Third Party Logistics
Providers (3PL)
Kyle Sera
Amy Irvine
Scott Andrew
Carrie Schmidt
Ryan Lancaster
Overview
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What are 3PL’s
Why use them
Tips for implementation of 3PL’s
4PL’s
Types of 3PL Providers
Transportation Based
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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
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Many have former warehouse and/or distribution
experience.
Examples: DSC Logistics, USCO, Exel,
Caterpillar Logistics, IBM
Types of 3PL Providers
Forwarder Based
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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
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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
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Significant growth and development in this
category of Internet-based, business-tobusiness, electronic markets for transportation
and logistics services.
Examples: Transplace, Nistevo
Logistics?
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Logistics: Managing the flow of information
and goods inbound from suppliers and
outbound to customers.
Why be good at this?
Core competency?
Why Use 3PL’s?
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Save time
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Don’t need to invest in:
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Trucks
Training
Development
Help expand
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New markets
International
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No roads
Why Use Cont.
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Narrow your focus
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Allows you to focus on your strengths
Don’t get spread too thin
Reach more customers more effectively
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Can ensure delivery times
can help a company run leaner
Management Focus
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Furthering your company
Consider potential benefits and drawbacks
3pl’s can increase profitability
Can you be a 3PL to someone else?
Levels of Outsourcing
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Transactional Outsourcing: Based on transactions, with no
long term contracts and no bonding between the 3PL and the
outsourcing company.
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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.
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Strategic Outsourcing: Based on long-term relationships with
successful outcomes, 3PL companies become partners in supply
chain management and establish transactional transparency.
3PL Defined
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Can be ambiguous as there are many definitions
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Some say “all or a significant part”
Some say “at least one part”
Best definition is probably a combination:
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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?
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Inbound Logistics recognizes top 10
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Uses its readers to conduct vote
Over 300 companies nominated with 3,000+
votes
Top 3 this year:
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1) UPS Supply Chain Solutions
2) Schneider Logistics
3) C.H. Robinson
How is a 3PL Differentiated From a
Transportation Provider?
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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
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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.
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2) Do your homework.
Do a comprehensive study
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Clearly document advantages, challenges, costs and benefits.
Document expectations
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Set down expectations in clear terms and include current costs.
Tips Continued…
Create a robust selection process.
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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.
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Qualitative measures that focus on effectiveness and quantitative
measures that focus on efficient utilization.
Have an efficient costing system
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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
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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.
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Create mutual trust, respect and a sense of integrity.
4PL Providers
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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
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One stop transport and logistics supplier
Work with suppliers and customers
Questions?
Sources
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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%20Log
istics.aspx
Class lecture slides:
http://logistics.about.com/od/thirdparty/a/uc041805.htm