotiated contacts and integrated IT systems to facilitate free
information flow and create supply chain visibility.

Strategic Outsourcing: Based on long-term relationships with

successful outcomes, 3PL companies become partners in supply
chain management and establish transactional transparency.

3PL Defined

Can be ambiguous as there are many definitions

Some say all or a significant part

Some say at least one part

Best definition is probably a combination:

Businesses that provide one or many of the following

logistics services:
Transportation Management
Public/Contract Warehousing
Distribution Management
Freight Consolidation

As a Manager
Which 3PL Provider Do I Choose?
Inbound

Logistics recognizes top 10

Uses its readers to conduct vote

Over 300 companies nominated with 3,000+
votes
Top 3 this year:

1) UPS Supply Chain Solutions

2) Schneider Logistics
3) C.H. Robinson

How is a 3PL Differentiated From a

Transportation Provider?
Transportation

provider gets product from

point A to point B
Could be considered a 3PL
Just one function of logistics
3PL provider assists in multiple functions

Successful Implementation of 3PL

Why you want to select the right provider the first time
Only about 65% of companies believe their provider is doing a
good job.
55% of logistics outsourcing contracts end in 3-5 years
The source had a list of 14 key tips for success, but we are going
to focus on the 5 most important issues.

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.

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?

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.

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
Assembles and manages the resources,
capabilities, and technology of its own
organization and other organizations to
design, build and run comprehensive supply
chain solutions

Transways Express 4PL

One

stop transport and logistics supplier

Work with suppliers and customers

Questions?

Sources

3PL definition:
http://accuracybook.com/glossary.htm
Top 10 3PL providers:
http://www.inboundlogistics.com/3pl/awards.shtml
Successful 3PL implementation:
http://logistics.about.com/od/thirdparty/a/uc041805a.htm
Sangam, VK. (2006). Implementing Third Party Logistics. Retrieved May
5th, 2006. From Massey University, About Business and Finance
website:
http://logistics.about.com/od/thirdparty/a/uc041805a.htm
Red Prairie:
http://www.redprairie.com/Industry%20Solutions/Third%20Party
%20Logistics.aspx
Class lecture slides:
http://logistics.about.com/od/thirdparty/a/uc041805.htm