KelloggGraduateSchoolofManagement■NorthwesternUniversityThirdPartyLogistics:CurrentIssuesandWorldWideWebResourcesThepurposeofthisnoteistoupdateapersonalreadyfamiliarwiththeThirdPartyLogisticsCompanies(3PL's)oncurrentissuesfacingtheindustry,andalsotoprovidealistingofavailableresourcesontheWorldWideWebrelatedto3PL's.ThecontentsofthispaperweredevelopedusingcontentfoundontheWorldWideWebsites.Itfirstcoversbasicconceptsabout3PL's,andthebenefitsandrisksofoutsourcinglogisticsfunctionstothesecompanies.Then,currentissuesfacing3PL'sarediscussed.Finally,wepresentasummaryofsomeofthemostimportant3PL-relatedsitesorganizedbycontent.Thefollowingisalistofthemostfrequentlyused3PL'sservicesinorderofreportedusebyarecentsurvey:ThisnotewaswrittenbyAdrianAlonso,LanceDonenberg,DanielGambaandDavidVelyunderthesupervisionofSunil

Chopra,ProfessorofOperationsManagement,J.L.KelloggGraduateSchoolofManagement,NorthwesternUniversity.ThisnotewaswrittenbyAdrianAlonso,LanceDonenberg,DanielGambaandDavidVelyunderthesupervisionofSunil

Chopra,ProfessorofOperationsManagement,J.L.KelloggGraduateSchoolofManagement,NorthwesternUniversity.WarehouseManagementShipmentConsolidationLogisticsInformationSystemsFleetManagement/OperationsRateNegotiationCarrierSelectionOrderFulfillmentImport/ExportProductReturnsOrderProcessingProductAssembly/InstallationCustomerSparePartsInventoryReplenishmentIn19963PLspurchasedabout$25billionworthoflogisticsservicesonbehalfoftheirclientsCopyright?July7,1997byKelloggGraduateSchoolofManagement.Toordercopies,call(847)491-3603.NopartofthispublicationmaybereproducedwithoutthepermissionoftheKelloggGraduateSchoolofManagement..Thereispotentialforanevenlargerfractionofthebusinesstobecomeavailableforoutsourcing.Initially,candidatesforoutsourcingwerecompaniesthateitherneededtoreducetheirassetsorplaycatch-upwithacompetitor.Todayaclientmaybealargecompanythatseesanadvantageinstrippingawaynon-corefunctions.Oneshouldnotmakethemistakeofviewingtransportationorwarehousingasfunctions.Smartercompaniesaremuchmorelikelytooutsourcepartsofthesefunctions(thepartstheyarenotgoodatorcannotmanageprofitably)ratherthanthewhole.Copyright?July7,1997byKelloggGraduateSchoolofManagement.Toordercopies,call(847)491-3603.NopartofthispublicationmaybereproducedwithoutthepermissionoftheKelloggGraduateSchoolofManagement.Anotherchangetodayisthatwithlargercompanies,withworldwidesupplysourcesandmarkets,outsourcingsomeofthelogisticsfunctions,theyaremuchmorelikelytodemandasinglevendortosupporttheirmassiveoperationsonaglobalbasis.Sincetransportationisoftenthelargestfunctionoutsourced,thedemandforonestopshoppinghasencouragedsomeofthelargertransportationcompaniestosetuptheirownlogisticscompanies.ServicesOfferedbyThird-PartyProvidersThirdpartyservicescanbedescribedonthreedifferentlevels:LiebandRandall,JournalofBusinessLogistics,Vol.17,No.1,1996.DistributionApril1996

ConsultingSitesEntity/CompanyDescriptionofWebSiteWebSiteAddressMaxwellManagementSuppliesconsultingservicestobothprovidersandcustomersof3PL/-humbly/#TopofNewsAndersenConsultingAglobalmanagementconsultingcompanywithadedicatedlogisticstrategygroup,helpingclientslinkstrategy,people,processandtechnology.DSIInternational3PLconsultinggroupExpeditorsInternationalofWashingtonThird-partylogisticsmanagement,consulting,warehousingandfulfillmentTheProgressGroupFocusingon3PLwarehousingdesignandmanagementLogirouteListingoflogisticsrelatedcompaniesADCCODistributionandTransportationGlobal3PLandtransportationconsultingservicesLogisticsConsultingGroup3PLconsultinggroup

