A Case Analysis of the Workings of a Third Party Logistics Industry Essay

Introduction The relevance of Third Party Logistics (3PL) Providers want non be overemphasized. The logistics industry reserves a in truth hefty hazard for industries to focus much on their core competencies and heartyly reduce their spending while at the same succession improving their systems and customer improvement aspects. Since nearly of the 3PL companies nonplus entirely the resources that argon necessary for effective logistics rifle on top of their human capital it is always the case that companies forget definitely suck a good experience on top of learning a people of new strategies in dealing with this attribute of helper. This paper will provide the basic theories on Logistics and Third Party Logistics. Consequently, it will relate such(prenominal) theories to actual experiences of a feature 3PL Industry leader Ryder Systems Inc. The paper will be discussing its core business office, set and take into close analysis both of the work that they have provided on two of their study clients. Similarly, the discussion of or so of the risk factors that argon inevit commensurate for the beau monde will in any case be taken into account.See moreThe Story of an Hour Literary Analysis EssayObjectives of the Study First amongst of the few objectives of the consume will be the students capability to communicate the concepts that ar relevant in the industry that he or she is working in. Second would be to show how big and relevant the marketplace for the logistics industry is. In relation with this is to illustrate how the telephoner which the write works in (i.e. Ryder Systems Inc) is able to have a significant share in this industry. Part of such objective would be explaining its book of profession, products and go and basic corporate values. There should besides be lead examples to illustrate how is the connection is able to maintain its top clients.Significance of the Study It is necessary to provide a scholarly study on the area of logistics because thither has not been a lot of studies are conducted in this type of industry. Most of the researches that the author have encountered are primarily brief case studies and basic theories that in the main based on the specific corporations that are doing such type of businesses. Having such, most of the literatures are one sided, that is discussing only the good experiences that were encountered in dealing with specific clients. It is the authors endeavor to bring out a research paper that is based on a holistic perspective so that there would be a thorough discussion of both of the positive and negative areas in spite of appearance the logistics industry.Review of Related publicationsLogisticsLogistics is the process of administering and controlling the form of goods, energy, information and opposite resources namely products, services and people from a particular participation. It would be very hard to imagine a particular companionship withou t proper logistical function or stand. The very rationale of a logistics support primarily lies on proper geographical positioning of bare-assed materials, works in process, and finish inventories at the most reasonable cost, this information is taken from Wikipedias introduction part, titled Logistics.Taken from the same reference, Wikipedia categorizes logistics into three types military, business and production logistics.Military logisticsProviding logistical support to the military is more of a matter of life and death. It is very crucial that soldiers supplies of food, fuel and ammunition be delivered in the fastest and safest possible manner if not, such would lead to very serious implications. Good examples of such cases are the US-Iraq war, the Statesn War of Independence and the Second World War.Business LogisticsThere are two different focuses in which logistics function in businesses the internal focus and the external focus which covers the flow from originating suppli er to end-user. Part of the business is the assurance of the proper coordination of resources in an organization. Two forms of logistics in business that are fundamental for the smooth run of the business are the steady flow of material finished a network of transport links and storage nodes and also the sequence of resources to carry out projects.Production LogisticsThe relevance of logistics within an industry need not be over emphasized. As industries are constantly changing their utensils to achieve capital efficiency and customer response, it is very necessary to snitch more effective the logistics function. For existing plants, the management often find themselves replacing part ad even machines in order to en received the pure tone and rate of productivity. Hence it is not only the case that condemnationliness of transporting these parts should be taken into consideration but also the cautiousness that is necessary to guarantee that by the time the machine or parts get to the production site, it is good-tempered on a perfect working condition.For the purpose of this paper, the author will concentrate specifically on two types of logistics function, i.e. the business and the production logistics.Third Party LogisticsIt would be more cost-effective for companies which dont have a particular superfluousization on transference and logistics to outsource using 3PL or third Party Logistics Provider. 