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8/3/2019 Third Party Logistics (3PL)
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Third Party Logistics (3PL)Third Party Logistics (3PL)
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Chapter 11Chapter 11 Management of BusinessManagement of BusinessLogistics, 7Logistics, 7thth Ed.Ed. 22
ThirdThird--Party Logistics:Party Logistics:
Industry OverviewIndustry Overview Firms have directed considerable attentionFirms have directed considerable attention
to developing supply chain relationships.to developing supply chain relationships.
Many companies have been in the processMany companies have been in the processof extending their logistics organizationsof extending their logistics organizationsinto those of other supply chaininto those of other supply chain
participants and facilitators.participants and facilitators. One way of accomplishing this extension isOne way of accomplishing this extension is
through the use of a supplier of thirdthrough the use of a supplier of third--
party or contract logistics services.party or contract logistics services.55
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OverviewOverview
ThirdThird--party Logistics is simply the use ofparty Logistics is simply the use ofan outside company to perform all or partan outside company to perform all or partof the firms materials management andof the firms materials management andproduct distribution function.product distribution function.
---- SimchiSimchi--LeviLevi
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A relationship between a shipper andA relationship between a shipper andthird party which, compared with the basicthird party which, compared with the basicservices, has more customized offerings,services, has more customized offerings,
encompasses a broad number of serviceencompasses a broad number of servicefunctions and is characterized by a longfunctions and is characterized by a long--term, more mutually beneficialterm, more mutually beneficial
relationshiprelationship---- Murphy &Murphy & PoistPoist (1998)(1998)
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Third Party LogisticsThird Party Logistics
In-house LogisticsDepartment
Shipper
Transportation
IT support
Warehousing
Others
In-house Operation
Outsourced
Operation
3PL
Shipper
Shipper
Shipper
Transportation
Warehousing
IT support
SC
integration
Others
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Characteristics of 3PLCharacteristics of 3PL
Perform outsourced logistics activitiesPerform outsourced logistics activities
Process management / Multiple activitiesProcess management / Multiple activities More customized servicesMore customized services
Mutually beneficial and riskMutually beneficial and risk--sharing relationshipsharing relationship
LongLong--term commitments (1~ 3 years)term commitments (1~ 3 years)
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Why Use 3PLs?Why Use 3PLs?
Save timeSave time
Dont need to invest in:Dont need to invest in:
TrucksTrucks
TrainingTraining
DevelopmentDevelopment
Help expandHelp expand New marketsNew markets
InternationalInternational
No roadsNo roads
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Why Use Cont.Why Use Cont.
Narrow your focusNarrow your focus
Allows you to focus on your strengthsAllows you to focus on your strengths
Dont get spread too thinDont get spread too thin
Reach more customers more effectivelyReach more customers more effectively
Can ensure delivery timesCan ensure delivery times
can help a company run leanercan help a company run leaner
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ITS, UC IrvineITS, UC Irvine
Why is it needed?Why is it needed?
AdvantagesAdvantages
oo Cost reductionCost reduction
oo Focus on core competencyFocus on core competencyoo Improved efficiency, service and flexibilityImproved efficiency, service and flexibility
oo IndustryIndustry--specific applicationspecific application
buildbuild--toto--order systems and eorder systems and e--merchantsmerchants
DisadvantagesDisadvantages
oo Loss of controlLoss of control
oo Impact on inImpact on in--house workforcehouse workforce
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3PL Vs. Transportation Services3PL Vs. Transportation Services
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Why Use 3PL?Why Use 3PL?
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ITS, UC IrvineITS, UC Irvine
Current StateCurrent State
---- Service OfferingsService Offerings
Dedicated Contract Transportation /Dedicated Contract Transportation /
Transportation ProcurementTransportation Procurement
Inventory ManagementInventory Management Logistics Management and ConsultingLogistics Management and Consulting
Freight Audit and Bill PaymentFreight Audit and Bill Payment
Customs ServicesCustoms Services
Shipment Tracking and TracingShipment Tracking and Tracing
Reverse Logistics and ValueReverse Logistics and Value--added Servicesadded Services
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3PL Providers3PL Providers