# Presentation: 390582

## Third Party Logistics

- Libby Ogard
- Prime Focus LLC
- October 20, 2004

## 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.

- Source: Council of Logistics Management

## Why Outsource?

- 80% of the top 400 US companies operate on a global scale

## Complex Inland Distribution Patterns

**Notes:**
A representative Retail model
The green boxes might represent the grocery supply chain
The blue might be fashion supply chain
The Yellow might represent intl crossdock mixing
The Red are regional/local dc’s with up to 300 stores attached to them.

## Profitability depends on Speed, Reliability and Visibility

## Outsourcing - Industry Trends

**Notes:**
In this survey by A.T. Kearny, we can see the reasons a company would outsource. 

## Outsourcing - Industry Trends

***Contract Logistics Savings Potential***

**Notes:**
As the logistics outsourcing industry matures, real value is being created...
Source: Armstrong & Associates, Inc - 1999

## FY 2003 Fortune 500 Global 3PL Gross Revenues by Industry

## Customers of 3PL’s

| Industry | Global Costs | Domestic Costs |
| --- | --- | --- |
| Automotive | $98.2  | $37.4 |
| Technology | $156.4 | $77.4 |
| Retailing | $98.6 | $67.2 |
| Consumer Products | $13.6 | $13.3 |
| Food and Grocery | $32.2 | $27.8 |
| Healthcare | $38.4 | $34.0 |
| Industrial and Elements | $179.7 | $84 |
| Other | $63 | $25.3 |
| Total Costs | $678.3 | $366.3 |

- Costs stated in Billion's of Dollars

## Customers of 3PL’s

- Percent of Fortune 500 Companies Using 3PL’s

- Armstrong and Associates 2004

## Buyers of 3PL Services

| Customer | # of 3PL’s Used |
| --- | --- |
| General Motors | 37 |
| Wal-Mart Stores | 33 |
| Ford Motor, HP | 27 |
| Procter & Gamble | 20 |
| General Electric | 17 |
| Georgia Pacific, IBM | 16 |
| PepsiCo, Sears | 13 |
| Coca-Cola, Sara Lee, Target, Xerox | 12 |
| General Mills | 11 |
| Delphi, Safeway | 10 |

## Services Provided By 3PL’s

- Source: Armstrong and Assoc 2004

**Notes:**
Many 3PL’s grow from a single discipline, but the buyers want turn key, multi functional capabilities. It is no longer valuable to simply manage the truck linehaul. 3PL’s are supply chain managers who move and monitor goods from Asia to Alpheretta, GA, managing cost, service and information, every step of the way. 

## Top Providers	     Est. Rev. ($M)

| 2003 Rank | Provider | 3PL 2003 Revenue |
| --- | --- | --- |
| 1 | Excel | $8,300 |
| 2 | Kuehne & Nagel | $6,900 |
| 3 | Schenker | $6,400 |
| 4 | DHL | $5,700 |
| 5 | P&O Nedlloyd | $4,800 |
| 6 | TGP/TNT | $4,700 |
| 7 | Panalpina | $4,600 |
| 8 | UPS Supply Chain | $4,100 |
| 9 | Nippon Express | $4,000 |
| 10 | C.H. Robinson | $3,600 |
| 11 | Menlo Worldwide | $3,100 |
| 12 | NYK Logistics | $3,000 |

**Notes:**
Source Armstrong and Associates
This list of 10 ten providers is interesting in that Ryder may be the largest but their revenues are not from trucking alone. Excel is dominent in the warehouse and value added area, but they must also package the movement of goods from start to finish. While UPS may be the largest carrier in the shipping business, they are not the largest 3PL

## 10 Commandments of Outsourcing

- Develop a strategy for outsourcing
- Establish a rigorous provider selection process
- Clearly define expectations
- Develop a good contract
- Establish sound policies and procedures
- Identify and avoid potential points of friction
- Communicate effectively with your partner
- Measure performance and communicate results
- Motivate and reward provider
- Be a good Partner