3PL is a specialized vendor which takes care of the sum management function of a particular companys integrated computer storage and transportation, and other services that could be made according to customers needs prior on market condition and the demands and delivery service requirements for their products and materials. Few of these services are inventory, material handling and packaging. According to Hertz, and Alfredsson in their article Strategic development of third fellow station logistics providers, Industrial Marketing Management there are f our categories of 3PL providersStandard 3PL provider this is the most basic form of a 3PL provider. They would perform activities such as, make clean and pack, computer storage, 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 denture and scope will enable this type of 3PL provider to perform these types of tasks.The customer adapter this type of 3PL provider tots in at the request of the customer and essentially takes over complete control of the companys 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 smal l.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.Ryder System IncCompany OverviewHeaded by their Chairman and CEO Gregory T. Swienton, Ryder System Inc is one of the trounce and leading industries in price of providing logistics, supply chain management and solutions all over the world. It has been featured in Fortune d and has received numerous commendations from its clients and peers within the industry.Few of its customer awards are from Toyota (Best Business Partner of the Year), Mazda (Carrier of the Year), Xerox (Delivery Carrier of the Year), whirl (Gold and Bronze Quality Awards), Alcan (Distribution Supplier of the Year), ARCO (Category 1, Supplier Status), Bombay (Carrier of the Yea r), Copperweld (Outstanding Supplier of the Year), Dominos Pizza (Supplier of the Year), etc.Similarly, few of its industry awards came from Forbes, Beacon Council, The Miami Herald, Commercial Carrier Journal, Hispanic Magazine, Logistics Management, Mercer Management Consulting, Internet Week, E Week, Information Week, Centro de Estudos em Logica, Consumer Goods Technology, CIO, National sentry duty Council, Latina Style, Information Week 500, Business Week, Inbound Logistics Magazine and B to B Magazine.Also, the company has been included in Calvert accessible Index since 1990, KLD Research & Analytics Domini 400 Social Index (DSI), United States Environmental Protection Agency and South Florida Commuter Services Best Workplaces for Commuters, Governance Metrics International (GMI) Highest Global Rating, Department of defense Employer Support of the Guard and Reserve (ESGR) Above and Beyond Award, Network Miami, and World Trade.In relation with this, Ryder has also been includ ed in InformationWeek 500 of leading business users of information technology and InternetWeeks top 100 U.S. companies for effectiveness in using the Internet to achieve tangible business benefits.As enumerated in Ryders official website the products that the company offers areFleet Management Solutions (FMS), which provides leasing, lease and programmed support of trucks, tractors and trailers to commercial customers preparation Chain Solutions (SCS), which manages the movement of materials and link information from the acquisition of raw materials to the delivery of finished products to end-users and Dedicated Contract Carriage (DCC), which provides a turn-key transportation service that includes vehicles, drivers, routing and plan.Corporate ValuesOne of the secrets of success of Ryder lies on its very strong recognition of the relevance of transformation in the workplace. The company focuses a lot on the relevance of the workforce by proving them a livelong set up of oppo rtunities regardless of color, gender and age.Fleet Management SolutionsAccording to the 2005 Ryder Annual Report on the Financial Statement Section, Ryders Fleet Management Solutions (FMS) accounts to 62% of get along annual revenue of the company, that is equivalent to $57 Billion.FMS allows its clients to focus on their central business and direct their capital to other parts of their business process. Ryder provides a whole range of products for leasing, commercial rent and contract maintenance solutions. In relation with this, it also had value-added fleet support services like insurance, vehicle administration, fuel services and a wide selection of used trucks, tractors.FMS caters from small to large scale enterprises. Most of its clients came from the following industries beverage, newspaper, grocery, lumber, wood products, home finishing and metal.Since FMS is divided to three major regions across the whole United States also adding Puerto Rico, the company holds a big 13 7,000 US fleet of commercial trucks, tractors, trailers that are leased or rented. Each major region is segmented into 8-16 Business Units (BU) and consequently, each BU has 7-15 Branch Offices.The BU are pretty much like a one-stop store because not only that it has a maintenance facility or a shop office, it also provides services for refueling, safety inspections and preliminary maintenance checks as well as a place for arrest maintenance and