Third-party logistics

CONTENTS
Introduction 3
1. Supply chain management 6
1. 1. Definition and characteristics of supply chain, participants 6
1.2. What is supply chain management, its objectives, principles and features 15
1.3. Application of supply chain management to the organization 17
1.4. The role of logistics in supply chain management 18
2. Third-party logistics 29
2.1. Definition and characteristics of 3PL 29
2.2. The growth and types of third-party logistics services providers 33
2.3. An outlook of services provided by 3PL 36
2.4. 3PL firms compared to other logistics firms (1PL, 2PL, 4PL, 5PL) 37
2.5. The advantages and disadvantages of hiring logistics service providers 39
2.6. Cooperation between 3PL providers (alliances) 43
3. The role of third-party logistics in supply chain management 46
3.1. Interactive effects of 3PL and SCM 46
3.2. The functions of 3PL in SCM 48
3.3. Factors to concern when selecting a 3PL service provider 48
3.4. Problems associated with use of 3PL providers 56
Conclusion 60
Reference list 61

The lines between pure brokers and “value-added” providers are blurring. Many are offering intermodal service, arranging for the shipment of containers by rail over long distances, in addition to truck and ocean transport. Some entities operate their own trucks or warehouses, while others function as pure intermediaries between shippers and underlying asset providersAs North American 3PLs become bigger and more successful, they could themselves become targets for acquisition by foreign-based transportation conglomerates. Companies that have sought a U.S. market presence in the past include Germany’s DB Schenker and Deutsche Post AG, the latter of which owns DHL. Denmark’s DSV is another European entity that is looking to grow globally.In actuality, third parties are migrating in both directions. Pure brokers are moving up into value-added services, while the biggest companies are venturing into brokerage to supplement their higher-level offering. At the transactional level, those “bedroom brokers” that are too small to compete will likely give way to internet-based exchanges that can serve the needs of small shippers. In this historically low-margin industry, the key to survival today is either to broaden one’s service menu or abandon the business altogether [19].Of course, fewer players with greater market power leads to higher rates, but that trend is already evident. The nationwide driver shortage is forcing carriers to raise wages in order to attract talent, capacity is tight due to the new boom in domestic oil and gas production, and fuel prices are likely to rise in the coming year. Even without the inevitable consolidation of third parties, shippers can expect to pay more for transportation in the coming year.Integrated logistics service providing customers (industrial, commercial or service companies) 3PL providers, expanding the range of so-called contract logistics by combining several (or overwhelming quantity) of logistics and coordination of their functions under a single operator.The emergence 4PL provider is due to the expansion of the functions, integration and coordination of the company's focus and key suppliers in the supply chain, including the establishment of an efficient circuit and data exchange between counterparties chain in real time with the help of modern information systems and technologies.Thus, in the development of logistics there is a clear trend towards the integration of the activities of regional businesses, including logistics operators. These general trends are a consequence of the global logistics processes in the world economy that on the background of increasing competition are the main actors in the integration of the market for its activities in order to reduce costs.In the scientific literature on strategic management in the context of institutional mechanisms stresses that the transition to a new type of interaction. It is not based on functional specialization, and on the integration of management activities and is aimed at increasing the flexibility of production and sales activities of enterprises before the due receipt of specific market opportunities that are not available for individual kompaniy. The objective content of the integration of interweaving and interpenetration and merging of reproduction processes, providing a more effective cooperation between enterprises.Thus, economic integration has a number of favorable conditions for the communicating parties. As a result of the integration of the system formed special relationships and ties between economic entities or creating new organizations. Integration cooperation gives businesses greater access to resources: financial, labor, and material, to the latest technology, and allows the products (services), based on a more capacious and demanding market.As a result of the integration of logistics operators form a complex scheme of interaction between business-related sequence of process steps and the process of promoting products on the market, called the supply chain. Such a scheme with characteristics similar to the networks, but may contain elements of hierarchical systems. The key principles of network organizations: a common goal, independent members, voluntary bondage, the presence of several leaders, integrated levels.The development of processes of interaction of enterprises can be viewed from the perspective of capital concentration and coordination of their economic activity. Joint activity of enterprises may have different legal form - the consortium, cartels, syndicates, a pool, a conglomerate, trust, association, group, industrial holding company, financial and industrial group, etc. However, the boundaries between the organizational forms of cooperation between the companies are quite blurred, since the variety of forms of business combination can be crossed on general characteristics.The role of third-party logistics in supply chain managementInteractive effects of 3PL and SCMAs mentioned above, SCM and 3PL have individual advantages. It is recommended that firms which aim to develop SCM, should utilize 3PL, and that firms which plan to introduce 3PL, should employ SCM. It is believed that SCM and 3PL have positive interactive effects, or synergy effects. This section will show the best combination of SCM and 3PL that would benefit the firm with their interactive effects.When a firm contracts-out logistics activities to a 3PL provider, the 3PL provider needs to establish transaction and inventory management systems involving other firms in the supply chain; i.e. supplier, manufacturer and retailer, etc. The 3PL provider does not usually provide all logistics activities solely. Some activities are outsourced to subcontractors. For example, non-asset 3PL providers may outsource a transport activity.Such relationship between the 3PL provider and the sub-contractor likewise constitutes a part of the supply chain process.Figure 4 describes two kinds of alliance, SCM and 3PL. This figure is modeled on a supply chain of manufacturing industry, where parts or materials are well standardized, resulting that production outsourcing is easy and inexpensive. In the alliance of SCM, Manufacturer A and Supplier B have a principal-agent relationship. In the alliance of 3PL, Manufacturer A and 3PL provider D also have a principal-agent relationship. They have to be cooperative in order to enjoy economies of scale and scope, and have to be flexible enough to revise the contract or to switch partners if the market environment is changed.Figure 4- Two kinds of alliance – SCM and 3PLTable 3.1 - Advantages and disadvantages of SCM and 3PLSCM3PLAdvantage:Creation ofnet benefitEconomies of scale and scopeConcentration to corecompetenceLead time reductionFlexibility to customersEconomies of scale and scopeSavings on capital