Third Party Logistics

A presentation
by
Pratick Gayen

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 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.

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 Why Use 3PL?

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 3PL Vs. Transportation Services

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 Outsourcing - Industry Trends

Avoid Capital Expenditures

Cut Costs

Increase Flexibility (service/financial)

Focus on Core Business

Improve Service

Lack of Scale

Acquire Talent

Avoid Labor Problems

Source: A.T. Kearney

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 Profitability depends on
Speed, Reliability and Visibility

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 FY 2007 Fortune 500 Global 3PL
Gross Revenues by Industry

Other $2.90
Insdustrial $18.8 Automotive, $26.7

Food $6.40

Healthcare
$2.80 Retailing $16.20 Technology $22.20
Consumer
Products, $2.20

Automotive Technology Consumer Products

Retailing Health Care Food

Industrial Other

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 Customers of 3PL’s
Industry Global Domestic Costs
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
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 Customers of 3PL’s

Percent of Fortune 500 Companies Using 3PL’s

90%
80%
70%
60%
50%
2002
40%
2003
30%
20%
10%
0%
1-100 101-200 201-300 301-400 401-500

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 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, 12
Target, Xerox
General Mills 11
Delphi,
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 Services Provided By 3PL’s

Lead Logistics
4% Other
Transportation
5%
Integrated Mgt
9% 21%
International
9%

Private Fleets
7%
Value Added Intermodal
20% 4%
Warehousing
21%

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 Top Providers Est. Rev. ($M)

2003 Rank Provider 3PL 2007 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
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 10 Commandments of Outsourcing

1. Develop a strategy for outsourcing

2. Establish a rigorous provider selection process
3. Clearly define expectations
4. Develop a good contract
5. Establish sound policies and procedures
6. Identify and avoid potential points of friction
7. Communicate effectively with your partner
8. Measure performance and communicate results
9. Motivate and reward provider
10. Be a good Partner

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 3PL Providers

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 Thanks…
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