repairs.Through FMS Ryder is able to provide the most cost-effective business logistics solutions on top of timeliness, quality and superior service.Full Service LeasingThe full service leasing program that is still based on the 2005 Ryder Annual Report is a custom made program which caters perfectly to any demand or need of a particular enterprise. This particular program helps companies to strategize their fleet management function or upgrade their fleet without necessarily having to allocate a specific percent of their annual capital.As sessing enterprises qualifications would depend in their corporate state of affairs, their companys size, residual size and a balance sheet treatment. Based on these qualifications, a leasing program will be created. After such would be the leasing of trucks that are custom engineered relative to the needs of the enterprise and normally would last for 3-7 year.The full service lease of Ryder has very good leveraging since the company has a good buying power since it purchases vehicles in bulk.Other related services include liaison maintenance which primarily deals with the repairs of vehicles, predictive and preventive assessments based on the type of the truck and driving habits of the enterprise, and also Ryder can replace any truck which temporarily went out of service. another(prenominal) additional feature of this program is the contact related maintenance which are additional services that are not within the hold contract but is however needed by the enterprise.Supply Chain SolutionsThis aspect of the services provided by Ryder pertains to the direct movement of foreign funds and related information from the acquisition of raw materials to the delivery of finished products to end users.The estimated market for this business is estimated to be $237 Billion and accounts to 29% of the companys total annual revenue. There are three categories in which Ryder operates in this particular service. The Professional Services provided by the company focuses on the classification, analysis, and improvement of its clients supply chain solutions in order to assure the enterprises consistency, efficiency and flexibility. This service is comprised of expert consultants who conduct extensive case studies, reviews to create a highly effective supply chain strategy. Another service provided by the company is Distribution Operations wherein few of the services being catered upon are warehouse facilities, administering the flow of products, coordinating warehousing and tr ansportation for inbound material flows, handling import and export for transnational onus, replenishment of component parts for manufacturing and ., and a whole lot more. The transportation services on the other hand take care on almost all of the factors that are necessary for an effective and timely transportation network. From planning and execution, Ryder also makes sure that the shipment consolidation, load scheduling and delivery confirmation are real-time and accurate through the use of different technological and web-based solutions. Ryder has the best transportation consultants who work in partnership with the Freight Brokerage Department.Analysis Having a discussed a brief background of the necessary foundations of an effective logistics company and having elaborated on the basic workings of Ryder System Inc, the author would like to have a brief case analysis of two of the long-time clients that the company have served for their logistics solutions Whirlpool and Phili ps. In relation with this, the author would also discuss the risk factors that are inevitable in this type of business.Risk Factors The author would like to discuss some of the things that pretend the logistics business at Ryder. One relevant factor would be the financial revenue of the company and its stability. Some heightens in market conditions such as the rental or sale of used vehicles, ability to retain customers and maintain appropriate utilization rates. It could also be the case that unstable interest rate and funds exchange rate might cause financial instability. sometimes occasional labor strikes, sudden changes in fuel prices and fuel shortages could be vital determiners of fluctuations. It is also a necessity that new growth initiatives in Fleet Management Systems (FMS) Business segment be a constant endeavor for the company. By having the company restructure the operational and sales teams, realigning business processes and organizing management it will be assured that the FMS will still be up to date and will still continue to be the biggest contributor for the companys annual revenue. Another risk factor that the company has to deal with is the residual risks on the value of their trucks. If the market for buying used vehicles suddenly declines there would be a sure loss on Ryder.In relation with this would be with regard to SCS revenue. Since a significant portion of SCS revenue came from a small number of customers, many of which are in the automotive industry, it could be possible that failure to retain these clients would yield to huge financial loss.One of Ryders clients which belong in this category is General Motors Corporation (GM) accounting for 35% of Ryders SCS total revenue and 18% of SCS operating(a) revenue. The loss of any of this customer