investmentRisk-sharingDisadvantage:Increase ofadministration ortransaction costsCreation of SCM allianceSearching effortsCoordination effortsInformation sharing (e.g.production schedules)Creation of 3PL allianceSearching effortsCoordination efforts (e.g. risksharing)Information sharingThe advantages and disadvantages of SCM and 3PL are shown in Table 1. With SCM, firms can reduce total cost through economies of scale and scope and can increase benefit by improving customer services. The disadvantages include increase of administration or transaction costs in the selection of reliable partners and sharing of responsibilities.The effects of 3PL are produced in a similar fashion as SCM. Advantages include cost reduction by economies of scale and scope, savings on capital investment, etc., while disadvantages include additional administration or transaction costs.Figure 5 describes possible appropriate combinations of SCM and 3PL as characterized by the degree of logistics and production outsourcing. A low degree of logistics outsourcing (LOL) implies in-house operation, while a high degree of logistics outsourcing (LOH) could be realized in several forms; for example maximum utilization of e-logistics to match cargo and transformation needs on real time. 3PL is in-between (LOM) these two levels. A low degree of production outsourcing (POL) is observed in the case of a mega-manufacturer or a conglomerate, while a high degree of production outsourcing (POH) is performed by an e-manufacturer or an e-retailer which can procure the necessary parts or materials by web-trading. SCM is in-between (POM) these two levels. From this figure, we can forward three hypotheses.Figure 5 - Strategic combination of SCM and 3PLHypothesis 1: given a firm which seldom outsources their production (POL), doing logistics activity in-house (LOL) might be suitable.Hypothesis 2: given a firm which outsources most of production (POH), it might be beneficial to use 3PL providers (LOM). E-logistics usage (LOH) might be suitable but is unknown for firms without sufficient experiences.Hypothesis 3: given a strategic SCM alliance (POM), best performance might be achieved using 3PL (LOM). Using e-logistics (LOH) might also be beneficial.Hypothesis 3 means that the 3PL provider could demonstrate their full ability if a strategic SCM alliance exists. Although SCM and 3PL have a principal-agent problem by nature, combining SCM and 3PL has an effect to alleviate it. The 3PL provider can audit the performances of the firms in the supply chain fairly as an outsider, which gives good stimulus to the firms. In the same way, the upstream (or downstream) firm can audit the performances of the manufacturer and the 3PL as an outsider, giving suitable advises to them. This is why the combination of POM and LOM is expected to be successful.The functions of 3PL in SCMTransport logistics intermediaries (freight forwarder, agent, carrier) is designed to ensure the delivery of goods from the point of sending in the right place, on time, intact and with the best cost.Most companies use the services of intermediaries, it requires close cooperation with freight forwarders, agents, and carriers in every mode of transport: road, rail, sea and air. Freight forwarders are constantly working to optimize the costs of transportation, comparing the cost of transportation of goods by different routes using different modes of transport for the development of the best mode of delivery, a compromise between low cost and high speed of delivery and reliability.Transportation companies, is involved in transportation, motivated simply because there are no two identical transport of goods subject to the diversity and increasing the number of new markets in the context of globalization of world trade.The duty of the freight forwarder is to ensure delivery of goods according to the planned route and schedule, as soon as the recommendations and suggestions concerning the transportation are accepted by the sender. Forwarder takes all the organizational issues on himself, which allows the client company to focus on so-called key competencies («core activities»). Forwarding companies in the transport business received "title" architect of transport; The reason for this is the fact that the development of routes, choice of transport, formation of the structure of logistics chains and channels the client company are their (freight forwarders), the main responsibilities and represents an important factor in the competitiveness of the freight forwarder.An important condition for the successful conduct of trade on the global market is to match each set of actions of state regulations and relevant procedures, especially if they relate to customs. It is in these moments all knowledge and skills forwarder come to the fore. Without these qualities and knowledge of the activities of international traders will greatly distracted from their direct duties - to respond to the material needs of the global business. In any transaction there is a share of international trade risks and the increasing complexity of international trade relations requires that the risks are managed much more sophisticated tools. For example, global companies (TNCs) requires that the forwarder could prevent and avoid risks arising during the movement of goods - loss, damage and destruction, although the possibility of forwarding agent to assist in the avoidance of other risks associated with international trade, such as credit risk the risk of changes in exchange rates, is virtually nonexistent.One of the most important aspects is to facilitate forwarding through consulting services to the international market entry of new importers and exporters.Most freight forwarders manages to offer and justify alternative methods of financing transactions related to international trade, which allow new entrants to use the methods of payment beneficial for all participants.The role of the freight forwarder will increasingly grow on the grounds that the companies in the process of adapting their cross-functional integration ties will seek to minimize the number of operations performed in the production and delivery of products to customers and not related to the core business, any shift in the logistics intermediaries. The ability to provide effective international transport of goods in the "door to door" of the receipt of a customer order and delivery to the end user, enables the forwarder to make a unique contribution to improving the efficiency of the supply chains of companies and the needs of end customers.It is necessary to highlight the most important functions performed by the majority of logistical intermediaries all over the world, the quality of which is the determining factor when choosing a logistics facilitator. The functions of the international freight forwarding companies are:Quotas consignments.Booking places on the vehicle.Customs clearance, assistance in the preparation of certificates and export licenses.Making declarations (in Russia - GTE, DTS, CTS, DCD, temporary declaration, etc.)clearance and assistance in obtaining consular invoices.Prepare bills of lading, bills of lading and other shipping documents according to the instructions of the client.Loading / unloading, cargo handling, sorting by fields, weighing, packaging in accordance with international requirements for the transportation of each mode of transport.Cargo insurance on the route of carriage or on a particular path segment.Providing warehousing services in port, the cargo terminal.Providing intermodal (multimodal) transport.Providing own vehicles and transport packaging (pallets, containers).Getting cash from the consignee for transmission / transfer of the sender.At present, most logistics intermediaries - forwarding companies of its strategic aim is the development of services, enabling the company to