Transcript
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INDUSTRIES IN TRANSTION:FREIGHT TRANSPORTATION INTERMEDIARIESIN THE INFORMATION AGE
Jiong Song
and
Amelia C. Regan
Metrans 2nd Annual Transportation Conference
Feb. 2, 2001
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Outline
Traditional Freight Transportation Intermediary
Section II Current State and Evolution of the Industry
Niche Markets -- Online Logistics Providers
Research Needs / Opportunities
Predictions / Conclusions
Section I
Section III
Section IV
Section V
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Traditional Freight Transportation Intermediary
Section II Current State and Evolution of the Industry
Niche Market -- Online Logistics Providers
Research Needs / Opportunities
Predictions / Conclusions
Section I
Section III
Section IV
Section V
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Third Party Logistics
Third-party Logistics is simply the use of an outsidecompany to perform all or part of the firms materials
management and product distribution function.-- Simchi-Levi (2000)
A relationship between a shipper and third party which,compared with the basic services, has more customizedofferings, encompasses a broad number of servicefunctions and is characterized by a long-term, more
mutually beneficial relationship
-- Murphy & Poist (1998)
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Third Party Logistics
In-house LogisticsDepartment
Shipper
Transportation
IT support
Warehousing
Others
In-hou se Operat ion
Outsourced
Operat ion
3PL
Shipper
Shipper
Shipper
Transportation
Warehousing
IT support
SC
integration
Others
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Characteristics of 3PL
Perform outsourced logistics activities
Process management / Multiple activities More customized services
Mutually beneficial and risk-sharing relationship
Long-term commitments (1~ 3 years)
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Why is it needed?
Advantageso Cost reduction
o Focus on core competencyo Improved efficiency, service and flexibility
o Industry-specific application
build-to-order systems and e-merchants
Disadvantages
o Loss of control
o Impact on in-house workforce
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Traditional Freight Transportation Intermediary
Section II Current State and Evolution of the Industry
Niche Markets -- Online Logistics Providers
Research Needs / Opportunities
Predictions / Conclusions
Section I
Section III
Section IV
Section V
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Industry Evolution
Third Generation( 2000 and beyond)
First Generation(1970s - 1980s)
Second Generation(1980s - 1990s)
Broader more integrated services
Transportation / warehousing
Freight forwarders / brokers
Shippers agents
Non asset-based companies
Asset-based companies increased
service offerings
Online freight marketplaces
Web-based 3PLs
Increasing supply chain integration
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Current State
-- Service Offerings Dedicated Contract Transportation /
Transportation Procurement
Inventory Management Logistics Management and Consulting
Freight Audit and Bill Payment
Customs Services
Shipment Tracking and Tracing
Reverse Logistics and Value-added Services
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Current State
-- Market Size
34.2
39.6
46.0
54.0
1997 1998 1999 2000
3PL market is growing
( $ Billions )
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Market Structure
< $20 million
$20 - 100
million
> $100million
AnnualRevenue
Orange Courier
Regal Logistics
Cass Information
System
California Distribution
Bax Global Logistics
Menlo Logistics
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Current use of 3PL by industry
75.9
71.1
61.4
56.2
53.8
82.2
Percentage of 3PL use in different industries Industry
Computer
Consumer
Retail
Chemical
Medical
Auto
Source "What's ahead for 3PLs Modern
Materials Handling, April, 2000
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Current Industry Status
No commonly accepted terminology
Technologies increase visibility, efficiency and integration
Theservice menu is rapidly changing
New breed of companies are emerging
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Traditional Freight Transportation Intermediary
Section II Current State and Evolution of the Industry
Niche Markets -- Online Logistics Providers
Research Needs / Opportunities
Predictions / Conclusions
Section I
Section III
Section IV
Section V
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Niche MarketsOnline Logistics Providers
Online Freight Marketplaces
Spot market
Auction and RFQ
Exchange
Meta-marketplaces
Application Service Providers (ASPs) Purchasing Consolidation Market
Infomediaries
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The Freight Transportation Industry is IdeallySuited e-commerce