or a significant reduction in the services provided to on this company could impact Ryders domestic and international trading operations and indecently affect SCS financial results. Whi le the company still focuses on diversifying their customer base both outside and within the automotive industry, the company may not be successful in doing so in the short term.In relation with this is the downward pricing pressure that might come from certain SCS customers could result in low revenues. For instance it could be the case that since all SCS services are provided under contractual arrangements that are based on certain assumptions regarding the scope of services, production volumes, operational efficiencies, productivity and other factors. If, as a result of subsequent changes in our customers business needs or operations or market forces that are outside of our control, these assumptions prove to be invalid, Ryder could have lower margins than anticipated. Attracting and retaining drivers could also be an issue since there has been a really cheeseparing competition in terms of their availability. The company could either opt to increase their salaries or let trucks sit idle, utilize lower quality drivers or salute difficulty meeting customer demands, all of which could adversely affect growth and profitability.Ryders attempt to continue to expand international operations may result in additional risks. Since the company is committed to meeting customers global needs by continuing to grow our international operations in Canada, Europe, Asia and Latin America and by entering into new markets such as China. The companys international operations, particularly in Latin America and Asia, are subject to adverse developments in foreign political, governmental and economic conditions, varying competitive factors, foreign currency fluctuations, potential difficulties in identifying and retaining qualified managers and personnel, potential adverse tax consequences and difficulties in protecting intellectual property adepts.Since the company operates in a highly competitive industry it is likely the case that the business may suffer if the company will be unable to adequately address potential downward pricing pressures and other competitive factors.Ryder competes with many other transportation and logistics service providers, some of which have greater capital resources than the company does some of the competitors periodically reduce their prices to gain business, which may limit the companys ability to maintain or increase prices. In relation with this, advances in technology may require increased investments to remain competitive, and the companys customers may not be ordain to accept higher prices to cover the cost of these investments.Ryder operates in a highly regulated industry, and cost of compliance with, or liability for violation of, existing or future regulations could significantly increase their costs of doing business. The business is subjected to regulation by confused federal, state and foreign governmental entities specifically the U.S. Department of Transportation and various state and federal agencies exerci se broad powers over Ryders motor carrier operations, safety, and the generation, handling, storage, treatment and disposal of waste materials.The company may also effect subject to new or more restrictive regulations imposed by the Department of Transportation, the Occupational Safety and Health Administration, the Environmental Protection Agency or other authorities, relating to the hours of service that our drivers may provide in any one-time period, security and other matters. Compliance with these regulations could substantially impair equipment productivity and increase the companys costs.New regulations governing exhaust emissions could adversely impact the business. The Environmental Protection Agency has issued regulations that require progressive reductions in exhaust emissions from certain diesel engines through 2007. Emissions standards require reductions in the sulfur content of diesel fuel beginning in June 2006 and the introduction of emissions after-treatment device s on newly-manufactured engines and vehicles utilizing engines built after January 1, 2007. Each of these requirements could result in higher prices for tractors, diesel engines and fuel, which are passed on to customers, as well as higher maintenance costs and uncertainty as to reliability, all of which could, overtime, increase costs and adversely affect business and results of operations.Case StudiesWhirlpool CorporationThe dilemma of Whirlpool Corporation primarily stems out to a highly fragmented warehousing and distribution network. The main warehousing facility of the company is primarily located in La Porte Ind, while having other packaging facilities all over the states. When vendors ship and deliver the parts needed for production, some are directly dropped in the packaging facilities in which is the ideal situation however a lot of times, the parts are delivered in La Porte which then requires Whirlpool to cross-dock shipments. As result of this, the transportation proces ses of goods are doubled in addition to repeating the strenuous tasks for inventory.such(prenominal) a case appears to be ineffective, costly and time consuming