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Emil Webinar Langley
1. www.emil.gatech.edu
WELCOME
Moderator Speaker
Dr. John Vande Vate C. John Langley Jr., Ph.D.
Executive Director, EMIL Prof, of Supply Chain Management
Georgia Institute of Technology Georgia Institute of Technology
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2. www.emil.gatech.edu
For More Information
Webinars
− Latin American Logistics Excellence – May 18, 2006
• Register at www.emil.gatech.edu
− Managing Asian Logistics – July 2006
− A True Life Story from the RFID Frontline – September 2006
EMIL Program Information & Deadlines
− Information: www.emil.gatech.edu
− Application Deadline: August 2006
Manufacturing Business Technology (MBT)
− http://www.mbtmag.com
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“Tenth Annual Third Party Logistics Study:
Views from the Customers”
C. John Langley Jr., Ph.D.
Professor of Supply Chain Management
Georgia Institute of Technology
March 21, 2006
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Webinar Agenda
Introduction and 10-Year Perspective
Logistics Outsourcing Practices
3PL Service Offerings and Capabilities
Technology Enablement
Management and Relationship Issues
Customer Value Framework
Future Industry Trends
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Tenth Annual Third Party Logistics Study Research Objectives
3PL Study Sponsors
Strategic Assessment of Use of 3PLs
Understand Customer Perspectives
Investigate Leading Topics
3PL Industry Assessment for the Future
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Industry Segments and Response Rates and Geographies Studied
7.0% 8.4% 13.6%
Automotive
Automotive Chemical
Chemical Consumer Products
Consumer Products
13.9% 20.9% 6.1%
Food and Beverage
Food and Beverage High-Tech/Electronics
High-Tech/Electronics Industrial Mfg.
Industrial Mfg.
6.7% 4.1% 4.3%
Pharma and Medical
Pharma and Medical Retail and Apparel
Retail and Apparel Telecommunications
Telecommunications
7,775 Companies e-Mailed – Spring/Summer 2005
Sent to Chief Logistics Executive
1,091 Surveys Returned - 14% Response Rate
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Special 3PL Workshops and Focus Group Sessions
Key Sessions Held With Industry Executives
− Boston, Massachusetts – session at Capgemini’s Accelerated
Solutions Environment
− Western Europe – two focus groups held with key European logistics
executives
− Asia-Pacific – workshop held in Singapore for Asian executives having
logistics responsibilities
Purposes of ASE, Workshop, and Focus Group Sessions
− Individual perspectives relating to the 3PL industry
− Identify and discuss key industry themes, trends, and issues
− Use feedback from executives to help with interpretation of 2005 study
results
− Incorporate findings into study publication
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Factors Perceived Important by
Logistics Executives, 1996-2005
1996 2005
Factor North
America North America All Regions
Pressure to reduce cost 87% 96% 91 - 100%
Pressure to enhance
65 80 74 - 84
customer service
Globalization 58 80 63 - 90
Develop new information
47 82 81 - 96
technologies
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Factors Responsible for Decision to Use 3PL Provider
North Western Asia- Latin
Factor
America Europe Pacific America
Cost 72% 74% 71% 65%
Service 61 55 51 64
Focus on corporate core competencies 29 40 43 38
Industry experience 27 16 20 26
Unique services available from 3PL provider 24 14 17 10
Asset reduction 22 30 31 30
Access to capable information technologies 16 10 20 9
Seasonality or surges in logistics activity 16 21 9 20
Corporate philosophies encourage outsourcing 12 10 17 16
Need for “change agent” 3 4 3 3
Labor problems 2 7 6 7
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Number of 3PL Providers Used
82
80
73 Most Users Involve
70 67
64 From One-Five 3PLs
60
50
40
30
Percent of Respondants
20 17 16
14 15
12
10
8 8
10 6 6
2
0
0
One to Five Six to Ten Eleven to More than
Fifty Fifty
North America Western Europe
Asia-Pacific Latin America 12
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Current (2005) vs. Projected (3-5 Years) Logistics
Expenditures Directed to Outsourcing
100%
2005
77% 2008-2009
80% 69% 70%
63%
59% 63%
51% 53%
60% 52%
44%
40%
20%
0%
North Western Asia-Pacific Latin America South Africa
America Europe
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Non-User Respondents:
Rationale for Not Using 3PL Services
Logistics is a Core Competency 35%
Logistics Too Important to Outsource 23%
Costs Would Not Be Reduced 36%
Control Would Diminish 41%
We Have More Expertise 23%
Service Levels Would Not be Realized 31%
0% 10% 20% 30% 40% 50%
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3PL Technology Expectations and Perceptions
100 IT Capabilities are key
89 to the 3PL provider
80
80
selection process
While important, 3PL IT
60 expertise is relied upon
in only 1 out of 3
40
40 relationships
34
Percent of Respondants
3PL customers’
