An Introduction to Third Party Logistics

Panama - September 20, 2012

“If you don’t like change,

you will probably enjoy irrelevance even less”

CHAOS - OPPORTUNITY

“Before the beginning of great brilliance,

there must be chaos.

Before a brilliant person begins something great,

they must look foolish to the crowd.”

Overview

What are 3pl’s

Why use them

Vested Collaboration

Tips for 3pl implementation

Adding 3pl value

Locative Logistics

“The line between disorder and order lies in logistics.”

- Sun Tzu

Types of 3PL Providers

Transportation Based

• Leveraged 3PLs use assets of other firms.

• Non-leveraged 3PLs use assets belonging solely to the parent firm.

• Examples: Ryder, Schneider Logistics, FedEx Logistics, UPS Logistics

Warehouse/Distribution Based

• Many have former warehouse and/or distribution experience.

• Examples: OHL , Genco, Exel, Caterpillar Logistics, Uti, and CEVA

Types of 3PL Providers

Forwarder Based

• Very independent middlemen with forwarder roles.

• Non-asset owners (NVO’s) that provide a wide range of logistics services.

• Examples: Kuehne & Nagle, Panalpina, DHL, C. H. Robinson, and APEX.

Financial Based

• Provide freight payment and auditing, cost accounting and control, and tools formonitoring, booking, tracking, tracing, and managing inventory.

• Examples: CTL, Data2Logistics, GE Information Services, FleetBoston.

Information Based

• Significant growth and development in this category of Internet-based, business-to-business, electronic markets for transportation and logistics services.

• Examples: Transplace, GT Nexus, nVision Global Technology.

Why Use 3PL’s?

Save time

• Limit your CAPEX and HR investment:

• Trucks

• Training

• Development

Help expand

• New markets, verticals

• International

Narrow your focus

• Allows you to focus on your core activities

• Don’t get spread too thin

Reach more customers more effectively

• Ensure measurable benefits in delivery times, inventory levels, returns

• Leaner, meaner company, embrace change

Levels of Outsourcing

Transactional Outsourcing:

Based on transactions, with no long term contracts and no bonding

between the 3PL and the outsourcing company.

Tactical Outsourcing:

Outsourcing on a long term basis with negotiated contacts and integrated IT systems to facilitate free information flow and create supply chain visibility.

Strategic Outsourcing:

Based on long-term relationships with successful outcomes, 3PL companies

become partners in supply chain management and establish transactional

transparency.

3PL Definition

Can be ambiguous as there are many definitions

• Some say “all or a significant part”

• Some say “at least one part”

Best definition is a combination:

• Businesses that provide one or many of the following logistics services:

• Transportation Management

• Public/Contract Warehousing

• Distribution Management

• Freight Consolidation

• Information and visibility

3PL Definition

A 3pl is 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 manufactures, and finished

products from manufacturers to distributors and

retailers.

Successful Implementation of a 3PL

Why you want to select the right provider the first time

• Only about 65% of companies believe their provider is doing a “good” job.

• 55% of logistics outsourcing contracts end in three to five years

• Some sources list as many as 14 key tips for success, but we are going to focus onthe five most important issues.

Tips for Successful Implementation

1) Have an outsourcing strategy

• Know what your outsourcing strategy is. It needs to be well thought out and measuredagainst in house solutions and capabilities.

• SWOT analysis. As a company you should understand the strengths, weaknesses,opportunities and threats of outsourcing logistics, rather than keeping them in house.

2) Do your homework

• Do a comprehensive study

• Clearly document advantages, challenges, costs and benefits.

• Document expectations

• Set down expectations in clear terms and include current costs.

• Create a robust selection process.

• Invite companies in to give a formal presentation without giving requirements. This can help document their strengths and weaknesses.

• Make a site visit to the 3PL, and talk with its existing customer.

Tips Continued…

3) Measure and review performance

• Have a efficient and accurate measurement system.

• Qualitative measures that focus on effectiveness and quantitative measures that focus on efficient utilization.

• Have an efficient costing system

• This will help you to understand the costs involved in outsourcing.

• “Are we making money doing this?”

4) Create an Implementation Strategy

• Create a project plan road map

• Be clear who does what, create a project management team with members from both organizations and review progress vs. planned milestones.

5) Nurture the Relationship

• Collaborate so the relationship develops outsourcing success

• Create mutual trust, respect and a sense of integrity.

“However beautiful the strategy,

you should occasionally look at the results.”

- Winston Churchill

Adding 3pl Value: Three Success Drivers

• Collaboration

• Innovation

• Locative Logistics

“Working jointly with others,

especially in a cross-functional, intellectual endeavor.”

Collaboration

• Equal parts people and technology

• Deepening and aligning relationships

• Suppliers, Customers, or Partners?