because not only that the company is doubling its expenses and is not doing well in terms of time management, but also the primary corporate value which is good customer service is highly compromised. By having late deliveries or goods or merchandise parts, Whirlpool doesnt appear to stand at its best disposition. Whirlpools Financial Managers are very reluctant in having to invest a lot of their capital in improving their warehousing and logistics solution, however, something must really be done in order to resolve their logistic problems, and hence this is when Ryder came into the picture. In choosing the right 3PL provider for their logistics solutions, Whirlpool assessed three major logistics provider. They have taken into consideration the contractors experience, strategy, capabilities and resources. Out of all the outs ourcing companies assessed Ryder was able to get the contract. The logistics processing service of Ryder to Whirlpool is conducted in this way Once the bulk shipments from offshore suppliers and onshore suppliers such as Mexico and the United States arrived at the distribution centers, the goods received by the warehouse management systems and have them bar-coded. After which Ryder then performs high volume packaging and kitting within the distribution center breaking down shipments such as large cartons containing 500 pee pumps into single-item boxes and polybags. In such a manner, Ryder effectively sorts out the parts and labels them so that it would be easier to identify them once delivered to Whirlpool clients. For the sake of quality and protection of the goods, they are assembled in blister-pack kits together with other components and accessories such as for instance a water pump, two washers and an installation brochure. The process of packaging is very much a holistic proce ss that allows the parts to be ready for delivery. Once the goods are packed in totes, they are bar-coded and move along the conveyor system. After which they are subjected on the sortation system wherein their bar-codes are matched with the orders entered in the system. The customers orders on the other hand are processed by Whirlpool and enter them into their systems while providing Ryder a periodic file in order to identify and sort out the orders to be delivered the following day. In order to monitor their performance, Ryder and Whirlpool follow five pick up Performance Indicators (KPI) these KPIs are shipment accuracy, inventory accuracy, service performance/fill rates, order cycle time and budget performance. In relation with the KPI, Ryder also follows the Net 5 Whirlpool Program which says that every division of operation should generate a net of 5% in cost savings. In sum, by having Ryder took in-charge of the logistics of Whirlpool the company is able to save a net of 7% in their annual logistics operation. Also, as evident, their logistics operations became more proficient and they are able to concentrate on their key competencies which are quality products on top of good customer service.Philips Consumer Electronics of North AmericaThe biggest challenge that Philips faced in terms of their logistics functions are in terms of inventory accuracy, the timeliness of product delivery, security in terms of warehousing and delivery and also cross-border delays.In 2001, the company clear-cut to fully outsource their logistics function by having more than 20 contractors bid for the service. Ryder was chosen amongst all of the said 3PL operators because of their relevant past experiences, efficacy in quality control and product management. Consequently, Ryders human resource was also taken into relevant consideration because of its diversity and good account of experience.In order to provide a very effective logistics recommendation to Philips, Ryder made an assessment to Philips network. Results of such are first the transfer of their Close District Center (DC) in El Paso Texas and replace with a new and larger distribution center at Alliance Park near Dallas Ft. Worth. The reason for such a change would be the bulk of market segments in which high demands of Philips electronics are purchased. By having the new DC inn Alliance Park, not only those products from offshore sources are received within the earliest possible time but also 80% of Philips clients were able to receive their products within 2 days.Cross-border traffics that are often caused by customs are significantly minimized as Ryder has already long-standing relationships with various custom offices all over the continent. Ryder has established Philips designated carriers pick-up station for the freight which usually came from Juarez Mexico. Sometimes this freight is delivered to the DC at Alliance Park while some are directly delivered to Philips customer.The process o f dealing with the logistics function of Philips starts with the Electronic Receipt of shipment delivery which tells Ryder exactly the due date for the delivery of the goods consequently, the electronic receipt goes straight to the order repository system giving Ryder a 48-hr lead time for the delivery after such would be the determination of the most cost-efficient transportation option that meets the delivery commitment. Part of the challenge in transporting goods is the diversity of the products that