1. November 25th, 2010

2. The 2010 15th annual 3PL study focuses attention on
topics of current importance
 3PL Customer study and Provider study
• Investigate customer needs and experiences
• Validate customer perspectives from 3PL providers point of view
• Identify areas for future improvement
 Topics of contemporary interest
• Total Landed Cost (TLC)
• Life sciences 2010 Special Topics
• Fast-moving consumer goods
 Strategic assessment of future of 3PL-customer relationships
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3. Survey respondents represented range of geographies
and industries
Shipper respondents Shipper industries represented
Industry %
Europe 1. High-Tech / Electronics 12
(297)
North America 26% 2. Consumer Products 10
(446)
40% Asia-Pacific
(194)
3. Food and Beverage 9
17%
4. Automotive and Transport Equipment 9
5. Life Sciences and Pharma/Healthcare 8
Latin America
(139) 6. Industrial Manufacturing 8
12%
7. Retail 6
Other 8. Chemical 6
(57)
5% Additional Industries (14) 18
Other 14
+ 746 Survey respondents from 3PL provider firms.
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5. Changing use by shippers of 3PL services is evidenced in
2010 after the 2009 economic downturn
Industry challenges that impact the use of 3PLs
 Logistics cost pressure
 Highly volatile freight prices
 Unpredictable demand challenge efficient supply chain management
Changing use of 3PL services in 2010
 65% of the shippers increase the use of 3PL services
 24% of the shippers return to insourcing of logistic activities
 46% of the shippers are reducing/consolidating the number of 3PLs used
• Consolidation trend of 3PLs in use by shippers is perceived even stronger from
3PL perspective (73%) and is expected to continue in the next couple of years
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6. Shippers report measurable benefits from use of 3PLs
Results All regions
Logistics Cost Reduction (%) 15%
Logistics Fixed Asset Reduction (%) 25%
Inventory Cost Reduction (%) 11%
Changed From 17 days
Average Order Cycle Length
Changed To 12 days
Changed From 73%
Order Fill Rate
Changed To 81%
Changed From 83%
Order Accuracy
Changed To 89%
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7. The IT Gap continues, but shows some narrowing in
recent years
IT “Gap”
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8. Shipper-3PL relationships evidence
continued improvement
Success Ratings: 89% of Shippers; 97% of 3PLs
Success Factors
 Openness, transparency and good communication
 Agility and flexibility to accommodate current and future business needs
and challenges
 Interest in “gainsharing” between 3PLs and shippers
 Interest in collaborating with other companies, even competitors, to achieve
logistics cost and service improvements
 Use of 3PLs Provides New and Innovative Ways to Improve Logistics
Effectiveness: 68% of Shippers; 95% of 3PLs
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9. Current State of the 3PL Market
Key Takeaways
 Outsourcing trend of logistic services continuous in
combination with the consolidation of 3PLs in use
 Shippers interest in integrated logistics services for
supply chain optimization is still limited
 Shippers report 15% cost reductions from 3PL use
 90% of 3PL relationships are seen as successful
 3PLs ability to provide new and innovative ways to
increase logistics effectiveness scores low (68%)
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10. 10

11. Common understanding of concerns but different view of
role that 3PLs should play in addressing them
Assessment of 3PL’s capabilities in addressing top logistic concerns
Ranking of Shipper
concerns1 view 3PL view
Improving shipment density/load utilization 87% 74% 76%
Reducing logistic costs 98% 69% 73%
Having a supply chain disruption/mitigation strategy 81% 68% 70%
in place
Building sustainability into supply chain 82% 65% 65%
Ensuring perfect order fulfillment 87% 62% 70%
Shortening new product time-to-market and supply chain 81% 46% 62%
integration
Accommodating sales promotions 66% 42% 60%
Rapidly responding to changes in consumer demand 83% 35% 43%
Gathering / utilizing in-store data on products 65% 32% 26%
Growing market share in emerging economies 63% 29% 26%
1 Shippers’ ranking of top concerns (see previous slide)
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12. Shippers most-used cost-reduction strategies don’t always
involve 3PLs
87%
Improved distribution center processes
53%
86%
Renegotiated rates for logistics services
48%
83%
Improved forecasting and inventory visibility
16%
80%
Improved shipment density/load utilization
56%
75%
Redesigned supply chain network
32%
74%
Renegotiated rates for warehouse services
46%
Method Used % of Methods implemented with 3PL
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13. Fast-Moving Consumer Goods
Key Takeaways
 The high-volume, low-margin fast-moving
consumer goods manufacturer must become more
demand-driven to serve a less loyal, more cautious
post-recession shopper
 Shippers are involving 3PLs less often in cost-reduction
strategies than one might expect
 The role 3PLs can play in helping shippers shall focus in
the future more on
• Shortening new product time-to-market and
• Ensuring perfect order fulfillment
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14. 14

15. 62% of Life Sciences shippers cite ensuring product
quality as a significant challenge
Imperatives Related Data Points
 Visibility is the top service Life Sciences companies need from 3PLs
Product Visibility  Driving the need for serialization and e-pedigree
 50% agree good business case for RFID in Life Sciences
Quality, compliance, and  More than 30 different Life Sciences GDP interpretations globally
risk  70% of shippers say that compliance is their top challenge
 73% of shippers say quality, compliance and risk mitigation are
Balancing quality and price significantly more important than price
 Just 49% of 3PLs agree that customers prioritize these over price
 Inventory control not just accurate quantity but quarantine
Inventory and temperature
 More than 60% of shippers list temperature control as an important
control 3PL capability
 High dollar value and treatment value make drugs tempting targets
Security  Counterfeit drugs and drug diversion have doubled over past five to
size years
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16. Life Sciences
Key Takeaways
 Challenges lie in three major areas: Product
integrity, customer service requirements, and
inherently complex ecosystem
 Cost is important but outweighed by quality,
compliance and risk mitigation
 Visibility is the top service need among life
sciences shippers
 3PLs can play a role in serving individual
customers and also in linking parties together
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17. 17

18. Unforeseen costs can quickly increase the total delivered
costs of a shipment
 Total landed cost: the sum of all costs associated with making and delivering
products to the point where they produce revenue
Country of Origin
Price Components China Vietnam EU
Net purchasing price for a specific volume of the 10,000 8,000 12,000
product from 3 different suppliers
Total transportation cost to Switzerland – 4,000 6,000 1,200
Ocean freight from China/Vietnam – Road freight
within Europe
Customs according trade agreement 1,000 1,500 n.a.
VAT (Switzerland 7.6%) based on value of goods 1,140 1,178 1,003
Total Landed Cost 16,140 16,678 14,203
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19. Nearly half of shipper respondents claim they make
extensive use of total landed cost
% Respondents by reasons why they are not
or minimally using TLC
Shipper Use of Total Landed Cost
Necessary data is not
49%
available
Somewhat
41% Minimally
11% Do not have the right
48%
tools
Exten-
sively Do not have sufficient
45% 31%
None time for analysis
3%
Not sure how to calculate
27%
or apply total landed cost
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20. Total landed cost
Key takeaways
 Understanding total landed cost helps companies make
better supply chain decisions
 While many shippers claim extensive use of TLC, others
are hampered by lack of data and tools
 Today’s lesser used factors, including risk factors,
transfer pricing and tax, and carbon costs, are of
increasing interest
 3PLs report a lack of customer interest and customer
data for providing TLC capabilities
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21. Q&A
 Check out our website at www.3plstudy.com
 Download copy of 2010 and earlier reports
 Additional information about the 2010 3PL Study
Thank You!
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