become a global logistics partner for its customers.The list of additional services associated with it, are listed below functions:- Management of logistics chains producers;- Providing multi-user warehouses and terminals for storage, sorting and cargo handling a wide range of products;- Distribution services of products from specialized regional distribution centers;- The return of goods and repair of vehicles;- The direct replenishment of inventories to top producers working day;- Diversified supply of spare parts and others.Cooperation with logistics intermediary allows firms to gain a competitive advantage by:1. Reductions in operating logistics costs, a general increase in the efficiency of the logistics system, and as a consequence, reducing production costs.2. Increase the level of flexibility and ability to adapt the company to the continuous changes of the environment.3. To reduce the risk.4. Reduce the duration of the operational and logistic cycles.Some aspects of logistics intermediaries PM opens next topic below.The company "Unisys Corporation" with a capital of 8.7 billion. Dollars. Was created through the merger of 2 computer companies. Currently, the company intends to review its policy in relation to logistics operations in European countries."Unisys" manufactures and sells computer products, from personal computers to sophisticated computer systems. 70% of all of the computer equipment sold in European countries, made in the USA, Canada, Brazil and the Far East.By implementing the new policy, the company began to review its position on the now single European market. Analysis of the processes of the organization and implementation of logistics operations showed that "Unisys" has little control over the process of delivering goods to consumers, while at the same time, there are options for improvement. management specialist logistics serviceThe first - is the creation of an integrated electronic system of EDI (Electronic Data Interchange), used for planning, monitoring traffic, billing and monitoring of funds received for products shipped.Second - is the need to create a computerized system for forecasting production levels for production planning, calculation of demand and supply of accounting components. The system should also help in the management of reserves.Third - "Unisys" is going to centralize inventory management, and this can reduce the amount of storage space. It was determined that the company enough to have five major central warehouses and 14 small terminal stations. Thus, reduced 72% of warehouse space and 76% - the amount of reserves that greatly reduce the cost of inventory carrying cost.Finally, the fourth - the company decided to reduce the number of transport companies involved in ensuring the delivery of the goods "Unisys", with the emphasis should be placed on road transport.Consider the action "Unisys" to improve its logistics operations in a united Europe.Reduce distribution costs by centralizing logistics is achieved by the fact that it is contributing to the enlargement of the parties purchased goods from suppliers (ie, an organizational form of the company may enter the market as a large wholesale buyers), enables a wide range of the latest and creates favorable conditions for the contracting of transport and discounts on the price of goods.Mission Supply Management is to bring together the ultimate goal is to transport the finished product and meeting customer demand. Completely taken in charge by freight of finished products. Each activity is planned and controlled as a link in the chain of the whole process of cargo finished products. The manager aims to increase productivity, achieving compromises that are reached between the functions to implement the cargo of finished products.In order to plan measures to improve traffic movement of finished goods, the manager has a lot of opportunities to organize interaction with marketing, manufacturing and other services. One or another way of improving the movement of traffic associated with the experiment, which aims at the full satisfaction of the demand at minimum cost. The focus is the problem of profitability.As the market is the enterprise extends beyond the national borders, global scale purchases and logistics, there is a need for an international strategy. The interests of consumers in the world market facing the high-quality and relatively cheap products. The global system needs to respond effectively to competition on price, quality and range of services. Hence the task of creating a network that would include a global system of computer information, improving customer service and providing a comprehensive transport system combined.Improved planning and control procedures in the management of material flows occurring in the widespread use of computers, often carried out simultaneously with the organizational restructuring of the services involved in the management of materials, in order to consolidate the efforts of management to find the best solutions to problems arising in this area. This leads to the formation of new institutional arrangements for coordination and control, integrating the efforts of the functional units, which were previously carried out their functions in isolation from each other.Each linear element of this structure has sufficient independence, but the units act as a single complex. All coordination and control functions are concentrated in the staff departments, reporting directly to control material flow. Linking the activities of various units in the long-term and medium-term is carried out in coordination and planning groups. An important role in this process is the use of specialized information systems. Centralized collection and processing of information allows to establish permanent control of all activities on materials management and timely implementation of corrective actions production.It should be noted that the development of linear function of the management of material resources is currently the main way of improving the organizational structure in this field. This process involves not only the union of specialized departments of all the functions of materials management in the corporation, but also, most importantly, their orientation to perform a wide range of functions beyond supply, involving the head of the relevant department in the work to improve the overall efficiency of commodity -materialnyh values ​​in the organization.It should be emphasized that there is great opportunity of improving linear functional structures through the creation of various kinds of coordinating mechanisms. In the area of ​​materials management is primarily the improvement of the system of planning, distribution and control of funds invested in the material resources, the use of various types of economic mechanisms. An important place is occupied by the creation of special bodies of staff, as well as the appointment of special managers coordinator.In conclusion, it should be noted that the transfer of the main functions of logistics companies "third party" is becoming more common in the Russian economy.The functions of 3PL-provider is not only the organization of transportation, inventory management products, and its accounting, warehousing, cargo handling, preparation have before delivery to the final consumer. Thus, the customer receives a complete package of all necessary services, completely meets their needs.So, logistics outsourcing is the transfer of logistics functions to third parties providers.Consider some examples.Some manufacturers have developed their own logistics service with significant budgets. Others, recognizing unprofitable intra-logistics, choose an alternative route. Namely - to turn to providers of logistics services. This can be both one and several cove supplies and services. In this and in another cases, there