needs to be delivered.From palm sized electronics to wide screen televisions, Ryder has to make sure that on top of optimizing the truck load space, it has also make sure that the goods will be delivered in a very good shape. In relation with this, there are certain products that are in season because of various factors such as strong advertising campaigns, popularity, etc. Hence Ryder has made sure that there should be effective slotting analysis in order to make the flow of goods i n and out of the warehouses more efficient.Security concerns such as robbery or smuggling of products due to its high product value are also taken into relevant consideration. Cameras, door alarms, and actual security guards are always in operation. Also, the most expensive products are caged in a special area wherein entrance and exit areas are highly monitored. Employees are also required to pin their IDs all the time specially when entering highly secured areas. Another good thing with Philips partnership with Ryder is the immediate feedback provided to Philips customer service right after the good is delivered to the customer. Hence such an act provides a real-time inventory and feedback that is very necessary in dealing with customer inquiry and/or complains.ConclusionThe logistics industry provides a very good opportunity for industries to focus more on their core competencies and significantly reduce their spending while at the same time improving their systems and customer s ervice aspects. Since most of the 3PL companies have all the resources that are necessary for effective logistics function on top of their human capital it is always the case that companies will definitely gain a good experience on top of learning a lot of new strategies in dealing with this type of service.Logistics is the process of administering and controlling the course of goods, energy, information and other resources namely products, services and people from a particular company. Specifically, 3PL is a specialized vendor which takes care of the supply management function of a particular companys integrated warehousing and transportation, and other services that could be made according to customers needs prior on market condition and the demands and delivery service requirements for their products and materials. Few of these services are inventory, material handling and packaging.The research focused on one of the leading providers of logistics function which is Ryder Systems Inc. The company is one of the best and leading industries in terms of providing logistics, supply chain management and solutions all over the world. It has been featured in Fortune 500 and has received numerous commendations from its clients and peers within the industry.As enumerated in Ryders official website the products that the company offers areFleet Management Solutions (FMS), which provides leasing, rental and programmed maintenance of trucks, tractors and trailers to commercial customers Supply Chain Solutions (SCS), which manages the movement of materials and related information from the acquisition of raw materials to the delivery of finished products to end-users and Dedicated Contract Carriage (DCC), which provides a turn-key transportation service that includes vehicles, drivers, routing and scheduling. The research has also discussed the various risk factors that are inevitable in dealing with a third party logistics company. These are the financial revenue of the co mpany and its stability, the need for restructuring the operational and sales teams, realigning business processes and organizing management, residual risks on the value of trucks, SCS revenue, downward pricing pressure that might come from certain SCS customers, attracting and retaining drivers, expand international operations, regulations governing exhaust emissions etc. Similarly, the research discussed two case studies in which 3PL specifically Ryder has done long-term business with such as Whirlpool and Philips.Literature CitedHertz, S., & Alfredsson, M., (2003), Strategic development of third party logistics providers, Industrial Marketing Management, (32), 139-149.Sangam VK. (2006). Implementing Third Party Logistics. Retrieved June 22, 2006, from About.com Website http//logistics.about.com/od/thirdparty/a/uc041805a.htmRetrieved from http//en.wikipedia.org/wiki/Third-party_logisticsThird Party Logistics. Retrieved celestial latitude 22, 2006, from Wikipedia. Org Website. Retr ieved from http//en.wikipedia.org/wiki/3PLAbout Us. Retrieved December 22, 2006, from Ryder.Com Website http//www.ryder.com/aboutus_home.shtmlManagement Team. Retrieved December 22, 2006, from Ryder.Com Website http//www.ryder.com/aboutus_cinfo_mt.shtmlCustomer Awards. Retrieved December 22, 2006, from Ryder.Com Website http//www.ryder.com/aboutus_cinfo_car.shtmlIndustry Awards. Retrieved December 22, 2006, from Ryder.Com Websitehttp//www.ryder.com/aboutus_cinfo_iar.shtmlProduct Line Brochures. Retrieved December 22, 2006, from Ryder.Com Website http//www.ryder.com/aboutus_cinfo_brochures.shtmlDiversity at Ryder. Retrieved December 22, 2006, from Ryder.Com Website http//www.ryder.com/aboutus_diversity.shtmlInvestor Relations Home. Retrieved December 22, 2006, from Ryder.Com Website http//investors.ryder.com/phoenix.zhtml?c=108468&p=irol-irhome