he Positive and Negative Impact by Using Third Party Logistics

Submitted to the College of ….   in partial fulfillment of the Requirements for the
Degree of
…
at the
…University

Under the Supervision of
Prof. …

June, 2007

ACKNOWLEDGEMENTS

I would like to express my gratitude to all those who helped me during the writing of this thesis. A special acknowledgement should be shown to Professor …., from whose lectures I benefited greatly. I am particularly indebted to Mr.  , who gave me kind encouragement and useful instructions all through my writing. Finally I wish to extend my thanks to the library assistants who supplied me with reference materials of great value.

CHAPTER ONE: INTRODUCTION
1.1 Motivation of the Research
 Nowadays, individual companies no longer compete with other stand-alone companies but supply chains compete against other supply chains (Christopher, 1997). The performance of the supply chain depends on the operations of all participants. The participants could include suppliers, manufacturers, carriers and retailers. If the participants work independently, supply chain costs and inefficiencies are likely to increase. The globalization of corporations has increased complexities and challenges in the supply chain. Strong competition, coupled with the factors stated, is motivating companies to build relationships with stake holders in the supply chain. As described by Christopher (1997), in such a network of participants and relationships, each partner adds value through specialization in an activity where it can provide differential advantage.

 With this background, many companies are working to integrate their supply chain both up-stream and down-stream in order to improve visibility, reduce inventory and improve fulfillment. The companies are now targeting overall cost reductions in the complete value chain rather than in parts of the value chain. That is, they are shifting from local or silo optimization to global optimization of supply chains. This requires closer coordination and operational synergies amongst all the players in the value chain. 3PLs are increasingly playing a vital part in customers' supply chains which makes the study of relationships between 3PLs and customers important.

1.2 Research Aim and Research Focus
 Based on the careful analysis about the nature of the third party logistics and manufacturing, combined with the actual case and related theories to do the research, we are expected to find out the relationship between the third party logistics and manufacturing. The main focus locates on the positive and negative impact when the third party logistics and manufacturing combine to come to use; also the problems when we analyze the study with China actual environment and the strategy that is expected to take are the important parts.

 Research focus: the positive and negative impact of the third party logistics for manufacturing is the main focus, along with the implementation of the third party logistics in manufacturing in China.#p#分頁標題#e#

1.3Definition of the Third party Logistics
 A third-party logistics provider is a firm that provides outsourced or "third party" logistics services to companies for part or sometimes all of their supply chain management function. Third party logistics providers typically specialize in integrated warehousing and transportation services that can be scaled and customized to customer’s needs based on market conditions and the demands and delivery service requirements for their products and materials.

 Literally Third Party Logistics means “outsourcing of logistics”. Today the term is used in Europe in a much narrower context, although without a common definition of the term. In this study Third Party Logistics is defined as follows: Third Party Logistics imply a long term co-operation agreement between 2 firms, who consider each other as partners and where the solutions are elaborated jointly with the purpose to meet the demands of the transport buyers. Generally the target is to develop a business alliance which creates a win-win situation for both partners.

 Hertz, and Alfredsson (2003) describe four categories of 3PL providers:

 Standard 3PL provider: this is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) – the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.

 Service developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.

 The customer adapter: this type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company’s logistics activities. The 3PL provider improves the logistics dramatically, but do not develop a new service. The customer base for this type of 3PL provider is typically quite small.

 The customer developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.

 Third Party Logistics is to a greater extent defined by the interaction between the forwarding company and the transport buyer than by the functions, which the transport company carries out. The central issue in Third Party Logistics is the way in which the transport company defines its own role in the entire supply chain. A modern transport company which carries out Third Party Logistics, considers itself as a part of its customers’ supply chain and enters a partnership with the customer in order to develop the relations and the systems with the aim to improve the competition in the entire chain for mutual benefit.#p#分頁標題#e#

 Third Party Logistics and thus partnership is to be considered as human resource commitment and hard work, where continuous development and innovation is the way to obtain mutual benefits. Whether the warehouse function and other associate productive functions are placed with the transport company is not essential to the extent of Third Party Logistics. Often other motives decide whether the warehouse function is maintained in-house with the transport buyer. Further to be mentioned:
•  The warehouse is placed in connection with the production, which is why outsourcing implies additional handling
•  The buildings are already available and there is no alternative use. Whether it is a question of Third Party Logistics, is thus depending on the binding character of the co-operation.

 There has been considerable interest worldwide in last few years in the growth of third party logistics providers. These firms typically provide some of the following services: warehousing operations, freight payments and auditing, carrier selection and rate negotiations. In addition, these firms may development information systems and manage inventory and customer order fulfillment (Boyson, 1999). The rapid growth of global markets has been followed by the birth of strategic channel intermediaries, such as foreign freight forwarders, non-vessel-owning common carriers, trading management companies, customs house brokers, export packers and port operators. Several recent studies have addressed the issue of growth in the 3PL market in detail. A study by Murphy and Poist (1998) provides a review and synthesis of research on this topic. They define 3 PL services in the following way:

 “a relationship between a shipper and third party which, compared with basic services, has more customized offerings, encompasses a broader number of service functions and is characterized by a longer-term, more mutually beneficial relationship."

1.4 Current Status of the Third Party Logistics
 One of the difficulties in estimating the size and scope of the 3PL industry is that it is difficult to draw the line between 3PLs, freight forwarders and carriers who are certainly logistics service providers. A recent study of shippers in Europe (KPMG 2000) makes the distinction between outsourcing and 3PL use based on the number of services outsourced. When this number is large, the company is using a 3PL; when only a few operations are outsourced in order to increase flexibility and reduce costs this is not considered 3PL.

 A 3PL company normally provides process-based services rather than a function based logistics services, which generally aims at the integration and full control of a part or whole process of shipper’s logistics network. Indeed, the process expertise, as well as economies of scale, is 3PL’s core competencies. The services are usually customized to each particular shipper and the number of services being outsourced by shippers is significantly higher than for a provider of separate transportation or warehousing services only. The prerequisite for this is often an integrated information system, covering the whole logistics network. The past research also found the 3PLs often form strategic alliances with their customers with comparatively long-term arrangements, normally from 1 to 3 years by contract.#p#分頁標題#e#

 Generally, a 3PL company provides services including whole or at least part of the listed rather than focusing on a single function.
Transportation / Distribution
§ General Trucking Service (TL, LTL);
§ Intermodal Transportation service (rail, ocean, air freight);
§ Specialized Services (bulk, tank, hazardous material, refrigerated goods etc.);
§ Time-constrained services (JIT, over night, same day etc.);
§ Shipment tracking & tracing;
Warehousing / Distribution
§ Public / Contract / Regional warehouse;
§ Operation Technology (bar coding, radio frequency, VMI etc. );
§ Value-added services (cross-docking, freight consolidation, pick & pack etc.);
§ Order processing and fulfillment;
Custom Services
§ Custom Brokerage;
§ Duty Drawback;
Freight Finance Services
§ Freight Audit;
§ Freight Bill Payment;
IT Support
§ EDI capability;
§ Logistics information system & other software;
§ Web-based solution;
Product Support Services
§ Reverse logistics;
§ Value-added services (package, label, mark, test, assembly etc.);
Logistics Management / Consulting
§ fleet operation;
§ Distribution UK thesis basenetwork design;
§ Carrier selection / negotiation / routing;
§ Facility location analysis / selection / design;
§ Inventory management;