Supply Chain Management Basics: 3PLs - One Size Does Not Fit All
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This document discusses third-party logistics providers (3PLs) and factors to consider when selecting one. It notes that 3PLs now offer a wider range of services beyond traditional transportation and warehousing, including global, IT, and value-added services. When evaluating 3PLs, the document recommends considering their technology capabilities, company culture, infrastructure, ease of doing business, key performance metrics, and intangible services. Selecting the best-fit 3PL can help shippers reduce costs, improve customer satisfaction, access global expertise, and reduce risk.
Supply Chain Management Basics: 3PLs - One Size Does Not Fit All
- 1. SUPPLY CHAIN MANAGEMENT BASICS: 3PLS – ONE SIZE DOES NOT FIT ALL BY: ANGELA CARVER
- 2. What is a 3PL? • The lines of what a third party logistics operation are have been blurred as 3PLs now offer a wider variety and combination of services than ever before. • 3PLs were once limited to transportation and warehousing services, but now also encompass global services, as well as IT and value added services. Let’s take a closer look at some of the services offered…
- 3. Modern Logistics Functions • Professors from the University of Tennessee’s Haslam School of Business published a whitepaper “Selecting and Managing a Third Party Logistics Provider Best Practices” which detailed some of the top functions outsourced to third party logistics providers including but not limited to the following: • TRANSPORTATION • Transportation outsourced to asset-based carriers • Private fleet management • Consolidation • Transportation cost & service improvement • Transportation outsourced to non- • asset based brokers • Freight bill payment & auditing • Freight claims & cargo insurance Small package services & big box services • Reverse logistics, green logistics & sustainability services
- 4. Modern Logistics Functions • WAREHOUSING • Basic warehouse functions: receiving, storage, pick, pack, ship • Cross docking • Order fulfillment • Yard management • Shared, multi-client DCs • Labor recruitment & management • Returns processing, sustainability services • Light manufacturing, customization, postponement & kitting
- 5. Modern Logistics Functions • GLOBAL SERVICES • Customs & freight forwarding • Multi-shipper container consolidation • Global airfreight • Logistics operations globally • INFORMATION TECHNOLOGY • E-commerce: EDI, web portals & cloud-based systems • Control towers and visibility tools • Customer relationship management (CRM): real time visibility • Transportation management systems (TMS): load & route optimization • Warehouse management systems (WMS) • Connectivity with a wide range of applications inside the firm
- 6. Modern Logistics Functions • SPECIAL SERVICES/VALUE ADD SERVICES • Talent acquisition and management for all levels • Omni-channel fulfillment: D2S, D2C & final mile services • Support for new business development • Customer acquisition & management • Supply chain consulting, modeling & analysis • Basic inventory management, vendor-managed inventory & physical inventory/cycle counting • Service parts logistics • Risk free innovation: advanced robotics, big data analytics, etc.
- 7. Top Outsourced 3PL Services Domestic & Int'l Transportation Outsourcing NotOutsourcing Customs Brokerage Outsourcing NotOutsourcing Freight Forwarding Outsourcing Not Outsourcing
- 8. Benefits of Finding a Best-Fit 3PL • Manufacturers and retailers outsource primary business functions to third party logistics businesses in order to focus more time on core competencies. Most times warehousing, transportation and associated services are not core competencies. • Outsourcing these services to a 3PLs with expertise in your industry can provide significant benefits and help you meet your overall goals. • In the University of Tennessee study, companies identified the top 6 benefits realized when outsourcing to a best-fit 3PL provider.
- 9. Benefits of Finding a Best-Fit 3PL 1. Reduce current costs – in 2015 shippers reported a 9% average cost reduction when using a 3PL 2. Reduce future costs – this is done through continuous improvement efforts 3. Improve customer satisfaction with accurate order fulfillment and on-time delivery 4. Provide global expertise – done through documentation, customs, global airfreight and more. 5. Reduce risk – helps you to avoid people issues, workman’s comp, union issues, and more. 6. Enable startup – provides support without capital investment for initial setup
- 10. 3PLs of All Sizes • When evaluating 3PL partners it is important to understand variations in the industry. Due to recent acquisitions, many small to mid-size 3PLs have become parts of mega-3PLs. • There are over 25 mega-3PLs that report revenue exceeding $1 billion annually. These businesses often support large manufacturers and retailers. • Smaller third party logistics operations, despite smaller capacity, have the ability to provide highly customized service due to a lower customer count.
- 11. Factors to Consider When Selecting a 3PL • As logistics needs increase in complexity, selecting a 3PL partner is more difficult than ever before and requires more detailed consideration. Cost is no longer the sole factor to evaluate. • Developing and executing a detailed RFP process can be useful. Some of the top factors industry experts recommend you include in your RFP consist of: 1. Technology capabilities – Warehouse management software, automated data collection devices and professional services such as EDI play a significant role in the success of supply chain collaboration. Consider what technology is available and how this facilitates access to business-critical information.
- 12. Factors to Consider When Selecting a 3PL 2. Company culture – Finding a 3PL that meets your needs both operationally and culturally, especially when operating in a global environment, is critical. Ask yourself is your 3PL partner has similar values, ethics, sense of responsibility and a clear understanding of what your partnership will entail? 3. Infrastructure – It is critical that both the shipper and the 3PL have similar resources and capabilities to meet the demands of customers as they change and evolve. An example of this would be 3PL presence in geographical areas where your customers reside so they can easily be serviced. 4. Ease of doing business – A best fit 3PL partner will be flexible enough to meet your supply chain needs. Consider the reliability and responsiveness of your third party logistics partner and their ability to optimize the total value chain process.
- 13. Factors to Consider When Selecting a 3PL 5. KPI metrics – Your 3PL partner must be able to benchmark and measure success. You must establish agreed upon key performance indicators and review them frequently to see if your 3PL is performing effectively. This can any range of measurement such as on-time performance, order accuracy, inventory damage, etc. 6. Intangible items – Third party logistics operations provide a variety of value added services and/or customized services to help meet customer needs. Evaluate 3PL capabilities as it relates to any special services your business requires.
- 14. Conclusion • Not all 3PLs are the same size and not all have the samecapabilities. Therefore, one size will not fit all. • Selecting a best-fit third party logistics partner can help shippers to remain responsive to market changes and compete effectively with businesses of all sizes. • Your shipper-3PL relationship should expand your capabilities, not become a hindrance. Take your time to evaluate the areas that affect your business most.
- 15. Receive a no obligation operational assessment to see what you should be looking for in a 3PL partner. Contact an Expert