PublicationsandAssociationsEntity/CompanyDescriptionofWebSiteWebSiteAddressLogisticsManagementComprehensivepublicationcoveringallaspectsoflogisticsincluding3PL,etc.LogisticsManagementInstituteLMIprovidesseniornationalsecurityandothergovernmentofficialswithadviceacrossthespectrumoflogisticsandacquisitionissuesCouncilofLogisticsManagementThissiteincludeslogisticscasestudies,informationonnewpublicationsandnationalconferencesandlocalroutableinformationTheAmericanChainofWarehousesItrepresentssomeofthebestwarehousesintheindustry.Theirmembersofferrelatedservicestomeettheeverchangingneedsoftheindustry.SocietyofLogisticsEngineers(SOLE)SOLEisanonprofitinternationalprofessionalsocietycomposedofindividualsorganizedtoenhancetheartandscienceoflogisticstechnology,educationandmanagementWarehousingEducationandResearchCouncilWERCisaprofessionalorganizationdedicatedtotheadvancementofeducationofpeopleinvolvedinthemanagementofwarehousesanddistributionfacilitiesHi-TechForwarderNetwork,Inc.(HTFN)HTFNformspartnershipsalongtheglobalsupplychainbetweenforwarders,airlines,3PL's,andshippersandofferssolutionstocomplexlogisticissues.VirtualLogisticsDirectoryThemostcomprehensivelistingbycategoryoflogisticrelatedwebsites

SpecialistsandIntegratedProvidersEntity/CompanyDescriptionofWebSiteWebSiteAddressGATXLogisticsIntegratedlogisticsserviceprovider.StrengthinwarehousemanagementMenloLogisticsOneoftheleading3PLcompaniesintheUS.DivisionofCNF.RyderDedicatedLogisticsRyderistheworld'slargestprovideroflogisticsandtransportationsolutionsthatenablebusinessestoimprovecustomerservice,reduceinventoryandspeedproductstomarketDSCLogisticsAfullserviceproviderofintegratedlogisticssolutionsCAThomas,Int.LogisticsDedicatedcontractwarehousingand3PLpartnerswithvariousFortune500companies.Goalistoexpeditehandling,minimizedistributioncosts,andcostsofinventoryre-supplydeploymentsdestinedtoregionalDCs.DedicatedLogisticInc.Providerof3PLservicesintruckingandwarehousingMMI,Inc.Providesglobaltruckloadtransportation,freightmanagement,specializedtransportationBrooksWarehousingSystemsLogisticservicescompanytailoredtothepackagedchemicalindustryoperationover1.5millionsq.ft.inNJandPAADLSA.deCVAglobal3PLproviderspecializinginwarehousing,transportationandpersonnel.AnexensionofMultiPackservices.InlandStarDistributionProvidescontractwarehousingandintegratedlogisticsforalloperations.EastCoastWarehouseandDist.Corp.Operationover2millionsq.ft.oftemperaturecontrolledwarehousing:foodindustry

Entity/CompanyDescriptionofWebSiteWebSiteAddressPreferredTranslocationsystemsSinglesourcelogistictracking,dispatchingandmanagementservicecompany.HTLTechnologiesProvides3PLandtechnicalsupportservicesforthehigh-tech,electronicandcommunicationindustries.J.B.HuntLogisticsLogisticsserviceproviderCopenhagenCapacityGlobalintegrated3PLserviceproviderincludingimportation,stocking,handling,distribution,orderandinvoicing,packingandlabelingGlobalSolutionInternational3PLproviderspecializingintracking,distributing,warehousing,reportingandmanagementspareparts.LargestcustomerisCaseCorporation.TibbetandBrittenGroupplcAUKbasedinternationalcompanyprovidingglobalwarehousingandlogisticalsupportservices,includingpre-retailingandpreparation.FederalExpressDetailedFedExservicesUPSWorldwideLogisticsLogisticsproviderdivisionofUPSSchneiderLogisticsAdivisionofSchneiderNationalCarriersExelLogisticsThirdpartysupplychainmanagerBRIGHTNationLeaseOffersfullarrayofthirdpartylogisticmanagementforallindustries.PartofBrightTruckingCo.NationLeaseisaconsortiumof115affiliatedcompaniesoperating500NorthAmericanfacilities

