Parcel Industry Overview

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Parcel Industry Overview Jerry Hempstead
Observations Comments Issues
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KIA Motors Logistics Program Mercedes Hernandez
Garner
Observations Comments Issues
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Wiring Harness Decision
Assumptions Calculations Recommendation
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Third Party Logistics (3PL)
3PL
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3PL Industry Objective
Logistics Service Provider
Shipper
Third Party Logistics Firm
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Third Party Logistics Defined

• THIRD PARTY LOGISTICS is an industry to which a
  shipper (owner of transported goods) outsources
  various elements of the supply chain to perform
  some / all logistics management functions
  including inbound freight, customs, warehousing,
  order fulfillment, distribution and outbound
  freight.
• Initiated in 1980s when companies began looking
  for opportunities to improver logistics
  performance.
• FedEx drew attention to 3PL service by offering
  JIT delivery
• FedEx success in 3PL marketplace opened it up to
  competition
• Initially primarily domestic coverage, 3PL
  industry is now global in character with a
  revenues approaching 150 billion in NA

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3PL Industry Characteristics
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3PL Outsourcing Opportunity

• For the shipper
• To acquire skills / resources not available
  internally
• To achieve competitive advantage through outside
  expertise
• To allow company to focus on its core
  competencies
• To improve operational productivity and customer
  service
• To improve business process efficiency
• To avoid making capital expenditures

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Types of 3PLs

• There are three types of third party logistics
  providers
• Asset Based 3PL companies that use their own
  trucks, warehouses and personnel to operate the
  clients business
• Management Based 3PL companies that provide the
  technological and managerial functions to operate
  the logistics functions of their clients, but do
  so using the assets of other companies and do not
  necessarily own any assets
• Integrated Providers 3PL companies that can
  either be asset based or management based that
  supplement their services with whatever services
  are needed by their clients

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3PL Application to Industry

1. Computers
2. Retail
3. Chemicals
4. Medical
5. Automotive

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Top 10 Services Outsourced to 3PL

1. Freight payment auditing
2. Warehouse operations
3. Carrier selection rate negotiation
4. Logistics information systems
5. Shipment planning
6. Fleet management
7. Packaging
8. Customer relations
9. Customer order processing fulfillment
10. Total supply chain (logistics) management

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Top 10 Global 3PL Companies
  3PL Company  HQ Location Revenue Employees Warehouses Tractors Trailers
1 UPS Solutions Atlanta, GA 8.90 35,000 100 2,000 4,600
2 C. H. Robinson Eden Prairie, MN 8.60 8,000 100 n/a n/a
3 Expeditors International Seattle, WA 5.60 12,600 110 n/a n/a
4 DHL Logistics Bonn, Germany 4.80 185,000 2,500 45 10,500
5 Uti Worldwide Long Beach, CA 4.50 20,500 260 1,250 1,825
6 Kuehne Nagel Schindellegi, Switzerland 3.90 53,000 500 n/a n/a
7 Catapillar Logistics Morton, IL 3.50 12,000 130 n/a n/a
8 DB Schenker Essen, Germany 3.20 62,000 500 n/a n/a
9 Penske Logistics Reading, PA 3.00 9,600 150 2,300 4,100
10 Panalpina World Transport Basel, Switzerland 3.00 14,800 240 n/a n/a
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3PL Provider Differentiation

• Focus on shipper business performance and value
• Employ performance measures
  that track shippers
  specific business objectives
• Emphasize flexibility and
  responsiveness to changing
  supply
  chain conditions
• Open flow / exchange of information
  (transparency)
• Target strategic (long-term) solutions

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3PL Industry Gap Issues
Shipper
3PL
Service Issues
Lack of continuous improvements 46 19
Service levels not realized 46 31
IT capabilities insufficient 43 31
Cost reductions not realized 36 34
Lack of project management skills 35 17
Unsatisfactory transition during implementation 31 25
Lack of global capabilities 30 21
Benefits not achieved in a timely manner 25 18
Promising services they do not have 25 n/a
Lack of business process integration 26 26
Lack of industry-specific knowledge 20 11
Inability to form meaningful / trustful relationships 12 13
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Shipper Benefits Attributed to 3PLs
Measureable Benefits 2011 Survey
Logistics Cost Reduction 13
Inventory Turn Improvement 9
Logistics Fixed-Asset Reduction 25
Order Fill Improvement Rate 79
Order Accuracy Improvement 87
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3PL Industry Status

• Shippers continue to increase use of 3PL
  outsourced services
• Demand for transactional / operational logistics
  services greater than demand for strategic
  management value-added services
• 3PL industry revenue will continue to grow at a
  10 rate per year, almost 5 times the growth
  rate of US GDP
• International logistics management is largest
  growth sector
• Joint gainsharing contracts have not taken hold
• Typically, 3PLs rank its relationship with
  shippers higher than the reverse but the gap is
  closing
• A significant logistics talent gap exists for
  both 3PLs and shippers
• 4PLs (integrate resources / capabilities /
  technology) in demand
• Strategically, nearshoring is growing opportunity
  for 3PL services

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