are certain advantages and disadvantages. Referring to one service to a number of suppliers, customers, completely independent, but runs the risk of uncertainty in action. Working on all kinds of services with a single provider, the customer receives the stability in the actions, but the risk of becoming hostage of his choice. However, customers increasingly want to receive the desired service from the services of a single operator. This trend comes mainly from large companies with high turnover and the volume of trade flows.What is the value of 3PL services for the client?First of all, saving time and resources. Having given some tasks to outsourcing, the company focuses on the production, marketing to politics.The development of the Russian market of logistics services is on the same path as in Europe, but of course with its own characteristics. Foreign clients who start business in Russia, of course, faced with obstacles. It features the country's legislation, especially transport infrastructure, lack of storage facilities, and qualified, too. In this paper we would like to show the 3PL provider in the understanding and application of Russian and foreign companies in Russia, not failing to mention the mistakes that allowed the work.Many Russian companies providing transport services mistakenly declare itself as a 3PL provider, actually being the only transport company that provides various types of transport services: rail transportation, automotive services, warehousing services. Whereas, the concept of 3PL services includes very different components. After 3 PL - a set of services that may include the services of various kinds of activities. It is not only transportation, but also the utilization of production, processing, optimization, repair and renovation of various customer applications. This single database with the customer relations culture, culture of behavior of staff, issues on quality, innovative solutions to optimize the turnover of the manufacturer and many others.In contrast to the Russian provider, Western companies have accumulated sufficient, exactly a good experience in providing 3PL services. But it often happens situation where the transport company takes the services of 3PL, continuing to work in the old way, waiting for orders, assignments from the client, and the client still has to think and plan. But the provider must show itself to its customers new solutions, to invent new services. For example, foreign manufacturers automotive industry may be two or three companies of 3PL services, and for each of the providers of fixed block your activities.In working with a 3PL-provider there are certain risks. The transfer of work to outsourcing - a very painful process, it takes from one to three years. In practice, there were cases when the provider is trying to dictate their terms to customers, improve the pricing, forced to go at them on occasion, knowing that the manufacturer's simplified departments that he has ceased to be guided by the market, in domestic technology. Such behavior is unacceptable. And now, the discussion of such situations - frequent theme forums and conferences on 3PL, 4PL services in Europe. It is necessary to take into account the history and avoid such unpleasant moments.Some manufacturers provide a focal point of its employees based 3PL provider - a separate legal entity. They monitor and control the logistics market, track trends, 3PL providers are confronted with each other, maintaining a healthy competition in the market of logistics services. As a result, 3PL provider becomes a 4PL provider, as added a new direction in business. The term 4PL was registered in 1996 by the consulting firm Andersen Consulting with the following interpretation: "The logistics provider is the fourth level is the manager of the supply chain that brings the resources, capacity and technology your organization with the resources, capacities and technologies to other logistics companies and manages to offer customers the most complete solution of problems in the supply chain. "In services, 3PL providers are primarily interested large customers. This applies especially to foreign retailers, manufacturers. Coming to the Russian market, they want to get the service of the European level. And often prefer to go to the same service provider that offers its services in Europe. It comes from the fact that the client is not really familiar with the market failure of the Russian 3PL-Derov and not sure what to get the service of good quality. And how Western 3PL provider to resolve the issue of services in Russia? It also concludes the contract of a thief with Russian 3PL providers.As a result, the customer receives the service at a 3-5 per cent better quality and 30-50% more expensive than if it appealed directly to the Russian logistics providers.Let us imagine ourselves in the place of director of logistics of large transnational producer whose plants are scattered across continents and is headquartered in the old Europe. In the nearest plans of the manufacturer - the development of business in Russia.In the first phase of development of a new market by the decision of an indoor-office sales in Russia, and the challenge for logistics is to deliver products from Europe. Ie the customer decides not to use the services of Russian companies, and manage on their own. The first rake on the way to the customer - a custom with all its intricacies and ambiguous legislation. After an unsuccessful attempt to coordinate the process remotely from the head office, and when the imported goods as a result of "stuck" at the customs office for a period exceeding its shelf life, the manufacturer decides about finding a Russian partner, capable professional, not to break the law, to do the job on time and for a reasonable price. In the future, this link-cal logistic chain is transferred to the Russian partner.The next stage of business development in Russia, the company is the creation of inventory in the country. And again, after long unsuccessful negotiations with the owners of warehouses, the manufacturer decides to transfer this task to outsource. Here is the second unit sent to the Russian partner. Then, at the end of the test period, after analysis of the logistics department of the manufacturer in Russia, comes the understanding that it is advisable to hire the services of the logistics operator. Having thoroughly studied the strategic objectives and policy of the company, the head of logistics department initiates the process of selecting a single logistics provider (3PL).The first step in the selection becomes 3PL market research logistics services. Based on my past experience, the manufacturer concludes that the analysis of the logistics market is best independent annual survey conducted by RBC (http://marketing.rbc.ru/).Carefully analyzing the results of research, we finally secured through the understanding of the effectiveness of the logistics operator. Thus, the logistics operator performs several important functions for the client:1. by the presence of a significant portfolio of orders from a large number of customers in the transportation, logistics operator has the opportunity to consolidate them, building a chain of round trips;2. The terms significant freight traffic, logistics operator is a major wholesaler in the market procurement of transportation services that allows him to buy stock on the market at a discount (discount), the carrier providing a guaranteed job on a permanent basis;3. as a key employer for the carrier is able to provide a decent level of service required by the client;4. to ensure the quality of services provided to customers, the major logistics operators have formed their own rolling stock to guarantee the service, regardless of external factors (sharp rise in sales, seasonal fever, New Year, etc.).In fact, these functions of the logistics operator is itself logistics. The manufacturer of a tender for the provision of transport logistics, involving large national logistics operators, have developed branch network. According to the results of the tender the leader - the same logistics partner, with mutual cooperation and with whom began the first steps on the Russian market.Since then, the scheme of the producer in a new market has changed dramatically:- The logistics department of the plant was reduced to one manager and two assistants - there was a part of the optimization of the logistics of the manufacturer;- Instead of the former employees of the staff appeared logistics operator, which organically joined the best employees of the disbanded Logistics Department. There is an excellent opportunity to monitor the work of 3PL provider;- Now all the work of the organization and support of supply fell to a professional team of logistics operator, concentrated in branches throughout Russia. Coordinating the work carried out from headquarters 3PL projects at the plant;- Made the integration of IT platforms and logistics operator of the plant, reducing order processing time to a few seconds, and there was a transition to electronic document management system;- Employees logistical operator took over the function of communication with the consumers of plant related to logistics, allowing almost nullify the eternal conflict with the sales and logistics to provide personalized service to customers;- Logistics operator performed a detailed audit of business processes in terms of logistics, which allowed to optimize the chain of supplies and implement the scheme Just-in-Time (just in time);- Work on the scheme Just-in-Time led to the optimization of inventory, which increased sales without increasing storage space.Now, manufacturers can focus on the production and marketing policy. This activity 3PL provider for the client - is absolutely transparent.At the end of the test period for the first six months of operation of the logistics outsourcing partner of transport logistics shows the following results:- Logistics budget decreased by 9.7%;- Inventory turnover increased by 1.9 times;- The cost of documents with logistics service providers reduced by 37%;- The quality of logistics partner, as measured by KPI's system was 98.6%;- 89% of customers rated the quality of service of the plant (logistics) "excellent".Head of the Department of Logistics at the next meeting, held in the main office of the manufacturer, received the award in the nomination "the best service solution", and was appointed director of the department of logistics in Eastern Europe.We have tried to illustrate the typical situation of a competent work of the Russian 3PL provider; In the theoretical part of the material, do not forget to tell ERROR-kah, and logistics that allow operators and customers.Every company has its way, the work is an expertise that originates in the nineties at the dawn of the market. In those early years, many companies have been pioneers, and, in fact, created the logistics market, together with its clients and partners. As then, their role today is to change the market, anticipating customer needs.Factors to concern when selecting a 3PL service providerDeciding to a use a third party logistics company is a decision that depends on a variety of factors that differ from business to business. The decision to outsource certain business functions will depend on the company’s plans; future objectives, product lines, expansion, acquisitions, etc.Once a decision has been made to outsource certain processes then a company will begin a search for the right 3PL that fits all their requirements at the best possible price. There are three types of Third Party Logistics Company that operate today.Asset BasedManagement BasedIntegrated ProvidersAsset based third party logistics companies use their own trucks, warehouses and personnel to operate their business. Management based companies provide the technological and managerial functions to operate the logistics functions of their clients, but do so using theassets of other companies and do not necessarily own any assets. The third category, Integrated Providers, can either be asset based or management based companies that supplement their services with whatever services are needed by their clients.When selecting a 3PL, the request for information (RFI) or quotation (RFQ) should be as detailed as possible. The company that is selected should be able to fulfill all the logistics requirements and that can only be assured if every requirement is communicated to potential companies. The RFI should include a detailed description of the areas to be outsourced. This will usually include:The scope of the contract, including locations, facilities, departments.Information on volumes involved; number of deliveries, warehouse sizes, number of items, etc.The logistics tasks are to be performed, e.g. warehousing, transportation, etc.The level of performance required.After the bids have been received by a company from the prospective 3PL’s, an evaluation would take place where a multi-discipline team will review each bid based on a pre-defined set of criteria. These will include some of the following.Does the 3PL provide the services required?Does the 3PL have the technology required to perform the tasks required?Does the company have the required warehouse space, dock capacity, warehouse personnel, etc.?Is the 3PL financially sound?Are the 3PL’s geographical locations suitable to cover the network?Does the 3PL have the flexibility to respond to changes?Are the 3PL’s environmental policies compatible?Are the costs of the services detailed enough for comparison to other bids?Are the customer references acceptable?Is the 3PL a good cultural fit?The selection team will usually review each of the bids based on the criteria and give each bidder a score. Depending on the importance of each criteria, a weighting can be given which gives more importance for one or more criteria in the selection process. Once the selection team has evaluated the bids, management will often select the top two or three companies for site visits, face to face interviews and more detailed reviews of financial records. Once a company has been identified contract negotiations would follow before a final agreement could be reached.A highly efficient, cost effective and un-disrupted supply chain represents the foundation of every successful company. It allows every other operation of the firm to move ahead without concern for a lack of materials, supplies or parts. If you are considering the addition of a logistics service provider, adequately vetting that Global 3Pl will determine whether your supply chain adds value or becomes a cost drain. Flash Global suggests considering these 6 considerations to thin of when interviewing third-party logistics service providers.Scalability.The most crucial ability a global 3PL must provide is the capability to scale their operations to your growing needs. Bi-directional scalability will have a direct influence on the efficiency of your supply chain. Every company strives to grow, perhaps going global; however, every company also has ups and downs. When demand contracts regardless of the reason, a 3PL must be immediately responsive and scale down operations to minimize costs while maintaining efficient flow of goods.Conversely, when demand skyrockets, you will need a logistics service provider that can manage the sudden spikes seamlessly and without effort. Businesses face growing pains at times, but a competent 3PL that offers holistic, comprehensive services and has experience handling sudden growth, you will most likely encounter a supply chain that provides added value.Thus, finding a 3PL that has customers of all sizes will help to ensure