The Positive and Negative Impact by Using Third Party Logistics

Nowadays, more and more manufacturers choose to focus on their most cores of competencies. This strategy leads to extensive outsourcing in areas. Regarding the 留學生dissertation網supply chain, most companies choose to begin their logistics operations utilizing the resources of a Third Party Logistics operation. Third party logistic company came into being for assisting manufacturers with the rigorous selection process assuring every criterion is considered, tailored to the special needs of their products. Its services include assisting with the generations of a Request for Proposal, Site Visits, Proposal Analysis and Recommendation.

This proposal uses the findings of a survey conducted during 2004 of large American manufacturers that addressed their use of third party logistics (3PL) services as its objective to examine the advantage and disadvantage by using the 3PL. The survey data show that the percentage of those companies using such services is at a record high level, and that users are giving a steadily increasing percentage of their logistics operating budgets to 3PL service providers.

Many 3PL relationships are long-term in nature, and the service providers continue to deliver value to their clients. The movement of large American manufacturers into other geographies for sourcing, manufacturing, and sales has led many of their 3PL service providers to expand into those areas to support those activities. During the next several years, the possible adoption of RFID technology by many of these manufacturers will pose significant challenges to their 3PL providers in attempting to meet the related needs of their clients.

Logistics outsourcing has become common among large American manufacturers as they seek not only to control costs, but also use logistics services as a means of differentiation in both domestic and international markets. The companies that use such services, or are considering their use, have been faced with an industry that has undergone significant changes in the past several years. The third party logistics (3PL) industry has changed structurally with mergers, acquisitions, company failures, and the entry of many new competitors into niche markets. The geographic coverage and service offerings of the major providers has expanded dramatically, and the industry has had to cope with a significant economic slowdown. The technology employed by the industry has also changed rapidly, not only increasing the capital costs of the service providers, but also exerting pressure on industry prices.

There is a well known summary of the findings of a survey conducted during 2004 as part of an annual research effort that examines 3PL service use by U.S. Fortune 500 manufacturers. The first survey in the series was conducted in 1991, and annual surveys commenced in 1994.

Each year, a questionnaire is developed and mailed to the chief logistics executive of the 500 largest American manufacturing companies, in an attempt to gather data concerning the use of 3PL services by those companies. The data generated each year not only provides an overview of current use patterns, but also provides a basis for comparison with the results of the earlier annual surveys. To provide a longer-term overview of 3PL use, each year the survey gathers data on the following issues: the extent to which large American manufacturers use 3PL services in their domestic and international operations, and the specific 3PL services used by those companies, the impact of using 3PL on logistics costs, logistics service levels, customer satisfaction, and employee morale and the future plans of users.#p#分頁標題#e#

The annual surveys also generate data concerning specific current topics of interest in the 3PL user and provider communities. For example, the 2004 survey also included 留學生dissertation網questions concerning the following topics: the 3PL contract renewal process, the value delivered by 3PL service providers to users, the extent of 3PL user commitment to RFID technology, the significance of the expansion of the membership of the European Union to 3PL users, the extent to which the companies surveyed operate in China and India, and their use of 3PL services in those countries and user views concerning the most significant developments that had occurred in the 3PL marketplace during the past year.

In each annual survey, users are asked to categorize the impact of their use of 3PL services in several areas. In one surprising development, 40% of the respondents reported a negative or very negative impact on employee morale. That was nearly double the percentage that reported a negative impact in last year’s survey (22%). Our earlier research has shown that the negative impact has historically been related to the downsizing of the logistics workforce that typically accompanies a decision to outsource logistics functions, and it may be that as the longer-term users cut more deeply into the full-time logistics workforce the remaining workers are becoming more skeptical about their future with those companies.

Seventy percent of users reported a positive or very positive impact on logistics costs, and that figure has been at least 70% each year since 2000. The magnitude of this positive response continues to be important because, in most instances, logistics outsourcing is initiated due to cost considerations. Clearly, competitive pressures in the global marketplace will continue to focus management attention on controlling logistics costs, and this should continue to draw attention to the service offerings of 3PL providers.

