426 W6: Case Discussion
Tie3D
Ch12PPT10e.pptxCHAPTER 12
Aligning Supply Chains
Supply Chain Management: A Logistics Perspective (10e)
Coyle, Langley, Novack, and Gibson
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May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Outline
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Types of supply chain relationships
Model for developing and implementing successful supply chain relationships
Imperative for collaborative relationships
The third-party logistics (3PL) industry
Alignment in Supply Chain Management
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Supply chain & Organizational strategies
Supply & Demand
Supply chain & Trading partners
Range of Relationship Types
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Source: Figure 12-1
Transactional
(Vendor)
Collaborative
(Partner)
Strategic
(Alliance)
Little or no integration or collaboration
More strategic and highly relational
Model for Developing and Implementing Successful Supply Chain Relationships
Model for Developing and Implementing Successful Supply Chain Relationships
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Source: Figure 12-2
Evaluate
Alternatives
Company
Needs
and Priorities
Potential
Partner
Capabilities
Select
Partners
Structure
Operating
Model
Implementa-tion
& Continuous
Improvement
Perform
Strategic
Assessment
Decision
to Form
Relation-ship
1
2
3
4
5
6
Model for Successful Supply Chain Relationships
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Involves the conduct of a logistics audit, which provides a perspective on the firm’s logistics and supply chain needs and a wide range of useful information.
Step 1: Perform Strategic Assessment
Decision involving external logistics service provider focuses on whether or not to have a relationship (core competency assessment)
Decision involving channel partners focuses on type of relationship that works best.
Step 2: Decision to Form Relationship
Thorough assessment of the company’s needs and priorities in comparison with the capabilities of each potential partner.
A broad representation and involvement of people throughout the company
Step 3: Evaluate Alternatives
Model for Successful Supply Chain Relationships Step 2: Decision to Form Relationship (continued)
Core competency assessment is key in relationship decision that involves an external provider of logistics services.
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Source: Figure 12-3
Expertise
Strategic Fit
Ability to Invest
Model for Successful Supply Chain Relationships Step 2: Decision to Form Relationship (continued)
“Drivers” and “facilitators” are identified in relationship decision that involves channel partners.
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Source: Figure 12-3
Drivers: Compelling reasons to partner
Asset/cost efficiency; customer service; marketing advantage; profit stability/growth
Facilitators: Supportive corporate environmental factors that enhance partnership growth & development
Corporate compatibility; management philosophy; mutuality of commitment; symmetry on key factors (e.g. size)
Neither drivers nor facilitators present: More transactional, or “arm’s length”
Common drivers with facilitating factors:
More structured, formal relationship
Model for Successful Supply Chain Relationships (continued)
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Select a logistics or supply chain partner only after very close consideration of the credentials of the most likely candidates.
Ensure that everyone involved has a consistent understanding of the decision made.
Step 4: Select Partner(s)
The activities, processes, and priorities that will be used to build and sustain the relationship. Examples of components are:
Planning
Communication
Risk/reward sharing
Contract style
Financial investment
Step 5: Structure Operating Model
Depending on the complexity of the new relationship, the overall implementation process may be relatively short, or it may be extended over a longer period of time.
Step 6: Implementation & Continuous Improvement
Model for Successful Supply Chain Relationships Step 6: Implementation & Continuous Improvement (continued)
Future success of relationship is a direct function of the ability of involved organizations to achieve both continuous & breakthrough improvement.