that they can scale to your needs through multiplying or aggregating shipments or making small adjustments as required as your business meets each day.Innovative Technology Platform.Procurement and shipping may seem to be low-tech operations; however, logistics service providers must measure their performance by the efficiencies they provide. Thus, those 3PLs that embrace cutting-edge technology offer your company the greatest potential for optimization.Cloud-based platforms and Internet of Things (IoT) devices have come into prominence, and they are giving 3PLs radically enhanced capabilities and capacity for control. A leading 3PL will have the latest systems that enable them to provide your firm with real-time data and feedback on supply chain operations and freight.Comprehensive Warehousing and Transportation Options.Whether you are vetting a non-asset-based logistics provider or an asset-based global 3PL, you should be offered a vast array of warehousing and shipping options suitable to your operations. Options and alternatives create opportunity within a supply network. When a 3PL has extensive relationships with multiple suppliers, you benefit from their ability to choose the lowest cost option. This makes having the leading technology platforms even more important for managing those options, identifying the most efficient and implementing it seamlessly.Financial Stability and Payment History.The sudden demise or disappearance of your global 3PL partner can have a devastating effect on your business and customers. Finding a partner with a history of financial stability and solid payment history will mitigate the potential that the logistics provider will fail causing you damage from their own mismanagement.As you evaluate the top 3PL candidates, ask for a listing of their partners and inquire about their payment history. Have they ever missed payments? How the 3PL handles business partners is a good indication of how they will treat your business, and touching base with those partners may give you a clearer view than a curated list of references.Proven Track Record.Looking beyond the financial stability of potential 3PLs, ask about their overall track record. Do they count multiple companies as long-term customers? Do they have a reputation as an innovative, cutting edge firm with the latest technology? Every service oriented company lives by its reputation of reliability and efficiency.High Quality Industry References.The references for a third-party logistics provider should be beyond good or simply passable. They should be excellent recommendations that this 3PL will be worth the time, and clients should not hesitate to rave about the results they have experienced or about the security, flexibility and reliability of the 3PL.In addition, references should speak to the culture and character of the global 3PL. Whether it is goods or service oriented, the logistics provider should be delivering a much higher value proposition than just efficiency. The ability to identify and exploit opportunities along the supply chain is a good example.Efficient 3PLs get the job done; however, the best logistics providers can deliver on cost savings, time-to-market improvements and compliance. Seek out a 3PL that is known for their laser focused culture on providing the highest quality service and value added propositions.The due diligence may be time consuming, but evaluating a 3PL should a process that is stringent in its examination. They will control a critical element of your operations. You should be able to determine in advance whether they will contribute to the success of your operations or be a drag on them. Flash Global has the professional service, innovative and proprietary technology and global footprint to deliver the results you need. Problems associated with use of 3PL providersIn Russia, the development of a broad category of 4PL level of integration is not necessary to speak. Very rare cases, when only the circuit elements 4PL. In Russia, even 3PL-market operators, accumulating goods from different manufacturers and delivering to stores retailers today is virtually nonexistent. The main share of the Russian market is now occupied by 3PL international operators such as the French company «FM Logistic», the British company «Tablogix», as domestic companies in this segment is actually not.Thus the market capacity is estimated at $ 45 billion. A year, and its annual growth of 5-6%. For example, last year the company «Metro Cash & Carry» announced a tender for the supply of goods from suppliers to retailers, but to win the competition from Russian providers unable to no one.The two leading companies in their segments - transport company Radar ("Russian Logistic Service") and the warehouse operator "National Logistics Company" (NLC) decided to join forces and get into this niche. "Russian Logistic Service" began sending trucks daily in the cities within 1500 km from Moscow, in particular, in St. Petersburg, Kazan, Rostov-on-Don, Samara, Togliatti-minute, Nizhny Novgorod. The service is aimed primarily at manufacturers of FMCG and retail chains, but, according to experts, the alliance radar and NLC have taken away part of the business and courier companies - the consolidation of large volumes of goods from different suppliers allows the operator to provide the customer with the ability to send the minimum party goods wholesale prices. Union radar and NLC - is the first step in the development of the transport network and storage infrastructure, which is absent in Russia. Until now, radar and NLC did not occupy a major share in the market of modular cargoes, and the new project will be for the companies at the same time output to the segment and the segment of 3PL-operators.Russia has the highest concentration of professional logisticians, of course, in Moscow, because it acts as the "transit point". All fixed capital, financial institutions are concentrated in Moscow. Accordingly, the brain centers and headquarters of major organizations involved in the movement of freight traffic seriously, are also located in Moscow. The situation in the regions is quite different. There will most likely work intermediaries - distributors, who often take the goods directly from the manufacturer. Because of this discrepancy are born with the problem of communication between individual warehousing, wrote in a system. Through communication between locations in different parts of the country's warehouses - it is a great tool for business success, but even large companies often do not have their own well-functioning warehouse network (equipment companies warehouses of class "A2" and "A +", which is an inherent part 3PL-operator just beginning). As for St. Petersburg today, and here the situation on the market develops in such a way that the established system of quality supply is impossible without a strong logistical component. Everyone knows that good logistics can achieve the optimum level of costs being very reasonable for the customer service. Do not forget that St. Petersburg is the largest port in Russia, but even so, all the distribution logistics is focused on Moscow.Russia - a country of vast spaces and large cities have divided the distance of thousands of kilometers. Under these conditions, transportation by rail - the most profitable way to deliver goods. But if in the transport of oil JSC "Russian Railways" sees the basis of their financial well-being, then consumer goods is more complicated. The relative underdevelopment of logistics technology, until recently, very difficult to use rail transport as a flexible tool for rapid response to requests for the mass market. It became clear that to increase the volume of goods sent by rail is not enough logistics centers and logistics operators intermodal logistics service schemes. But in this case the field is