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To Outsource or Not to Outsource

To Outsource or Not to Outsource. Scott McWilliams Executive Chairman, OHL. Agenda. 3 rd Party Logistics (3PL) Providers 3PL Market Overview Disadvantages to Outsourced Logistics Advantages to Outsourced Logistics Suggestions When Outsourcing With a 3PL Final Thoughts. 3PL Providers.

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To Outsource or Not to Outsource

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  1. To Outsource or Not to Outsource Scott McWilliams Executive Chairman, OHL

  2. Agenda • 3rd Party Logistics (3PL) Providers • 3PL Market Overview • Disadvantages to Outsourced Logistics • Advantages to Outsourced Logistics • Suggestions When Outsourcing With a 3PL • Final Thoughts

  3. 3PL Providers 3PL (Third Party Logistics) Providers can perform all or part of the following logistics functions: • Transportation • Warehouse/Distribution • Information/Financial • Value Added Source

  4. Transportation 3PLs • Both asset and non-asset based • Services include: • Carrier procurement and management • Network optimization • Transportation optimization • Performance management/reporting • Freight audit and payment • Forwarding

  5. Warehouse/Distribution 3PLs • Regional, domestic and global 3PLs • Services include: • Warehousing • Inventory management • Information systems (WMS, OMS) • Fulfillment • Value-added services such as embroidery, engraving, gift wrap, software installation, etc. • Returns management

  6. Information Based 3PLs • Information based 3PLs core offering is management and technology within the supply chain versus physical execution • Services include: • Process management • Information technology (TMS, BI) • Consultation on industry trends, solutions, and benchmarks

  7. 3PL Providers • Information based knowledge • Shared gains/risk • Flexible and collaborative • Advanced technology • Greater expertise • Technology integration • Enhanced capabilities • Broader service offerings • Enhanced expertise • Contractual • Transactional • Basic services • Focused on cost

  8. 3PL Market Overview • CAGR of 3PL market 10.3% for past 15 years • Asset based carriers increased performance continues supported by efforts to keep supply tight Source: Armstrong & Associates, 2012

  9. 3PL Market Overview • The “30 Club” – GM, P&G, Wal*Mart, Pepsi and Ford • Who are 3PL customers? Source: Monte Sol Capital, Radiant Logistics July 2012; Armstrong & Associates, 2012

  10. 3PL Market Overview • Majority of companies plan to increase outsourcing in 2013 • Continuing trend to consolidate number 3PLs used • Latest 3PL Study reports 86% of outsourcers report success Source: Stifel, Nicholaus & Company Inc. 2013 Third-Party Logistics Study, 2012

  11. Disadvantages to Outsourced Logistics • Latest 3PL study shows fewer reasons why firms don’t outsource • Non-users realizing 3PLs getting better over time Source: Stifel, Nicholaus & Company Inc. 2013 Third-Party Logistics Study, 2012

  12. Disadvantages to Outsourced Logistics Other areas……. • Integration/Coordination costs • 3PL biased choice of service providers • Sensitive data/information leaks • Reduced contact with their customer • Competitor and 3PL collaboration

  13. Advantages to Outsourced Logistics • Risk sharing • Supply-chain contingency • Flexibility • Real Estate • Operations • Labor • Strategy • Variable costs • Speed • Focus on core competency • Access to additional resources • Software

  14. Advantages to Outsourced Logistics • Latest 3PL study shows quantified results Source: Stifel, Nicholaus & Company Inc. 2013 Third-Party Logistics Study, 2012

  15. Suggestions when outsourcing to a 3PL Both sides should learn from past failures: Source: Inbound Logistics 3PL Market Report, 2012

  16. Suggestions when outsourcing to a 3PL For the Shipper… For the 3PL… Offer strategic thinking and planning Understand competitive market Insist on clearly defined expectations Develop a good contract Establish sound policies and procedures Identify and avoid potential friction points Communicate – effectively! Request performance measurement program Motivate and reward your personnel Be a good partner • Have strategy for outsourcing • Develop rigorous selection process • Clearly define your expectations • Develop a good contract • Establish solid policies and procedures • Identify and avoid potential friction points • Communicate – effectively! • Measure performance and communicate results • Motivate and reward providers • Be a good partner Source: C.F. Lynch & Associates, Logistics Outsourcing

  17. Final Thoughts • Understand your situation – everyone is unique

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