Seventy percent of the respondents also reported a positive or very positive impact on logistics service levels. While this is lower than the record 85% positive impact reported in last year’s survey, more than two-thirds of the users have indicated a positive impact in this category each year since 2000. As discussed earlier in this paper, service considerations typically dominate the 3PL contract renewal process. Forty-five percent of the respondents reported a positive impact on systems development/support activities, up from 43% last year, and nearly double the 23% reported in 2002.

Each year, in discussing the data related to the impact of using 3PL services, people tend to make two additional observations. First, many respondents typically indicate that using 3PL services had no impact in several of these categories. However, respondents do not necessarily expect logistics outsourcing to produce benefits in all of these areas. For example, a 3PL application that seeks to improve logistics service levels might actually increase logistics costs or have no impact on them. Second, as has generally been the case, relatively few respondents indicated that they believe using 3PL services had a very positive impact in any of these categories. This may reflect the typical user desire for continuous improvements along each of these dimensions.#p#分頁標題#e#

Nevertheless, the percentage of users who indicated that the use of 3PL services had a negative impact on their companies increased in each of the categories. As noted above, 40% of the respondents said that 3PL use had a negative impact on employee morale versus 22% last year. Fifteen percent reported a negative impact on logistics costs (10% last year). Whether this year’s negative numbers is a sign of the emergence of serious problems in the industry is unclear at this point.

During the past several years there has been extensive discussion within the logistics profession concerning the possible application of RFID technology to the field. Much of that discussion has been stimulated by the highly-publicized steps that Wal-Mart, Gillette, and the Department of Defense have taken to implement that technology within their logistics networks.

In view of the interest in this topic, the 2004 survey sought to determine not only how extensively RFID technology has been embraced by the large manufacturing firms that currently use 3PL services, but also what the implications were to 3PL providers. Of the 48 3PL users identified in this survey, one-third said that their companies are currently committed to using RFID technology in their logistics operations. Eight of those 16 companies are conducting pilot studies on RFID within their organizations.

Further, of the 32 executives who indicated there are not currently committed to using that technology in their logistics operations, half said their companies are actively considering its possible use at some point in the future. In total these numbers mean that two-thirds of the companies identified in this survey as 3PL users are either committed to using RFID in their logistics networks, or actively considering its possible usage. Clearly, this has important implications to 3PL providers not only in terms of the expertise related this technology that must be developed within their organizations, but also in terms of possible capital outlays and potential operational changes.

Those who indicated their companies were currently committed to using the technology were also asked what types of support, if any, that commitment would entail with respect to their 3PL providers. Interestingly, most said “none.” Those who believed that some 3PL support would be necessary focused on a requirement that provider-managed distribution centers would have to be able to scan outgoing shipments. It would seem that this matter has not been thoroughly examined by many of these manufacturers, and that it will likely become a more significant issue in their discussions with 3PL providers in the near future.

The continued globalization of 3PL service use was again confirmed by the survey results, with 80% of the respondents indicating that they use 3PL services in both domestic and international operations. That figure had been 69% in the 2003 survey. Twenty percent of the users identified in the survey indicated that they only use 3PL services domestically (20% in 2003). No respondent reported using 3PL service only in the international arena.#p#分頁標題#e#

Besides the current results we get from this important survey, this proposal also analyses the current state of the Third party Logistics both home and abroad. According to the 2000 statistics, the expenditure of logistics was $3750 billion in the whole world, and the third party logistics market was $207 approximately 5.5% of the whole expenditure. By 2002, the world logistics expenditure increased to $4000 billion, and the third party logistics reaches up to $281 billion, approximately 7% of the whole.

From 1996 to 2002, the increase rate of global third party market is 13%. The logistics expert Robert Randall announced in the 2000 American Logistics Report that the cost of American logistics was $920 billion in 1999, accounting for 9.9% of $926 billion GDP, while the percent was 11.4% in 1990, and 15.7% in 1980.( Lieb, R.C. and Peluso, L. 2000a) American third party logistics industry consulting company report tells that American third party logistics market was $56.4 billion, account for 5.6% of the whole American logistics expenditure. The expenditure of logistics was 85 billion Euros in 1999 in European Union, and the third party logistics market was 26 billion Euros approximately 30% of the whole expenditure.