beginning to change for the better. So in particular, JSC Russian Railways, has created and actively develops the department of customs clearance and border crossings already have successes on the Information and Electronic passage, reducing the time limits the accuracy and completeness of the information.Many major European providers - FM Logistic, Kuehne & Nagel, Schenker - are already present in the Russian market. But most of them only have organized in our country bonded warehouses and did not start until the general expansion. A clear leader - the company FM Logistic. It is obvious that at the moment compete with the firm of "National Logistics Company" (NLC). There are other domestic companies with a reputation for a "very advanced" - Radar ("Russian Logistic Service"), RFP ("Russian Logistic Provider"), the Company "KIA-Center" or "Uralkonteyner." And now, just a matter of time, though quite short, as they will be able to successfully confront the massive arrival of powerful western operators.The main trends of modern logistics are: the emergence of a greater range of the services offered and to raise awareness of customers about how they can usefully use such services.A few years ago, each of the firms involved in logistics whatever their type of service, it is today the boundaries between different types of logistics activities have become very blurred. More and more enterprises perform different modes of transport, and offer a variety of additional services: warehousing, customs clearance, distribution, etc., ie, may offer service through the entire supply chain, the so-called «One-stop shopping».A few years ago, each of the firms involved in logistics whatever their type of service, it is today the boundaries between different types of logistics activities have become very blurred. More and more enterprises perform different modes of transport, and offer a variety of additional services: warehousing, customs clearance, distribution, etc., ie, may offer service through the entire supply chain, the so-called «One-stop shopping».In addition, transport companies, previously offered one kind of regional transportation, replaced by logistics, offering transport to the global geography and any transport, and in addition also a comprehensive service throughout the supply chain. For example, delivery of goods from Europe invited to express delivery air transport for 1-3 days, and regular transportation for 5-10 days by road. Client interest-out, first of all, delivery time and accuracy, its price, and the choice of mode of transport it is ready to provide logistics.Large and medium-sized enterprises are increasingly beginning to lean toward the purchase of complete logistics solutions. This allows them to focus more on its core business - the development and marketing of the products, which is for the main company. A operations, such as warehousing and conveying, charge of logistics. Thus, they are able to use the skills and experience of the logistics company to improve its own efficiency. From a financial point of view, important is the fact that it allows you to turn fixed costs on a variable in related activities, that is, depending on the volume of products. However, at present in the Russian market of logistics services 3PL-operators are not many companies as it should be. The reason - the high cost of services, high level of responsibility that has to subcontract to third parties. And it is not always an adequate performance of the Russian tuned Western technology.Characteristic and the changes that occur in the relationship between customers and logistics. If they had revolved around the question of specific transportation or customs procedures, and the main criterion for customers was the price of the services, they are now increasingly moving to a long-term basis, and clients are becoming more demanding of the quality of services. Therefore, more and more logistics companies are involved in the management of all processes in the supply chain, and the company's clients are increasingly acquaint them with their long-term goals, to jointly work out a mutually acceptable solution. Customers increasingly value their time and increasingly trusted by the professionals-Logistics cooperates with, seeking to limit their number, but to develop long-term cooperation with those whom they have chosen partners.Similar changes are taking place in the Russian logistics market, helped by the arrival of the leaders of the world to our logistics. Thus, on the basis of the above tendencies, it is possible to conclude that the market logistics, and, in particular, the logistics outsourcing have a strong capacity for development, both abroad and in Russia. The processes of globalization, integration and cooperation, as well as increasing consumer demand encouraged companies that want to be competitive in the market, to apply logistic approach to building its business and to use in their work a tool such as logistics outsourcing. The market of logistic services in our country is, of course, is in its infancy, but has a very favorable medium-term outlook. Small wonder that in recent years has increased interest in Russia on the part of well-known international logistics operators. For example, a large American company Hines, is engaged in development and management of commercial real estate, is under way on projects warehouses 100 000-200 000 square meters. m each in the Moscow region.In Russia, unlike in Europe, Asia, USA, Canada, other countries where outsourcing of logistics services uses the vast majority of companies, it is an effective instrument is given little attention. But Russian business is developing in a way similar to the ways of the world the rest of the world. Therefore, it is necessary to choose a strategy combining efficiency prima tion tools of logistics companies and trends of concentration on core activities ("core competencies") that is sure to provide ample opportunities for the development of the market of logistics outsourcing and specialized logistics intermediaries as a 3PL, 4PL and in Russia.It is necessary to take into account that logistic knowledge in Russia, mostly drawn from Western sources. And in our country has its own specifics, its mentality, its business culture. Logistics scheme suitable for the modern Russian conditions are developed individually and often do not have standard solutions. Accordingly, it is obvious that you need to create a coherent science-based system of the Russian logistics theory and practice, based on the positive experience of western partners, but corresponding to modern realities of our country.Thus, it can be summarized as follows:Many companies today are attracted third-party firms to perform logistics operations, but there are still many difficulties that do not allow to say that outsourcing in Russia has become a common practice. Below are the specific Russian problems, said the head of logistics departments of retail chains as important obstacles to the development of outsourcing of logistics functions.• Lack of market quite competent and powerful logistics operators, which could cope with the management of the entire logistics or even the individual functions of a large network.• The low level of confidence in the third-party companies. Suffice it rarely transmit functions that affect the company's image in the eyes of customers. The source of the problem lies in the insufficient amount of information on the activities of logistics providers.• Inadequate laws for the regulation of the activities of freight forwarders. Due to the absence of a law on compulsory licensing activities forwarders are facts of loss and damage of cargo. In some cases, this leads to the fact that small companies cease to exist. Since carriers usually do not insure their liability in case of damage or loss of cargo is very difficult legal means to compensate the loss. At the same time some negative examples tarnish the entire industry of freight forwarding services.