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Source: Figure 12-4
1. Customer Value Research
2. Process Mapping
3. Data Analytics
4. Cost Analysis
5. Benchmarking and Intelligence
6. Supply Chain Transformation
Supply Chain Value
Imperative for Collaborative Relationships
Imperative for Collaborative Relationships Elements of Successful Collaboration
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1
2
3
4
5
6
7
Strategic plan to provide direction to the collaboration
Well-understood goals and objectives
Trust and commitment
Organizational compatibility and communication
Equitable sharing of gains and losses
Benefits greater than going it alone
Dedication to continuous improvement
Imperative for Collaborative Relationships Barriers and Benefits
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Benefits
Barriers
Focus on core competencies of supply chain organizations
Increased sharing of information and knowledge
Greater responsiveness to customers’ needs
Creation of competitive advantage over competing supply chains
More productive and satisfying relationships
Resistance to change
Conflicting business objectives
Inconsistent goals and key performance indicators
Lack of trust
Unwillingness to share information
Lack of managerial support
Turf protection
Imperative for Collaborative Relationships Three Important Types of Collaboration
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Source: Figure 12-5
Vertical Collaboration
Horizontal Collaboration
Full Collaboration
The Third-Party Logistics (3PL) Industry
Third-Party Logistics: Industry Overview
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Images courtesy of Supply Chain 24/7
Participants who are involved in the buying and selling of outsourced logistics services range from 1PL’s to 5PL’s:
1PL – Shippers or receivers of product moved through supply chain.
2PL – Asset-based logistics providers that physically move product through the supply chain (transport carriers of various modes).
3PL – Firms that manage and/or provide logistics services on behalf of their clients and customers. Most of these organizations are non-asset based.
4PL – Firms that provide broader scope of services to help manage elements of the supply chain, and typically may be more strategically involved than 3PLs would be.
5PL – Companies that aggregate demands of 3PLs into bulk volumes to negotiate better rates with logistics service providers.
“A third-party logistics firm may be defined as an external supplier that performs or manages the performance of all or part of a company’s logistics functions.”
Third-Party Logistics Evolution of Logistics Outsourcing
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Source: Figure 12-6
4PL
Manage Multiple 3PLs (LLP)
Take on More Risk than 3PLs
Provide Advanced IT Services
Provide Strategic Consultancy
“Control Tower” Services
3PL
Transportation Management
Domestic vs. International
Asset vs. Non-Asset Based
Value-Added Warehousing and Distribution
Management of Other Logistics Services
Software
1
2
3
4
5
6
Spin-Off Elements of Supply Chain
Advanced Services
Lead Logistics and 4PL Services
Single Source 3PL Contract Logistics
Individual or Multiple Logistics Activities
Insourcing
Third-Party Logistics Types of 3PL Providers
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Images courtesy of cls3pl, vwmin.org, Atlanta Customs Brokers & International Freight Forwarder
Transportation-based
3PL providers founded as a subsidiary or major division of a large transportation firm.
Contract Logistics -based
Generally referring to services relating to warehousing and distribution.
Freight Forwarding-based
Organizations performing services for the daily flow of global commerce, purchasing shipping capacity from asset-based providers, then re-selling to supply chain customers.
Examples: FedEx Supply Chain Services, UPS Supply Chain Solutions, DHL, Ryder Supply Chain Solutions, Schneider logistics, and Penske Logistics.
Examples: CEVA Logistics, DSC Logistics, Exel/DHL, Geodis, Penske Logistics, Saddle Creek Corporation.
Examples: C.H. Robinson, DHL, Expeditors, Hub Group, and UTi Worldwide.
Third-Party Logistics Types of 3PL Providers (continued)
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Images courtesy of holykaw.alltop.com, Lynden, Biz Journal
Financial-based
Firms providing services such as freight payment and auditing, cost accounting and control, tools for managing shipment visibility, information, and tracking, and consulting and advisory services.
Information -based
A newer, innovative type of third-party provider emerged as a result of growth and development of Internet-based, business-to-business, electronic markets for transportation and logistics services.
Corporate Subsidiaries-based
3PL organizations that initially were divisions or subsidiaries of manufacturing or distributor organizations.
Examples: Tranzact Technologies, CTSI, and Cass Information Systems.
Example: Transplace, Inc.