20 satisfaction levels with
3PL technology
services has great
0
IT Capabilities are Rely on 3PL Satisfied with 3PL Having the "right room for improvement
necessary for 3L providers for IT provider's IT software" is major
providers Leadership capabilities competitive
advantage
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3PL Provider Roles
3PL’s Mostly thought of as
80% “Tactical Service Providers”
70%
60%
50%
40%
30%
20%
10%
0%
Tactical Service Logistics Strategist Supply Chain
Provider Integrator
North America Western Europe Asia-Pacific Latin America
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Two-Tiered Relationship Structure
Relationship Relationship Traditional Service
Attributes Structure Outsourcing Terms Attributes
• Fourth-Party • Broad supply chain expertise
• Partnership Joint
Logistics Provider • Deep industry domain & consultative skills
Venture
(4PL) • Advanced technology capability
• Value Based
• Business process outsourcing, beyond logistics
• Risk Sharing
• Lead Logistics • Project management & provider coordination
• Few Partners
Provider (LLP) • 3PL technology integration
• Long Term (5+ years)
• Innovation & continual improvement
• Common Core Values
• Supply Chain
• Alignment & Trust
Manager (SCM)
• “Coopetition” Strategic
• Contractual • Third-Party • Traditional logistics services
• Fixed & Variable Logistics Provider • Modular product offerings
•Transaction (3PL) • Focused cost reduction & service improvement
Oriented • Operating excellence
• Short Term • Logistics Service • Niche services
Tactical
(1 to 5 years) Provider (LSP) 21
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Customer Evaluation of Outsourcing Success
100%
80%
60%
40%
20%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
North America Western Europe Asia-Pacific Latin America
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Quantifiable Measures of 3PL Success
North Western Latin
Cost/Benefit Asia-Pacific
America Europe America
Logistics cost reduction 11% 10% 11% 10%
Fixed logistics asset reduction 8% 20% 33% 14%
From From From From
Order fill rate (%)
91.6 to 93.9 86.6 to 92.7 91.5 to 95.8 77.5 to 83.9
Average order-cycle length From From From From
change (days) 9.3 to 7.0 6.3 to 4.3 6.3 to 4.1 16.0 to 8.0
Inventory turns* 7.1 to 8.2 10.0 to 9.3 28.3 to 29.7 14.5 to 14.3
Cash-to-cash cycle From From From From
reduction (days) 41.4 to 36.9 37.1 to 33.3 31.0 to 26.2 33.7 to 30.9
Service level improvement
62% 67% 64% 77%
(percent “yes”) 24
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Areas for 3PL Provider Improvement
Service level commitments not realized
Time and effort spent on logistics not reduced
Cost reductions have not been realized
Cost “creep” and price increases once relationship has commenced
Unsatisfactory transition during implementation stage
Inability to form meaningful and trusting relationships
Lack of on-going improvements and achievements in offerings
Lack of strategic management and/or consultative/knowledge based
skills
Lack of global capabilities
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Next Generation of Logistics Outsourcing Models
Key Attributes Geographic Coverage
• Speed of Implementation
• Knowledge Transfer Global Supply Chain
• Shared Risk & Reward Advanced Integrators
• Comprehensive Solution Services
• Project Management
• Single Point of Lead Logistics Pan-Regional Integrators
Contact (4PL)
• Enhanced Capabilities Value-Added Multiple Locations
• Broader Service Offerings (Third Party Logistics) (intra or inter regional)
• Focused Cost Basic Services Location(s)
Reduction Specific
(Logistics Service Providers)
• Resident Client Infrastructure
Knowledge Insourcing
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Future Industry Trends
Continued expansion, acquisition Increased efforts to update,
and consolidation of 3PL industry enhance, and improve 3PL
Improved customer-needs provider-user relationships
alignment Expansion of global markets
Two-tiered relationship models and needed services
(strategic and tactical) Increased adoption of shared
Continued expansion of service service networks and
offerings across supply chain, “coopetition” strategies with
and broad-based business traditional competitors
process outsourcing Need for relationship
Increasing importance on reinvention, mechanisms for
repeatable and leveraged continual improvement, and
solutions solution innovation
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Thank You Very Much !!!
“Tenth Annual 2005 Third Party Logistics Study:
Views from the Customers”
For Further Information:
www.3PLstudy.com
www.tli.gatech.edu
29
30. www.emil.gatech.edu
For More Information
Webinars
− Latin American Logistics Excellence – May 18, 2006
• Register at www.emil.gatech.edu
− Managing Asian Logistics – July 2006
− A True Life Story from the RFID Frontline – September 2006
EMIL Program Information & Deadlines
− Information: www.emil.gatech.edu
− Application Deadline: August 2006
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