High Fragmentation of Shippers and Carriers Many Intermediaries
Complex Supply Chains
High Search Costs Significant Opportunities for Economies of Scale
Several Models Emerging
Online Logistics Providers-Opportunity
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Spot market
Auction and RFQ
Exchange
Meta-marketplaces
Application Service Providers (ASPs)
Purchasing Consolidation market
Infomediaries
Niche MarketsOnline Service Providers
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Spot market
Auction and RFQ
Exchange
Meta-marketplaces
Application Service Providers (ASPs)
Purchasing Consolidation market
Infomediaries
Niche MarketsOnline Service Providers
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Spot market
Auction and RFQ
Exchange
Meta-marketplaces
Application Service Providers (ASPs)
Purchasing Consolidation market
Infomediaries
Niche MarketsOnline Service Providers
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Spot market
Auction and RFQ
Exchange
Meta-marketplaces
Application Service Providers (ASPs)
Purchasing Consolidation market
Infomediaries
Niche MarketsOnline Service Providers
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Spot market
Auction and RFQ
Exchange
Meta-marketplaces
Application Service Providers (ASPs)
Purchasing Consolidation market
Infomediaries
Niche MarketsOnline Service Providers
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Spot market
Auction and RFQ
Exchange
Application Service Providers (ASPs)
Purchasing Consolidation market Infomediaries
Niche MarketsOnline Service Providers
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Spot market
Auction and RFQ
Exchange
Application Service Providers (ASPs)
Co-ops Infomediaries
Niche MarketsOnline Service Providers
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Traditional Freight Transportation Intermediary
Section II Current State and Evolution of the Industry
Niche Markets -- Online Logistics Providers
Research Needs / Opportunities
Predictions / Conclusions
Section I
Section III
Section IV
Section V
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Recent Research General market examination
o Lieb and Randal (1999)
o Lieb and Peluso (2000a, 2000b)
Contracts and relationships
o Leahy, Murphy & Poist (1995)
o Sankaran & Charman (2000)
Decision-making processeso Menon, McGinnis & Ackerman (1998)
o Lim (2000)
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Behavioral Models Carrier and Shipper behavior models
o Carrier selection
o Contract design
o Contract negotiation
3PL providers behavior
o Service offerings
o Carrier selectiono Contract design
o Contract negotiation
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Online Freight Marketplaces Integrated and Time Sensitive Optimization Problems
o Dynamic and stochastic routing and scheduling systems
o Dynamic inventory management systems
o Combined inventory-routing modelso Real-time bidding and freight matching algorithms
o Optimal pricing strategies for intermediaries and carriers
o Optimal bidding strategies for shippers
Simulation-based analysis of costs and benefits toshippers, carriers and 3PLs under competing businessmodels
o Is it a zero sum game? Who wins? Who loses? How much?
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Section II Evolution and Current State of the Industry
Niche Markets -- Online Logistics Providers
Research Needs / Opportunities
Predictions / Conclusions
Section I
Section III
Section IV
Section V
Traditional Freight Transportation Intermediary
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Predictions and Conclusions The total market for freight transportation intermediaries is still
growing with the boom of e-commerce;
The conventional 3PLs will not fade, but will face with the competitionfrom the online logistics providers;
The companies have to combine the logistics expertise with advancedtechnology to evolve;
Strategic alliance and merge/acquisition will be important to obtaincomprehensive and intergrated supply chain solution capability;
Small carriers and niche carriers will benefit from increased access toshippers and reduced search costs
Medium sized and Large carriers may resist and try to continuebusiness as usual or simply become e-commerce enabled using currentbusiness models
The 120+ on-line freight marketplaces will be reduced to less than 10leaders and a few successful niche players in near future.
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Predictions and Conclusions The freight transportation industry has historically been slow to
change
Personal relationships will continue to be important despite agrowing acceptance of web based interactions
The potential benefits of IT are huge
Major industry changes will comethe question is how soon
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End
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