Emil Webinar Langley
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1 www.emil.gatech.edu WELCOME Moderator Dr. John Vande Vate Executive Director, EMIL Georgia Institute of Technology Speaker C. John Langley Jr., Ph.D. Prof, of Supply Chain Management Georgia Institute of Technology
Transcript of Emil Webinar Langley
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WELCOME
Moderator
Dr. John Vande VateExecutive Director, EMIL
Georgia Institute of Technology
Speaker
C. John Langley Jr., Ph.D.Prof, of Supply Chain Management
Georgia Institute of Technology
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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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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
Webinar Agenda
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Introduction and 10-Year Perspective
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Tenth Annual Third Party Logistics Study Research Objectives
Strategic Assessment of Use of 3PLs
Understand Customer Perspectives
Investigate Leading Topics
3PL Industry Assessment for the Future
3PL Study Sponsors
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Industry Segments and Response Rates and Geographies Studied
7,775 Companies e-Mailed – Spring/Summer 2005Sent to Chief Logistics Executive1,091 Surveys Returned - 14% Response Rate
Food and BeverageFood and Beverage13.9%
Industrial Mfg.Industrial Mfg.6.1%
High-Tech/ElectronicsHigh-Tech/Electronics20.9%
Pharma and MedicalPharma and Medical6.7%
TelecommunicationsTelecommunications4.3%
Retail and ApparelRetail and Apparel4.1%
AutomotiveAutomotive7.0%7.0%
Consumer ProductsConsumer Products13.6%13.6%
ChemicalChemical8.4%8.4%
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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 responsibilitiesPurposes 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
2005Factor
1996 North
America North America
96%
80
80
Develop new information technologies 47 82 81 - 96
All Regions
Pressure to reduce cost 87% 91 - 100%
Pressure to enhance customer service 65 74 - 84
Globalization 58 63 - 90
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Logistics Outsourcing Practices
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Factors Responsible for Decision to Use 3PL Provider
Factor North America
Western Europe
Asia-Pacific
LatinAmerica
Cost 72% 74% 71% 65%Service 61 55 51 64Focus on corporate core competencies 29 40 43 38
Industry experience 27 16 20 26
Unique services available from 3PL provider
Asset reduction
Access to capable information technologies
Seasonality or surges in logistics activity
Corporate philosophies encourage outsourcing
Need for “change agent”
Labor problems
16 21 9 20
12 10 17 16
24 14 17 10
22 30 31
20
3 4 3 3
6
30
16 10 9
2 7 7
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Number of 3PL Providers Used
73
17
82
64
16 14
6
67
1215
6
82
10 8
00
10
20
30
40
50
60
70
80
One to Five Six to Ten Eleven toFifty
More thanFifty
North America Western EuropeAsia-Pacific Latin America
Perc
ent o
f Res
pond
ants
Most Users Involve From One-Five 3PLs
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Current (2005) vs. Projected (3-5 Years) Logistics Expenditures Directed to Outsourcing
63%70%
52%53%44%
69%
59%51%
63%
77%
0%
20%
40%
60%
80%
100%
NorthAmerica
WesternEurope
Asia-Pacific Latin America South Africa
20052008-2009
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Non-User Respondents: Rationale for Not Using 3PL Services
31%
23%
41%
36%
23%
35%
0% 10% 20% 30% 40% 50%
Service Levels Would Not be Realized
We Have More Expertise
Control Would Diminish
Costs Would Not Be Reduced
Logistics Too Important to Outsource
Logistics is a Core Competency
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3PL Service Offering and Capabilities
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Outsourced Logistics Services(North America Results – 2005)
PercentLogistics Service Outsourced
Outbound Transportation 78%Warehousing 63Customs Brokerage/Clearance 63Inbound Transportation 58Freight Forwarding 56Transportation Management 49Freight Bill Auditing/Payment 45Cross-Docking/Shipment Consolidation 39Order Fulfillment/Distribution 29Consulting Services 23Procurement of Logistics 23Carrier Selection 19Product Marking/Labeling/Packaging 18
PercentLogistics Service Outsourced
Product Returns and Repair 18%Inventory Management 17Product Assembly/Installation/Mfg 16Reverse Logistics & Waste Disposal 16Information Technology 15Rate Negotiation 14Fleet Management 13LLP/4PL Services 11Materials Management 10Inventory Ownership 8Order Entry/Processing/Customer Svc 7Customer and Supplier Compliance 5Factoring (Trade Financing) 2
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Technology Enablement
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3PL Technology Expectations and Perceptions
89
3440
80
0
20
40
60
80
100
