SCM 3443: Chapter 12

Dedicated contract carriage:

-3PL serves as customer's private fleet -Customer gains advantage of private fleet without capitalization, operating and management responsibilities

Outsourcing is very common today for activities such as:

-Accounting -Payroll and tax preparation -Advertising -Human resource benefits administration -3PLs

Intermodal Marketing Companies:

-Also known as Shippers' Agents and Consolidators -Facilitators of transportation only -Assume no legal liability -Function like a broker, but typically work for the shipper instead of the carrier -Usually handle shipper's payment to carrier - shippers must beware

Keys to successful relationships:

-Both organizations invest time and money in development and sustainment -Information sharing -Culture of trust -Openness to new ideas and methods -Collaboration on a regular basis -Team approach to problem solving -Leveraging of each partner's capabilities

Examples of Non-asset Based Companies:

-C.H. Robinson -XPO Logistics -Capgemini -KPMG

Surface Forwarders:

-Consolidates small shipments -Acts as both a shipper and a carrier -Assumes responsibility for the shipment

Tools for Implementation and Continuous Improvement:

-Customer value research -Flowcharting and statistical process control -Activity-based costing, benchmarking, process reengineering

Freight Brokers are NOT considered a carrier because...

-Do not have to maintain cargo insurance -Must post a $10,000 surety bond

Transactional or "arm's length" relationships-

-Drivers not present -Facilitating factors not present

Benefits of Air Freight Forwarders:

-Fast, door-to-door, single carrier service -Single bill of lading, tracing services

Pool Distribution Advantages:

-Faster transit time -less handling -lower rates -lower inventory costs

Select Partners Key Actions:

-Interact with the final candidates on a professionally intimate basis. -Achieve consensus on the final selection from all involved executives. -Establish consistent understanding of the final selection and what is expected from the chosen service provider

Pool Distribution-

-Large quantity of freight moved as one shipment in bulk to central distribution point -Freight unloaded, sorted by customer, delivered to local destination -Competes directly with LTL service offered by LTL motor carriers

Freight Brokers:

-Middlemen between shipper and motor carrier (Like a real estate agent or stock broker) -Normally represents the carrier (Seeks freight on their behalf) -Charges the shipper, takes broker fee (approximately 8-10%), gives rest to trucking company -Are NOT considered a carrier

Distribution Based-

-Most were originally public or contract warehousing services -Expanded services into inventory management and order fulfillment. -Some have integrated transport services into offerings -Wide range of market reach, from local to global

Shippers' Associations:

-Non-profit cooperative consolidators -Function much like surface forwarders and brokers, but only for members -Negotiates volume discounts with transportation providers -Arranges flexible services -Better service and lower costs to members

Forwarder based-

-Originated from intermediaries such as freight forwarders, brokers and agents -Arrange transport-related services for less-than-full vehicle shipments and for international shipments -considerable mergers and acquisitions

Air Freight Forwarders:

-Pickup/delivery, consolidator (Similar to surface freight forwarders, but use airlines for line haul service) -Focus on high value, time-sensitive goods (Documents, spare parts, medical components)

Types of 3PL providers:

-Resource ownership -Primary services

Structured, formal relationship-

-Share common drivers -Facilitating factors present

Drayage:

-Short haul trucking, pick up and delivery of containers -Typically contracted for by rail or ocean carriers

Examples of Asset Based Companies:

-UPS -J.B. Hunt -Exel -Ryder -FedEx

Evaluate Alternatives-

-Uses drivers and facilitators to identify the most appropriate type of 3PL relationship. (transnational/arm's length or structured/formal relationship) -Evaluation should include cross-functional perspectives

Types of Resource Ownership:

-asset based -non-asset based

Specialty Services:

-dedicated contract carriage -drayage -pool distribution -merge in transit -last mile delivery

Examples of Transport based services:

-move freight -manage transportation operations -operate fulfillment centers -develop logistics solutions

Intermediary Services:

-surface forwarding -air forwarding -freight brokerage -intermodal marketing -shippers association

Types of Primary Services:

-transportation based -resource based -forwarder based -financial based -information based

3PL Relationship Development Process Steps:

1. Perform Strategic Assessment 2. Decision to Form Relationship 3. Evaluate Alternatives 4. Select Partners 5. Structure Operating Model 6. Implementation & Continuous Improvement

Types of 3PLs (primary services):

1. Transport based 2. Distribution based 3. Forwarder based 4. Financial based 5. Information based

Strategic Needs of 3PL Users:

1. strategic info 2. tech. strength 3. capacity access 4. talent availability 5. omni channel 6. sustainability expertise 7. future requirements

Transport based-

Business origin in freight movement

Structure Operating Model-

Clarify each party's responsibilities, activities, processes, and priorities that will drive day-to-day operations.

Non-asset Based-

Contracts with other firms to provide services rather than owning required assets

Information based-

Digitized activities that were previously performed manually or required the use of licensed software

Implementation & Continuous Improvement-

Duration of the overall implementation process depends on the complexity of the new relationship, and continuous improvement is key to the future success of the relationship.

Decision to Form Relationship-

Evaluate whether transportation and logistics is core competency in terms of expertise, strategic fit, and ability to invest. The absence of any of these may suggest that the use of 3PL services is appropriate.

Asset Based-

Owns assets and labor force needed to run transport and logistics activities

Select Partners-

Partner should be selected only after close consideration of the credentials of the top candidate 3PLs is made.

Perform Strategic Assessment-

Perform a logistics/supply chain audit (Identifies current state, needs, and strategy alignment)

Financial based-

Specialize in monetary issues and financial flows in the supply chain

Outsourcing-

Substituting external specialists for in-house capabilities

Disadvantage of Air Freight Forwarders:

cost of service

The ultimate goal of the development and implementation of 3PL relationship process is to...

develop outstanding customer service capabilities and cost-efficient operations

Examples of Financial Based services:

freight rating, freight payment, freight bill auditing, accounting , electronic payment, carrier compliance reporting, freight claims

Non-asset Based Benefits:

more flexible and unbiased in decision making

Transportation management is the...

most frequently used 3PL service, with outsourced services overall remaining "tactical" (vs. "strategic") in nature.

Examples of Information based services:

online freight brokerage services, cargo planning, routing & scheduling; internet access (pay per use) to TMS, WMS, performance management tools

Asset Based Weaknesses:

potential for bias toward 3PL own internal resources in developing solutions for customers.

Asset Based Benefits:

readily available capacity, permanent employees, and direct control of the customers' freight.

Non-asset Based Weaknesses:

subject to competition for capacity from external providers (more intensive relationship management required)