What Is Logistics?
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Optimizing the distribution of freight and freight-flow information from manufacturer to consumer. |
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Using advanced information systems and expertise to reduce inventories, cut transportation costs, speed delivery and improve customer service. |
What Is Third-Party Logistics?
* Origin - The military forces developed the first logistics systems for managing and deploying large volumes of supplies and troops.
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Corporate Transportation - U.S. businesses first established logistics as stand-alone divisions for transportation and manufacturing. As the walls between divisions gradually broke down, a new logistics approach evolved to help tie together the supply chain, or in other words, the entire movement and storage of freight. New distribution patterns emerged as markets demanded greater speed to consumers, creating distribution sites closer to consumers, just-in-time manufacturing and more comprehensive, precise supply chain management. |
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Outsourcing - Companies during the middle and latter part of the 1990s have discovered the benefits of hiring outside, or third party, logistics experts to manage the total flow of products, from raw materials to finished goods. They also see the value of providing strategic business counsel, enabling companies to become more efficient, competitive and to focus on their own core competencies. |
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Professionalism - rapid, growing acceptance as a profession in recent years due to proven results from specialized technologies, engineering expertise and proven operational results. |
Industry Snapshot
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U.S. logistics industry size: $900 billion - almost double the size of the high-tech industry, or more than 10 percent of the U.S. gross domestic product (Source: U.S. Department of Commerce). Global logistics size: $3.43 trillion ( Michigan State University - Dr's. Donald Bowersox and Calantone). |
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U.S. contract logistics' industry size: $46 billion, with an average annual growth rate of between 10-15 percent each year. (Armstrong and Associates). |
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Inventory is expensive: U.S. companies spend $4 billion a year on inventory interest, $8 billion on taxes, obsolescence, depreciation and insurance, and $2 billion on warehousing (Cass Information Systems). |
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Total logistics activities make up 15-20 percent of finished product costs. (International Warehouse Logistics Association). |
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Nearly 75 percent of U.S. manufacturers and suppliers are either using or considering a contract logistics service, and that figure will go higher (survey by Ernst & Young LLP). |
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About 60 percent of 123 companies surveyed using a third-party logistics firm said logistics was a core competency, and almost 80 percent thought that logistics represented a key competitive advantage (Ernst & Young LLP). |
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Satisfaction levels remain high: 86 percent of survey respondents who had outsourced some part of their logistics operations said the experience had been successful (Ernst & Young LLP). |
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What Is the Background of Logistics Professionals? |
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Skills - planning, analytical, problem-solving and technical. Key personality traits - flexibility, adaptability, a strong work ethic and customer service commitment. |
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University training programs - consist of purchasing, inventory, transportation, technology, industrial engineering, mathematics, management and marketing disciplines. |
What Is New in Logistics Today?
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Real-time visibility to orders, inventory and shipments enables companies to be more responsive to customer delivery requirements while cutting inventory levels. |
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Collaboration drives relationships between suppliers, customers and even competitors to share information and physical networks. This collaboration leads to industry wide lower inventory, lower costs and better customer service. |
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Global Network Manager services aid companies who need to manage multiple outsourced partners with common reporting processes and metrics. As companies outsource functions from purchasing, to inventory management to logistics execution, management of multiple partners requires more expertise. |
Where Will Third-Party Logistics Go Tomorrow?
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Firms who previously outsourced regionally move toward global engagements. These firms seek a partner who can provide one system and uniform processes around the world to leverage the efficiencies of their global network and best serve their global customers. |
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Turnkey supply chain management outsourcing expands beyond logistics and warehouse management to other functions such as order entry, purchasing, and inventory ownership. Companies strive for an integrated approach to further outsourcing as they drive down costs. |
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