• Too high cost services. The cost of the warehouse operator, for example, on average, 1.5 times higher than the cost of operation of self-storage system (this figure, however, does not take into account the diversity of operating costs and losses due to the freezing of funds in its own storage facilities).• Failure to integrate vast amounts of complex logistics providers in the structure of the customer due to the mismatch of technical and information standards.• Non-compliance claimed and actually implemented by a range of services. This, in particular, for the possibility of customs clearance, declaring that almost all operators, but actually provide the required volume and with sufficient quality only a few.• No companies in the market, providing a full range of logistics services (implementation of international and domestic traffic by all modes of transport, customs clearance, warehousing, distribution of goods and cargo insurance and so on. D.).In the contract logistics market, the basis of which in Russia, as well as throughout Europe, are the services of 3PL-providers, there is a significant amount of pent-up demand. The main objectives of cooperation of trade and production companies with logistics intermediaries of this class is to provide a competitive advantage by:• reduce operational logistics costs, a general increase in the efficiency of the logistics system and, as a consequence, reduction of production costs;• increasing the flexibility of the company and the ability to adapt to constant changes in business conditions;• risk reduction;• reduce the duration of the operational and logistic cycles.The priorities of the logistics operators should be to achieve high quality and comprehensiveness of services, expansion of material-technical base and organization of harmonious cooperation with the customs authorities. Availability demand will stimulate the formation of logistics intermediaries, meet the requirements of companies.When entering a new market, even very large multinational companies providing logistics outsourcing, consistently pass all stages in the development of mediation and perform one or more functions to the provision of logistics services. The rate of data flow stages depends on the financial capacity of the operator, the state of the warehouse and transport infrastructure of the region and the particular market readiness in principle to take the appropriate level of service.Optimal for a given stage of development of the market and a package of services to the implementation of which should strive to logistics operators, depending on the needs of companies that are regional economic leaders and influence the formation of distribution channels in this market.A significant number of retailers the main direction of its development is currently selected in the expansion of sales regions, but few logistics operators are able to boast of having a well-functioning outside the capital, transport and storage system. It should be noted also that a significant portion of highly skilled logistics specialists working in Moscow, serving as the main "staging point". At the same time, in many regions there is a shortage of qualified specialists, which is why there are problems in communication between the individual warehousing, wrote in a system.Through communication between locations in different parts of the country's warehouses - is a great tool for building an optimal distribution system. Closing this gap is able to dramatically increase the competitiveness of any logistics operator.Worldwide, one of the most frequently used ways to create full-featured large 3PL-providers is a cooperative logistics intermediaries. They prevent the development of a low level of state support, serious administrative barriers, the lack of sources of investment, limited access to credit resources, difficulties with the allocation of land, and so on.. In these conditions, the formation of strategic alliances between the narrow functional logistics operators may be an effective solution to the problem of creating competitive 3PL- providers, the organizational structure and service that meet international standards.CONCLUSIONNowadays, the demand of third-party logistics provider becomes an increasingly important issue for companies to improve their customer service and to decrease logistics costs. This paper presents an integrated fuzzy approach for the evaluation and selection of 3rd party logistics service providers. This method consists of two techniques: (1) use fuzzy analytic hierarchy process to identify weights of evaluation criteria; (2) apply fuzzy technique for order preference by similarity to ideal solution (TOPSIS) method to evaluate and sequence alternatives and to make the final selection. Finally, an actual industrial application is performed in logistics department of a tire manufacturing company. For this, first, eight logistics supplier selection criteria were determined, and then the best alternative among seven logistics service provider companies was selected by the proposed method.Outsourcing has become a common practice in many industries, specifically in the logistics activities. Because more companies outsource their logistics operations, selecting appropriate and preferable third party LSPs has increasingly become a critical issue and a strategic decision for companies outsourcing their logistics operations.In this work, we have considered the relationship of SCM and 3PL, and offered some hypotheses about logistics and production outsourcing. It is recommended that joint usage of SCM and 3PL should be promoted because of their positive interactive effects, as indicated by the hypotheses. That is, when firms are intent on introducing SCM, it would be beneficial to outsource logistics activities and utilize a 3PL provider. The reverse could be true as well.Issues for further study can be classified into two: theoretical and empirical. First, as mentioned in hypothesis 2, we could not fully clarify the relationship between e-logistics usage (LOH) and the e-manufacturer or e-retailer (POH). This is because we do not have a confident perspective about IT and its implications on SCM and 3PL, partly owing to insufficient experiences. However, if we could acquire adequate cumulative experiences of e-business, we will be able to assume the relationship between LOH and POH. We could then offer new hypotheses and revise Figure 2. Second, we have to conduct case studies in order to justify our hypotheses empirically, which could also bring practical suggestions and recommendations for private firms, and bring new ideas for further theoretical development.The proposed methodology of this study is easy to implement and quite reliable for ranking the alternatives. Applicability of the proposed methodology has been proposed in a tire company for the selection of the third-party LSPs. The approach can also be applied effectively to help any managerial decision-makings. The findings provide valuable insights for logistics practitioners, academicians, and educators. For further research, other multicriteria evaluation methods can be used and the obtained results can be compared with the ones found in this paper. Also, the methodology of third-party LSPs selection can be successfully adapted to other sectors with different data sets.list of ReferencesAn overview of Third Party Logistics Industry; Centre for transportation studies, Massachusetts Institute of Technology.APICS Dictionary, 8th edition, 1995.Waters. Global Logistics and Distribution Planning: Strategies for Management, 2003.Chartered Institute of Logistics and Transport, 1998.Harland, C.M. 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