Some statistics indicates the proportions of the third party logistics in the whole logistics market are 76% in Europe, 80% in Japan, 58% in America, and these are still growing. 24% European non-third party logistics consumers are considering the employment of the third party logistics services, and along with 33% American consumers; 62% European enterprises that have already accepted the third party logistics services are considering the possible increase of such service, and the same thought with 72% American enterprises.

The more than two decades of economic reform and transition to market economy has brought China unprecedented economic expansion. China is now the world’s largest manufacturing base, and is closing in on becoming the world’s largest market. To a large extent, the future growth of China’s economy will hinge on the ability of logistics service providers to offer cost-effective and efficient supply chain management. With the economic expansion and China’s accession into WTO, the logistics industry in China is set to take off. But how far will it go?

We have already witnessed a rapid transition in the logistics industry in China, from an industry dominated by a few big state-owned enterprises as recently as a decade ago, to the emergence of domestic and foreign third party logistics service providers, as well as lots of small scale local service providers which sometimes consist of two people with one truck. The word “logistics” now pops up everywhere on billboards and in daily newspapers, and is one of the hottest words in China. The infrastructure in China has improved dramatically. New modern facilities such as airports, ports, highways, logistics parks and warehouses are being built at a record setting pace. Companies have invested extensively in information technologies and software. But while these are without a doubt important signs for the future of China’s logistics industry, it will be governed by many other important signs for the future of China’s logistics industry requires a deeper look into various key components of the industry. These include: corporate structure, finance, services, operations, management, information technology, customer relations and policy issues.#p#分頁標題#e#

China’s logistic industry has developed rapidly since the start of the reform program. Nowadays, China has established its integrated transportation system, including railway transportation, truck transportation, water carriage, aviation transportation and pipeline transportation. China's third party logistic firms are also on the way, distribution centers are developing evidently, and the application of modern logistic technology is strengthened.

But from the aspect of the general level of the development of logistics, China’s logistic industry is still in its beginning development stage. Each element of logistic process is still separate and divided. Circulation cost accounts for a great proportion of the total costs. Logistic industry has wide development space and large market potential. Modern logistic industry will be an important industry in economic development and a new sector of Chinese economic growth.

At present, both domestic and foreign joint ventures regard China as a market with huge growth potential. Virtually all companies offer total logistics solutions in addition to many traditional logistics services, such as warehousing and transportation. Most of the companies have already built extensive domestic networks, especially in Eastern China; all of them have plans for future expansion. Road transportation is the preferred mode in China, but surprisingly and contrary to the established notion, most companies do inter modal transportation.

The majority of the companies out sources transportation, but retains tight management control over operations. Overall, warehousing is still at an early stage of development, with rudimentary facilities and limited use of modern information technology. The electronic products and household appliances sectors have accounted for the highest portion of revenues by logistics companies. The electronic products market is also regarded as having the highest potential growth. When it comes to future challenges, there exists a marked difference between domestic and foreign companies. Domestic companies are most concerned with the limited resources available for future expansion, while foreign companies list policy restrictions and regulations as their biggest challenges.

At the very beginning of this report, there is a description and analysis of the definition and current state of the third party logistics both home and abroad. Then in the second part of the report, the research aim and focus will be elaborated. The third part is an introduction of the methodology. In this dissertation, I mainly use case study 物流學留學生畢業dissertation需求and related theories to do the research. Why to use such method and the advantages and disadvantages are also introduced in this part. In part four, the literature review mainly focuses on the different aspects of the third party logistics, such as origin and background, further development, key nature, the developing state in the advanced countries, and the comparison between China and the advanced countries. In part five, there is an expectation of the development of third party logistics in China in the near future. Last but not least, Part seven notes down the detailed implementation plan of the 3 party logistic companies in China. #p#分頁標題#e#