third party logistics (3pl)

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    Third Party Logistics (3PL)Third Party Logistics (3PL)

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    Chapter 11Chapter 11 Management of BusinessManagement of BusinessLogistics, 7Logistics, 7thth Ed.Ed. 22

    ThirdThird--Party Logistics:Party Logistics:

    Industry OverviewIndustry Overview Firms have directed considerable attentionFirms have directed considerable attention

    to developing supply chain relationships.to developing supply chain relationships.

    Many companies have been in the processMany companies have been in the processof extending their logistics organizationsof extending their logistics organizationsinto those of other supply chaininto those of other supply chain

    participants and facilitators.participants and facilitators. One way of accomplishing this extension isOne way of accomplishing this extension is

    through the use of a supplier of thirdthrough the use of a supplier of third--

    party or contract logistics services.party or contract logistics services.55

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    OverviewOverview

    ThirdThird--party Logistics is simply the use ofparty Logistics is simply the use ofan outside company to perform all or partan outside company to perform all or partof the firms materials management andof the firms materials management andproduct distribution function.product distribution function.

    ---- SimchiSimchi--LeviLevi

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    A relationship between a shipper andA relationship between a shipper andthird party which, compared with the basicthird party which, compared with the basicservices, has more customized offerings,services, has more customized offerings,

    encompasses a broad number of serviceencompasses a broad number of servicefunctions and is characterized by a longfunctions and is characterized by a long--term, more mutually beneficialterm, more mutually beneficial

    relationshiprelationship---- Murphy &Murphy & PoistPoist (1998)(1998)

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    Third Party LogisticsThird Party Logistics

    In-house LogisticsDepartment

    Shipper

    Transportation

    IT support

    Warehousing

    Others

    In-house Operation

    Outsourced

    Operation

    3PL

    Shipper

    Shipper

    Shipper

    Transportation

    Warehousing

    IT support

    SC

    integration

    Others

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    Characteristics of 3PLCharacteristics of 3PL

    Perform outsourced logistics activitiesPerform outsourced logistics activities

    Process management / Multiple activitiesProcess management / Multiple activities More customized servicesMore customized services

    Mutually beneficial and riskMutually beneficial and risk--sharing relationshipsharing relationship

    LongLong--term commitments (1~ 3 years)term commitments (1~ 3 years)

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    Why Use 3PLs?Why Use 3PLs?

    Save timeSave time

    Dont need to invest in:Dont need to invest in:

    TrucksTrucks

    TrainingTraining

    DevelopmentDevelopment

    Help expandHelp expand New marketsNew markets

    InternationalInternational

    No roadsNo roads

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    Why Use Cont.Why Use Cont.

    Narrow your focusNarrow your focus

    Allows you to focus on your strengthsAllows you to focus on your strengths

    Dont get spread too thinDont get spread too thin

    Reach more customers more effectivelyReach more customers more effectively

    Can ensure delivery timesCan ensure delivery times

    can help a company run leanercan help a company run leaner

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    ITS, UC IrvineITS, UC Irvine

    Why is it needed?Why is it needed?

    AdvantagesAdvantages

    oo Cost reductionCost reduction

    oo Focus on core competencyFocus on core competencyoo Improved efficiency, service and flexibilityImproved efficiency, service and flexibility

    oo IndustryIndustry--specific applicationspecific application

    buildbuild--toto--order systems and eorder systems and e--merchantsmerchants

    DisadvantagesDisadvantages

    oo Loss of controlLoss of control

    oo Impact on inImpact on in--house workforcehouse workforce

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    3PL Vs. Transportation Services3PL Vs. Transportation Services

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    Why Use 3PL?Why Use 3PL?

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    ITS, UC IrvineITS, UC Irvine

    Current StateCurrent State

    ---- Service OfferingsService Offerings

    Dedicated Contract Transportation /Dedicated Contract Transportation /

    Transportation ProcurementTransportation Procurement

    Inventory ManagementInventory Management Logistics Management and ConsultingLogistics Management and Consulting

    Freight Audit and Bill PaymentFreight Audit and Bill Payment

    Customs ServicesCustoms Services

    Shipment Tracking and TracingShipment Tracking and Tracing

    Reverse Logistics and ValueReverse Logistics and Value--added Servicesadded Services

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    3PL Providers3PL Providers