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
43
49
40
56
44
29
53
49
61
41
59
45
43
33
63
49
56
67
42
59
51
44
29
21
24
21
37
25
33
25
20
47
23
33
23
16
47
38
38
34
30
26
21
60
53
51
51
72
66
62
62

Third Party Logistics
Major Users of Third Party Logistics
Buyers of 3PL Services
General Motors
Wal-Mart Stores
Ford Motor, Hewlett-Packard
Procter & Gamble
General Electric
Georgia-Pacific, IBM
Du Pont, Home Depot
Altria Group, PepsiCo, Sears Roebuck
Coca-Cola, Sara Lee, Target, Xerox
General Mills
Delphi, Safeway
Colgate-Palmolive, Deere, Kroger, Lucent Tech
Dow, Exxon, Honeywell, IP, Kmart, Weyerhaeuser
# of 3PLs Used
37
33
27
20
13
12
11
10
9
8
17
16
14

Third Party Logistics
Impact of 3PL Use on Firms
Category Negative No Impact Positive
Employee Morale
Logistics Costs
Customer Satisfaction
22
10
6
Systems Development
Logistic Service Levels
10
1
Supply Chain Integration 2
45
14
29
47
14
35
33
77
65
43
85
63

Third Party Logistics
3PL Cost Benefits to Firms
3PL Service
Warehouse Management
Rate Negotiation
Shipment Consolidation
Freight Bill Payment
Direct Transportation Service
Fleet Management/Operations
Carrier Selection
Freight Forwarding
Percent of Respondents
Reporting Benefits
30
16
14
30
14
8
6

Third Party Logistics
3PL Service Benefits to Firms
3PL Service
Warehouse Management
Order Fulfillment
Freight Bill Payment
Direct Transportation Service
Fleet Management/Operations
Tracking/Tracing
Percent of Respondents
Reporting Benefits
22
11
9
9
9
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
1= Most important; 5 = Least Important
Importance Rank
2.08
2.29
2.36
2.43
2.54
2.54
4.07
3
4
1
2
5
5
7
.

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
1 = Most important; 5 = Least Important
Importance Rank
1.62
3.44
3.59
3.67
3.74
4.04
4
5
6
1
2
3

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
1 = Major Problem; 5 = Not a Problem
Importance Rank
3.33
3.42
3.82
3.95
4.10
4.13
4
5
6
1
2
3

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

Third Party Logistics
Importance
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
Score Rank
1.301
1.405
1
2
1.551
1.611
1.807
1.878
5
6
3
4
1.892
1.899
2.037
2.054
2.108
2.118
2.162
2.267
2.389
2.338
2.635
3.476
15
16
17
18
.
11
12
13
14
9
10
7
8