Third Party Logistics

Anwar Mohamed

31 October 2008

Source: Council of Logistics Management

Definitions

• Third Party Logistics (3PL): Outsourcing all or much of a companies logistics operations to a specialized company.

• Third Party Logistics Provider: A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated or “bundled” together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging and freight forwarding.

How to works…

Customer

3PL Provider

Your Enterprise

SIZE AND SCOPE

• Contributes well over 5% of the GDP National Statistics,2006National Statistics,2006

• 5th Largest Industry in the UK Prospects,2006Prospects,2006

• Employs over 1.7 million people Skills for Logistics , 2006Skills for Logistics , 2006

• Involves with over 65000 organisations Insidecareers,2006Insidecareers,2006

WHY OUTSOURCE?

• Cost & Time effectiveness• Freeing resources• Technical expertise • Asset Reduction• Focus on corporate core

competitiveness

% of 3PL Providers Used

Source: Focus 06Source: Focus 06

0

10

20

30

40

50

60

70

2001 2002 2003 2004

N. America

W.Europe

Asia

Globalization

• 80% of the top 200 UK companies operate on a global scale

SHANGHAI, CHINA

PHILIPPINES

U.K.

HONG KONG

KOREA

JORDAN

HONDURAS

DOM. REPUBLIC

LOS ANGELES, CAL.

SAIPAN

LEGEND MERCHANDISING & PRODUCTION SERVICES

PRODUCTION SERVICES

US - Hayward

SRI LANKADHAKA, BANGLADESH

NEW YORK, NY

F I J I

TAIWAN

MAURITIUS

SWAZILAND

ISRAEL

EGYPT

PORTUGAL

SPAIN

MINNEAPOLIS, MINN.

HAYWARD CAL.

GUADALAJARA, MEXICO

GUATEMALA

NICARAGUA

LAHORE, PAKISTAN

NEW DELHI, INDIA

FRANCE

CHITTAGONG, BANGLADESH

MALAYSIA

MADRAS, INDIA

BANGALORE, INDIA

BOMBAY, INDIA

GUANGZHOU, CHINA

DONGGUAN, CHINA

QINGDAO, CHINA

TIANJIN, CHINA

MEXICO CITY, MEXICO

THAILAND

SINGAPORE

POLAND

INDONESIA

DUBAI

KENYA

Madagascar

MILAN, ITALY

FLORENCE, ITALYTURKEY

SHENZHEN, CHINA

EL SALVADOR

BRAZIL

LESOTHO

DURBAN

VIETNAM

BAHRAIN

KARACHI, PAKISTAN

Costs stated in Billion's of Dollars

Top Ten 3PL’s Customers

Industry Global

Global

Costs

Domestic Costs

Automotive

Technology

Retailing

Consumer Products

Food and Grocery

Healthcare

Metal Industry

Other

$98.2

$156.4

$98.6

$13.6

$32.2

$38.4

$179.7

$63

$37.4

$77.4

$67.2

$13.3

$27.8

$34.0

$84

$25.3

Total Costs $678.3 $366.3

Clients of 3PL Providers

Source: Armstrong and Assoc 2004

Services Provided By 3PL’s

Transportation Mgt21%

Private Fleets7%

Intermodal4%

Warehousing21%

Value Added20%

International9%

Integrated9%

Other5%

Lead Logistics4%

Top 3PL Providers Est. Rev. (£M)

Rank (2003) Provider Revenue1 Excel £8,300

2 Kuehne & Nagel £6,900

3 Schenker £6,400

4 DHL £5,700

5 P&O Nedlloyd £4,800

For a Successful 3PL

• Develop an Outsource Strategy• Measure Performance• Create a Project Plan / Road

Map

Source

• 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

• CILT uk

• Logistics and Transport Focus Magazines