• Creating visibility and trust early

• Leveraging relationships for lower costs

“The introduction of something new; an idea, method,

device or technology.”

Innovation

Game Changers

• Differentiate one company from another

• Market makers vs. share takers

Involves risk – often personal risk

Scalability

• Innovation cannot be successful if it is not scalable

• “One-off” solutions add complexity to large operations

Locative logistics is a scalable supply chain platform based onapplication programming interfaces (API) and geographicinformation systems (GIS) applications, which supply specificinformation about the physical presence, strategic importance,and economic impact of products or cargo in-transit.

This is a situational assessment of a location, or locations in asupply chain.

Note: The technologies that will be become more prevalent will be GPS,iPhones/iPads, GIS, API, augmented reality, Google Maps based platforms andsocial media “apps” that layer data on a location.

Locative Logistics

“There is nothing so useless as doing efficiently

that which should not be done at all.”

– Peter Drucker

To be successful in this new “knowledge economy,” empathy

and collaboration need to focus on the same horizon toward the

mutual destination of innovation.

Collaborating creates value, and executive empathy makes

mutual innovation possible.

We are moving into the “conceptual age” of business,

where the right price is not necessarily the lowest price.

It is no longer enough to be a great numbers

person…metrics…scorecards…dashboards or technology

We now expect more of our leaders,

with empathy (being attuned) and collaboration skills

among those qualities most desired.

“Not everything that counts can be counted, and not everything

that can be counted, counts.”

- Albert Einstein

Traditional Supply Chain Partnerships

STRATEGIC SERVICES

Su

pp

ly C

hai

n P

artn

er(S

CP

)C

ust

om

er

Visionary

Su

pp

ly C

hai

n P

artn

er(S

CP

)C

ust

om

erS

up

ply

Ch

ain

Par

tner

(SC

P)

Cu

sto

mer

VisionaryLeading

Cu

sto

mer

Lea

d L

og

isti

cs

Pro

vid

er (

LL

P)

Leading

Cu

sto

mer

Lea

d L

og

isti

cs

Pro

vid

er (

LL

P)

Cu

sto

mer

Lea

d L

og

isti

cs

Pro

vid

er (

LL

P)

Traditional

Cu

sto

mer

3PL

Traditional

Cu

sto

mer

3PL

Cu

sto

mer

3PL

Supply chain transformation

Operational excellence Agility

Increase shareholder value

Supply Chain Partner

Customer needs:

Integration Services

SC Consulting

Services

PLANNING & OPTIMIZATIONSERVICES

Supply & Demand Planning

Strategic Sourcing &

Procurement

Material & Production

Planning

Information Optimization

NetworkOptimization

Inventory Optimization

PLANNING & OPTIMIZATIONSERVICES

Supply & Demand Planning

Strategic Sourcing &

Procurement

Material & Production

Planning

Information Optimization

NetworkOptimization

Inventory Optimization

MANAGEMENTSERVICES

Partner Management Financial Management

Transportation Management

Materials Management

Warehouse Management

Order Management

MANAGEMENTSERVICES

Partner Management Financial Management

Transportation Management

Materials Management

Warehouse Management

Order Management

CORE SERVICES

Freight Forwarding –Air & Ocean Transport

Common Carriers –Transport Services

Dedicated Contract Carriage

Public or Shared Warehousing

CORE SERVICES

Freight Forwarding –Air & Ocean Transport

Common Carriers –Transport Services

Dedicated Contract Carriage

Public or Shared Warehousing

25

Vested Collaboration Tenants

CiP &

Training

Cloud

Based

(Open)

Less Ego

(Leadership)

Empathy

(Alignment)

Locative

Logistics

Speed

(Perception)

People &Process

(Collaboration)

API, GIS,

& AR(Individual)

“I don’t want to sell anything, buy anything, or process anything

as a career. I don’t want to sell anything bought or processed, or

buy anything sold or processed, or process anything sold, bought,

or processed, or repair anything sold, bought, or processed. You

know, as a career, I don’t want to do that.”

- Lloyd Dobler (Say Anything – 1989)

Michael J. Stolarczyk

Ports America

525 Washington Blvd

16th Floor, Suite 1660

Jersey City, New Jersey 07310

W www.portsamerica.com

E michael.stolarczyk@portsamerica.com

T https://twitter.com/#!/mjstolarczyk

Questions?

Ports America Introduction

� Ports America is the largest independent port-terminal operator in North America, handling more than 12.7

million TEU, 4.3 million vehicles, 8.9 million tons of general cargo and 1.6 million cruise ship passengers.

� Owned by Highstar Capital, and is responsible for port development, investment, operating and stevedoring

activities for the last 89 years.

� Ports America currently operates over 80 terminals in over 42 port locations in the United States, employing

more than 12,000 people at its operations through its wholly owned subsidiaries, concessions, or joint

venture partners.

28