IT Capabilities arenecessary for 3L
providers
Rely on 3PLproviders for IT
Leadership
Satisfied with 3PLprovider's ITcapabilities
Having the "rightsoftware" is major
competitiveadvantage
Perc
ent o
f Res
pond
ants
IT Capabilities are key to the 3PL provider selection processWhile important, 3PL IT expertise is relied upon in only 1 out of 3 relationships3PL customers’satisfaction levels with 3PL technology services has great room for improvement
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Management and Relationship Issues
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3PL Provider Roles
0%10%20%30%40%50%60%70%80%
Tactical ServiceProvider
Logistics Strategist Supply ChainIntegrator
North America Western Europe Asia-Pacific Latin America
3PL’s Mostly thought of as“Tactical Service Providers”
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Two-Tiered Relationship StructureRelationship Attributes
Relationship Structure
Traditional Outsourcing Terms
ServiceAttributes
• Partnership Joint Venture
• Value Based• Risk Sharing• Few Partners• Long Term (5+ years)• Common Core Values• Alignment & Trust• “Coopetition”
• Fourth-Party Logistics Provider(4PL)
• Lead Logistics Provider (LLP)
• Supply Chain Manager (SCM)
• Broad supply chain expertise• Deep industry domain & consultative skills• Advanced technology capability• Business process outsourcing, beyond logistics• Project management & provider coordination• 3PL technology integration• Innovation & continual improvement
• Third-PartyLogistics Provider (3PL)
• Logistics Service Provider (LSP)
• Contractual• Fixed & Variable•Transaction
Oriented• Short Term
(1 to 5 years)
• Traditional logistics services• Modular product offerings• Focused cost reduction & service improvement• Operating excellence• Niche services
StrategicStrategic
TacticalTactical21
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Customer Value Framework
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Customer Evaluation of Outsourcing Success
0%
20%
40%
60%
80%
100%
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
Cost/BenefitNorth
AmericaWestern Europe
Asia-Pacific Latin America
Logistics cost reduction
Fixed logistics asset reduction
Order fill rate (%)
Average order-cycle length change (days)
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 reduction (days)
From 41.4 to 36.9
From 37.1 to 33.3
From 31.0 to 26.2
From 33.7 to 30.9
Service level improvement (percent “yes”)
62% 67% 64% 77%
From 9.3 to 7.0
From 6.3 to 4.3
From 6.3 to 4.1
From 16.0 to 8.0
11% 10% 11% 10%
8% 20% 33%
From 91.5 to 95.8
14%
From 91.6 to 93.9
From 86.6 to 92.7
From 77.5 to 83.9
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Service level commitments not realizedTime and effort spent on logistics not reduced Cost reductions have not been realized Cost “creep” and price increases once relationship has commencedUnsatisfactory transition during implementation stageInability to form meaningful and trusting relationshipsLack of on-going improvements and achievements in offeringsLack of strategic management and/or consultative/knowledge basedskillsLack of global capabilities
Areas for 3PL Provider Improvement
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Future Industry Trends
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Next Generation of Logistics Outsourcing Models
Location(s)Specific
InsourcingInsourcing
Basic Services(Logistics Service Providers)
Value-Added(Third Party Logistics)
Lead Logistics(4PL)
AdvancedServices
Global Supply Chain Integrators
Pan-Regional Integrators
Multiple Locations(intra or inter regional)
• Project Management• Single Point of
Contact
• Enhanced Capabilities• Broader Service Offerings
• Speed of Implementation• Knowledge Transfer• Shared Risk & Reward• Comprehensive Solution
• Resident Client Knowledge
• Focused Cost Reduction
Geographic CoverageKey Attributes
Infrastructure
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Future Industry Trends
Continued expansion, acquisition and consolidation of 3PL industryImproved customer-needs alignmentTwo-tiered relationship models (strategic and tactical)Continued expansion of service offerings across supply chain, and broad-based business process outsourcingIncreasing importance on repeatable and leveraged solutions
Increased efforts to update, enhance, and improve 3PL provider-user relationshipsExpansion of global markets and needed servicesIncreased adoption of shared service networks and “coopetition” strategies with traditional competitorsNeed for relationship reinvention, mechanisms for continual improvement, and solution innovation
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“Tenth Annual 2005 Third Party Logistics Study:Views from the Customers”
For Further Information:
www.3PLstudy.comwww.tli.gatech.edu
Thank You Very Much !!!
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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