Examples: Neovia, Inc. (formerly Caterpillar Logistics), IBM Global Business Services
Third-Party Logistics: Global 3PL Market
Global 3PL Revenues Exhibit Modest Growth for 2013-2014
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| Region | 2013 Global 3PL Revenues (US$Billions) | 2014 Global 3PL Revenues (US$Billions) | Percent Change 2013 to 2014 | Percent Change 2012 to 2013 | Percent Change 2011 to 2012 | CAGR 2006-2014 |
| North America | $ 177.3 | $ 187.6 | + 5.8% | + 2.9% | + 6.7% | + 4.3% |
| Europe | 158.1 | 174.4 | + 10.3% | + .01% | - 2.6% | + 0.7% |
| Asia-Pacific | 255.6 | 269.6 | + 5.5% | + 5.3% | + 23.6% | + 10.2% |
| South America | 44.9 | 41.9 | - 6.7% | + 3.0% | + 12.4% | + 8.1% |
| Others | 69.0 | 77.2 | + 11.9% | - .01% | + 6.4% | |
| Total | $ 704.9 | $ 750.7 | + 6.5% | + 2.7% | + 9.9% |
Source: Table 12-1
Third-Party Logistics U.S. 3PL Market 2000-2018E (US$ Billions)
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Source: Figure 12-7
Third-Party Logistics Logistics Outsourcing Activities
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Source: Table 12-2
% Respondents by Logistics Services that Use a 3PL (Global Results)
Services within Other ranged from 6% - 7%
Series 1
Other (e.g.customer service, LLP/4PL) Supply chain consultancy services Information technology (IT) services Fleet management Service parts logistics Order management and fulfillment Product labeling, packaging, assembly, kitting Inventory management Transportation planning and management Freight bill auditing and payment Cross-docking Reverse logistics Customs brokerage Freight forwarding International transportation Warehousing Domestic transportation 7.0000000000000034E-2 0.11000000000000003 0.11000000000000003 0.12000000000000002 0.12000000000000002 0.2 0.22000000000000006 0.25 0.28000000000000008 0.31000000000000016 0.33000000000000024 0.34000000000000014 0.45 0.48000000000000015 0.60000000000000031 0.66000000000000036 0.8
Third-Party Logistics Important 3PL IT Capabilities
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Source: Table 12-3
EDI
Transportation management (execution)
Customer order management
Transportation management (planning)
Visibility (order, shipment, inventory, etc.)
Web portals for booking, order tracking, inventory, etc.
Shippers
Providers
Transportation management (execution)
EDI
Transportation management (planning)
Warehouse/DC management
Visibility (order, shipment, inventory, etc.)
Web portals for booking, order tracking, inventory, etc.
Third-Party Logistics: IT Gap
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Source: Figure 12-8
IT “Gap”
Third-Party Logistics Management and Relationship Issues
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Source: Table 12-4
| Customers’ Expectations of 3PL Providers |
| Superior service and execution (proven results and performance) |
| Trust, openness, and information sharing |
| Solution innovation and relationship reinvention |
| Capable information technologies to support the relationship |
| Ongoing executive level support |
| Service offering aligned with customer strategy and deep industry knowledge |
| 3PL Providers’ Expectations of Customers |
| Mutually beneficial, long term relationship with company |
| Trust, openness, and information sharing |
| Dedicating the right resources at the right levels, including executives |
| Access to useful data to design solutions and provide desired services to customers |
| Clearly defined service level agreements |
| Fiduciary responsibility and overall fairness relative to pricing |
Third-Party Logistics: Future 3PL Industry Trends
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Continued expansion, acquisition and consolidation of 3PL industry
1
Expansion of global markets and needed services
2
Continued broadening of service offerings across supply chain, and broad-based business process outsourcing
3
Two-tiered relationship models (strategic and tactical)
4
Growing range of “strategic” services offered by 3PLs and 4PLs
5
IT capabilities to become an even greater differentiator
6
Increased efforts to update, enhance, and improve 3PL provider-user relationships
7
Increased adoption of shared service networks and sometimes collaborative initiatives with traditional competitors
8
Emphasis on relationship reinvention, mechanisms for continual improvement, and solution innovation
9
Images courtesy of Edutopia
Summary
Inter-firm relationships may span from transactional to relational and may take the form of vendor, partner, and strategic alliances.
Collaborative relationships have been identified as highly useful to the achievement of long-term supply chain objectives.
Third-party logistics providers are “external suppliers that perform all or part of a company’s logistics functions.”
3PLs may be thought of as transportation-based, warehouse/distribution-based, forwarder-based, financial-based, and information-based.
The most prevalent 3PL services used are transportation, warehousing, customs clearance and brokerage, and forwarding.
