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Third Party Logistics: Views From The Customers

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Fifty. North America. Western Europe. Asia-Pacific. Latin America. Percent of Respondents ... Cost sharing and cost-plus structures are most common. 6. 4. 17 ... – PowerPoint PPT presentation

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Title: Third Party Logistics: Views From The Customers


1
Third Party Logistics Views From The
Customers
Ramon Veldhuijzen 31st of January 2006
2
Today's objective is to assess the 3PLs position
from a shipper point of view
Agenda
  • Today we are going to discuss Third Party
    Logistics from a customer point of view
  • The presentation contains the results of the 10th
    Annual Third Party Logistics study by Capgemini,
    GeorgiaTech, SAP and DHL
  • In the discussion session this afternoon we
    discuss our opinion
  • All back-ground material can be found on
    http//3plstudy.com/

3
Agenda
Agenda
  • Outsourced Logistics Market view
  • How is the outsourcing market developing?
  • Understand Customer Perspectives
  • How customers select and manage 3PLs
  • What are customer needs and how well do
    providers respond
  • How relationships are build
  • 3PL Industry Assessment for the Future
  • 3PLIndustry challenges
  • Future industry trends

4
Companies expect to increasingly outsource
Logistics Services
Market view
of Expenditures directed to outsourcing
Market trends
  • Although shippers continuously expect an increase
    of outsourced, the actual percentage has remain
    stable (2002 -2005).
  • Contract logistics market continues to grow 7.4
    annual growth.
  • Further consolidation in LSP and shipper side.
    LSPs have to re-invent their core services after
    going through a series of merger and acquisitions

Source IATA 2004
5
Market view
What Services are Most Commonly Outsourced?
Services outsourced
Comments
  • Warehousing and freight remain by far the most
    common services
  • Services who used to be advanced are now standard
  • Customers indicate the wish to outsource more
    advanced services, however the user percentage
    for these lies typically under the 10 boundary.
  • 3PLs are requested to fill the gap in IT and
    enable global expansion

6
Agenda
Agenda
  • Outsourced Logistics Market view
  • How is the outsourcing market developing?
  • Understand Customer Perspectives
  • Reasons for outsourcing
  • Outsourcing satisfaction and results
  • 3PL Industry Assessment for the Future
  • 3PLIndustry challenges
  • Future industry trends

7
Argument for Using or Not Using a 3PL Provider
are sometimes Similar
Customer perspective
Comments
Reasons for (not) outsourcing
  • Cost focus drives outsourcing
  • Most important reason not to outsource is
    logistics being a core competency
  • Key conclusion is that periodically
    (re)considering the use of a 3PL is providing
    valuable insight in improving logistics

8
88 of Customers see their outsourcing relation
as very or extremely successful
Customer perspective
Comments
Customers evaluation of outsourcing success
  • Almost 90 of the shippers considers it
    outsourcing relation as very or extremely
    successful

100
89
90
88
89
89
85
81
76
80
60
40
Percent of Respondents
20
0
2002
2003
2004
2005
North America
Western Europe
Figures indicate the percentage of 3PL users by
region who rate their relationship with their 3PL
providers as other "very successful" or
"extremely successful".
9
Customers state Quantifiable Measures of 3PL
Success
Customer perspective
Comments
Customers evaluation of outsourcing success
  • Customer satisfaction is based on quantifiable
    improvements
  • Note the table does not include improvements
    that can be made without outsourcing

10
Customers main concern is the lack of service
level and cost-creep
Customer perspective
11
Price is the Most Important 3PL Selection
Attribute
Customer perspective
Comments
Selection criteria
  • Criteria
  • Cost is key during selection
  • Select a 3PL is complex
  • Price (eAuctions, tender)
  • References

Most Important
Least Important
12
Most Customers use a Limited Number of 3PL
Providers
Customer perspective
Number of 3PL Providers used
Vendor strategies
  • Companies reduce the number of service providers
  • Trend towards regional Transport sourcing
  • Global transport providers do not exist
  • Lead logistics Provider or 4PL strategy
  • A LLP manages other 3PLs on behalf of the
    customer
  • Benefits is a reduction of control effort
  • Deal structures range from hourly fee,
    transaction based to full broker model
  • Contract term is key
  • Must be short enough to keep pressure long
    enough to cover migration cost and allow relation
    building

Most Users Involve From One-Five 3PLs
82
80
73
67
70
64
60
50
40
30
17
20
16
15
14
Percent of Respondents
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
13
Cost sharing and cost-plus structures are most
common
Customer perspective
70
60
50
42
40
33
33
32
30
28
28
28
28
30
25
21
20
19
20
17
17
Percent of Respondents
9
9
9
10
6
6
6
6
5
4
4
4
3
3
2
0
0
Joint Venture
Revenue
Risk/Reward
Cost Sharing
Cost-Plus
Shareholder
Sharing
Sharing
Value
North America
Western Europe
Asia-Pacific
Latin America
South Africa
14
Gain share structures seem to become less popular
Customer perspective
  • Gain share models have proven to be hard to
    implement
  • Savings are hard to measure.and even harder to
    distribute
  • Parties do not have sufficient trust to open the
    books
  • Cost focussed global sourcing programmes do not
    recognize the value
  • Customers are disappointed with more complex
    relationship models
  • Unclear definition and contractual models
  • Disappointing performance of the 3PLs

15
Expectation Setting Relative to Relationship
Management
Customer perspective
16
Outsourcing Strategy Success and Value Creation
Customer perspective
  • Example Key Success Factors
  • Well-understood goals and objectives of the
    relationship
  • Ability to reach consensus on matters of
    importance
  • Corporate compatibility and strategic alignment
  • Effective measurements and measurement strategies
  • Migration plan toward advanced services
  • Agreed-upon exit strategy and succession plan
  • Value Created is Also a Function of Several
    Other Factors
  • Benefits derived from service offerings
  • Price vs. perceived benefit
  • Standardized vs. customized service offerings
  • Breadth of service offerings
  • Integration (operational and technological
    integration)
  • Geographic coverage

17
Agenda
Agenda
  • Outsourced Logistics Market view
  • How is the outsourcing market developing?
  • Understand Customer Perspectives
  • How customers select and manage 3PLs
  • What are customer needs and how well do
    providers respond
  • How relationships are build
  • 3PL Industry Assessment for the Future
  • 3PLIndustry challenges
  • Future industry trends

18
Summary of 3PL Industry Successes Over Past 10
Years
Assessment
  • Value Satisfaction High satisfaction ratings
    impressive metrics
  • Sustained Growth Growth of 3PL industry and
    increases in 3PL spend as fraction of total
    logistics spend
  • Industry Awareness and Usage Increased
    familiarity with 3PL terminology and strategic
    and operational roles that 3PLs can play
  • Service and Capability Advancements 3PLs have
    enhanced service offerings and now are involved
    in developing exciting, technology-based advanced
    service offerings

19
3PL Industry Challenges
Assessment
  • Disappointment by Users with 3PL Providers
    Abilities to Develop Advanced Service Offerings
  • Globalization inventory/asset-based services
    contract manufacturing strategic
    management/consulting broad business process
    outsourcing technology innovation and leveraged
    solutions
  • Need for Relationship Reinvention, Mechanisms for
    Continual Improvement, and Solution Innovation
  • Need greater responsiveness to changing business
    and logistics environments
  • Increasing Importance on Repeatable and Leveraged
    Solutions
  • 3PLs find conflict between need for capable
    strategic management services and deep industry
    knowledge, and the availability of low-cost
    standard solutions
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