MiscellaneousLinksEntity/CompanyDescriptionofWebSiteWebSiteAddressShipperTPLSoftwarefocusingonfreightforwardersand3PL'sserviceprovidersARTrafficConsultants,Inc.3PLsoftwareserviceproviderfocusingontransportationindustry.Servicesofferedincludepre-audit,out/inboundrouting,payment,EDIandreporting.LogisticsPty.Ltd.Australianproviderof3PLsoftware,consultingandeducationalservicesTLinksofover1800logisticsandtransportationrelatedsitesincludingjournals,interestgroups,andcompanies.TheOutsourcingInstituteAprofessionalassociationofexecutivenetworkforindependentinformationandexpertiseonthestrategicuseofoutsideresourcesTheInternetTruckstopIncludestheinternetloadingdockfordailypostingsofloadavailabilityTransportItThetransportationandlogisticswebsitetoassisttheshipper.Auniqueroutingguide/directorywithhelpfulinformationandcontacts.IntertransLogisticsSolutionsSupplychainsoftwarecompany.BasicServiceProviders*.Inthiscasethethirdpartyprovidestraditionalphysicaldistributionservicessuchaswarehousing,orderprocessing,orderpicking,andtransportation.ValueAddedServiceProviders'.Inthiscasethethirdpartyprovidesthebasicserviceslistedabovealongwithvalueaddedservicessuchasspecializedpick/packoperations,crossdocking,casemarkingandlabeling,orderconsolidation,EDI,managementreporting,andASNs.LogisticsIntegrators*.Inthiscasethethirdpartyproviderassumesfullresponsibilityformanagingkeysupplychainoperationsonadailybasis.Allworkhoweverisundertheclientssupervision.Thethirdpartyprovidesbasicandvalueaddedservicesalongwithensuringtheseamlessflowofproductsandlogisticsinformationamongthemselves,theirclients,andthecustomers.BenefitsofOutsourcingTheOutsourcingInstitute.TheOutsourcingInstitute.Akeyquestionthatacompanyhastoaskbeforeconsideringtheoutsourcingoptionis:Whatisitinthereforus?Herewelistsomepotentialreasonsthatmayargueinfavorofoutsourcing.Improvecompanyfocus:Moreorganizationsareeliminatinginternalfunctionsthatarenotconsideredcorecompetencies.Accesstoworld-classcapabilitiesandnewtechnology:Oftenthesethirdpartylogisticscompaniescapabilitiesaretheresultsofextensiveinvestmentsintechnology,methodologiesandpeople,overaconsiderableperiodoftime.Sometimes,thesecapabilitiesincludespecializedindustryexpertisegainedthroughworkingwithmanyclientsfacingsimilarchallenges.Therefore,thisexpertiseistranslatedintoskills,processes,ortechnologiesuniquelycapableofmeetingtheseneeds.Acceleratereengineeringbenefits:Outsourcingtoa3PLalreadyreengineeredtoworld-classstandardsallowsthecompanytorealizethoseanticipatedbenefitsimmediately.Share(pool)risks:Therearetremendousrisksassociatedwiththecapitalinvestmentsanorganizationmakes.A3PLcansharetheserisksacrossthemanycompaniesthatitserves.Thisallowsa3PLtolowerriskrelativetoacompanyperformingthefunctionitself.Free-upresources:Outsourcingoffersawaytoconservecapitalandallowsacompanytoredirectitsresourcesfromnon-coreactivitiestowardactivitieswhichhavethegreaterreturninservingthecustomer.Cashinfusion:Sometimes,outsourcinginvolvesthetransferofassetsfromthecompanytothe3PL.Theseassetshaveavalue,andinfactaresometimessoldtothe3PL.Reduceandcontroloperatingcosts:Outsourcingtoa3PLmostlikelywillgiveaccesstoalowercoststructure,whichmaybetheresultofagreatereconomyofscaleorsomeotheradvantagebasedonspecialization.Whencalculatingthecostbenefitsitisveryimportanttoconsidertotalcostssincecoordinationcostsoftenincreasewhenallorpartofafunctionisoutsourced.Resourcesnotavailableinternally:Companiesmightsimplynothaveaccesstotherequiredresourceswithinthecompany.Eliminatelaborproblems:Whilecompaniesarerarelywillingtoconcedethisfact,manyviewoutsourcingasawaytoeliminatelaborproblems.Thisisatwoedgedswordandonehastobeextremelycarefulhere.Perceivedbenefitsdonotalwaysmaterialize.RisksofOutsourcingOutsourcingisnotwithoutrisks.Infactthebenefitsareoftenmoretransparentwiththerisksoftenbeinghiddeninitially.Belowwelistsomekeyrisksthatmustbeaccountedforbeforeanoutsourcingdecisionismade.Coordinationcosts:Whenanylogisticsfunctionisoutsourcedcoordinationcoststypicallyincrease.Itisimportantforthecompanytoaccountfortheseanddecidehowtheyaretobemanagedwiththe3PL.Lossofinternallogisticsmanagementcapability:Theknowledgeandexpertisegeneratedonthedaytodayoperationwillresideinthe3PLcompany'smanagementteam.Thisbecomescrucialasacompanygrowsandmakesreorganizingdecisions.Acloserelationshipwiththe3PLcanhelpinthisregard.Reducedcontactwithfinalcustomer:Outsourcingthedistributionfunctionmightforcethecompanytolosedirectcontactwiththeendcustomer(atleastphysically).Thishasacriticalimpactoncustomerservice.Itishardforacompanytodefinecustomerservicefora3PLifitdoesnotitselfhavedirectcustomercontact.Thiscanalsohaveanimpactontheintroductionofnewproductsandservices.Biasedchoicesofserviceproviders:Ifa3PLisownedbyalargetruckingcompanyandit'smanagingthedistributionfunction,theremightbesomepressurebytheparentcompanyofthe3PLtogiveaportionofthebusiness,evenwhenit'snotcompetitive.Lossofvoiceinpublicpolicyissues:Forexample,ifthedistributionandwarehousefunctionsareoutsourced,andthereisathreatofsomelegislationthatwillaffectthewarehousingandtruckingindustries,thecompanywillnotbeabletorepresentthoseinterests,sincetheyareperformedbythe3PL.Leakageofsensitivedataandinformation:3PLcompaniesnormallyhaveaccesstoalotofinformationthatmightbevaluabletocompetitors,leavingthecompanyvulnerable.CurrentIssuesOutsourcingdecision:Who'sinvolved?Apparently,whenitcomestooutsourcing,thedecisiontohirea3PLstillappearstooriginateatthetopoftheorganizationchart.TheLogisticsManagementonlinemagazineissueofDecember1996,publishedtheresultsofacomprehensivesurveyconductedbyProf.LiebofNortheasternUniversityandHughL.RandallofMercerManagementConsulting.Theycanvassed500ofthelargestU.S.manufacturingcompaniesandCEO'sof25top3PL's.Thislateststudywasafollowuptoearliersurveysconductedin1995,1994,and1991.Inthisyear'ssurvey,59%saidthestrategicdecisiontoretain3PLservicescamefromthecorporatelevel.Thisstudyalsofoundthatlogisticsmanagerswerebeingjoinedbymanagersfromotherfunctionalareas(mainlymanufacturing)whendecidingwhetherornottooutsource.Thegrowinginvolvementofmanufacturinginthisprocessreflectsthesupply-chainmanagementfocusoftoday*scompanies.Some57%saidthemainbenefitofusinga3PLwaslowerdistributioncosts.Otherssaidthattheircompaniesoutsourcetotakeadvantageoftheproviders1managerialexpertise.3PL'sGrowthThethirdpartylogisticscompanieshavehadgrowthratesinpreviousyearsofover100%,butastheindustryisreachingthe$25billionayearlevel(intheUSalone),thatkindofgrowthisnolongereasytomaintain.Infact,arecentarticleintheLogisticsManagementonlinemagazineforecastedagrowthrateofabout40%,tailingoffto15%twoorthreeyearsfromnow.Partofthereasonissimplemath.Intheearlydayswhenthethirdpartylogisticsindustrytotaled$5billion,a$5billionincreaserepresenteda100%increase,butwitha$25billionayearindustry,a$5billionincreaserepresentsonly20%growth.Estimatesarethatthisindustrywilltripleinsizeoverthenextfiveyearstomorethan$200billionglobally.Source:JournalofCommerce,December13,1996.Source:JournalofCommerce,December13,1996.However,thatisonlyoneexplanationofwhyisthisindustrynotgrowingasfastasitoncedid.ArecentsurveybyProf.LiebofNortheasternUniversityandHughL.RandallofMercerManagementConsulting,notedsignsofdissatisfactionamongshippersthatusethirdpartylogistics.Onequarteroftherespondentsreportedthattheyhadcanceledathirdpartycontractatsomepoint,mostfrequentlyfornon-performance.Itseemsthatmanycompaniesstartarelationshipwithaclient,offeringthemallkindsoflogisticsoutsourcing,butinfacttheirexpertiseisincertainareas,andwhenfacedwithrealchallengesintheotherareas,servicebecomesanissue.Forexample,78%ofshippersreportedthatusinga3PLhadapositiveimpactonlogisticscosts,howeveronly49%reportedapositiveeffectoncustomersatisfaction,andonly57%saidithadboostedserviceinnovation.Ontopofthat,some33%ofshipperssaidthatuseof3PL'shadanegativeimpactonemployeemorale.Whereisthegrowthgoingtocomefrom?Althoughtheindustryisnotgrowingasfast,therearecertaincompaniesthatforecastgrowthratesintherangeof50%,includingMenloLogistics,fromRedwoodCity,California.Alargeportionofthisgrowth,isactuallynotfromnewclients,butexistingrelationshipswithclientsthatwanttoextendthescopeofservices.Thistrendtowardsanintegratedlogisticsfunctioniswhatwillmostlikelygeneratefuturebusiness.AsanexecutivefromLogixdescribesit:"Thevalueaddediswhenyou'removingacrossthesupplychain.3PL'sarestitchingtogethermorethanonefunction.Therearesignificantdollarsoutthereifyoudothis”.However,thissometimesrequiresgoingglobal.Foronething,3PL'sareformingalliancesthatallowthemtoofferabroaderrangeofservices.Over80%ofthe3PL'ssurveyedsaidthattheyhadestablishedalliancestoprovideservicessuchasinternationaldistribution,trucking,freightforwarding,andcustomsbrokerage.Alongwithfunctionalintegration,thirdpartiesareseeingdemandfortheirservicesintheareaofinformationsystemsexpertise.Whathashappenedwithmanycompaniesisthattheirinternalinformationsystemsdepartmentsaretoobusyforinstalling/developingthenecessaryinformationtechnologyfortheirlogisticsoperations.Therefore,thisisapotentialgrowthareafor3PL's,especiallyforthosethathaveadoptedasupply-chainstrategytomanagematerialflow.Productassembly,handlingproductreturns,relabeling,supplyingspareparts,andproductpackaging(typicallycalledend-of-supply-chaintasks)aresomeofthemostpromisinggrowthareasforcontractdistribution.Thekeyfor3PL'stocontinuegrowingistocontinuouslycarveoutmarketniches.Someconcentrateonspecificindustries,likeautomotive,retail/wholesale,andhigh-tech/computers.Othersarespecializinginfunctions,sincethereisnoroomforanendlesslistoffull-service3PL's.SupplyChainManagementSomeofthe3PLRealtimeinventoryinformation?Scanningcapabilitiessareinthebusinessoftradinginformationforinventory.Trueintegrationwithalloftheplayersinthesupplychain—onethatistransparentandmergesintoatrueSupplyChainManagement(SCM)system-anewclassofsoftwaretechnology.SCMwillletwarehouseoperations,suppliersandmanufacturesbetterintegratetheiroperations.Forexample,asinglepurchasedecisioninaretailstorecangenerateavirtuallyinstantaneousseriesofdomino-likeresponsesallthewaythroughthesupplychain.Yourgoalistobeabletoreplaceinventory-manufacturers1Realtimeinventoryinformation?ScanningcapabilitiesSCMis,ineffect,justonegreatbigdistributedapplicationspanningacrossseveralfirms,eachwiththeirowncomputerworkinginconcertinthesupplychain.Itincludesmanufacturingandproductionsystems;marketingandsalessystems;orderentryandproductconfigurationsystems;traditionallogistics—includingwarehousemanagementsystems;customerservice;invoicingforcustomers,accountspayableandreceivable;vendorrelations;electroniccommercesystemsandcommunications;andintegration,backup,securityandoverallmanagementofallofthedatacreatedbyallofthesesystems.Fromtheshipper'spointofview,thepersonmakingthedecisiontooutsourcelogisticstoa3PLisactuallybettinghisorherjob.Ifit'sabaddecision,theylosetheirjob.Therefore,somecompanieshavetriedtohiremiddleandtop-levelmanagersfromthoseindustriesthattheyserve.OnesuchcompanyisFritzCos.,that10yearsagodecidedtogowiththisstrategy.ThisaffordsFritz'scustomersameasureofconfidencethattheirclient'sneedsandrequirementsareunderstood.If3PL'saregoingtosupporttheretail,high-tech,andchemicalindustries,thenitisintegralthattheyhaveexperiencedmanagersfromthosesectors,saidLynnC.Fritz,chairmanandCEOoftheSanFranciscogloballogisticsgiant.5Challengesfor3PLs6Thirdpartyprovidershavesignificantopportunities,buttheymustovercomesomeproblems.Akeyistheperceptionthatthirdpartieshave“overpromisedbutunderdelivered."Thisisaperceptionthatmustbereversed.3PLsmustalsofocusondevelopingandperfectingthosesystemscapabilitieswhichdifferentiatethetopcompaniesfromtherest.If3PLsexpecttomeettheirclients9logisticsneedseffectively,theymustbeabletooffer,amongotherservices:DataaccuracyReliableserviceCustomizedmanagementreportsCompetitiveprices.3PLsmustalsobesensitivetotheirclients9concernsaboutlosingcontrolovercriticalservicesforcustomers.Ifsuccessfulinestablishingthenewrelationship,3PLsmusthandlethemovetoexternaloperationswithcarefulregardforthenewclient'sinternalstaffandcorporatepractices.Thirdpartiesmustmakeatransitionfromtheirfocusonproductandtransactionorientedservicestonewstrategiesbasedonlongtermbusinesspartnerships,businessprocessmanagement,andintegratedinformationflows.Thethird-partyproviderswhocanmeettheseneedswillmostlikelyenjoylongtermsuccess.SomespecificareasforoutsourcingTwomajorareasforoutsourcingareprivatefleetsandwarehousing.Webriflydiscusstheoptionsavailableineachcaseandsomefactorstobeconsideredinthedecision.PrivateFleetManagementPrivatefleetsareundergreatpressurethesedaystojustifytheirexistence.Howeveracompanyneedstobeverycarefulwhenevaluatingwhethertooutsourcesomeorallofitsprivatefleetoperations.Akeyquestionishowtoevaluatethebestmixofassetuseandownershipofthetruckingoperation.Theoptionsavailabletoacompanyareasfollows:Contractmaintenance:Inthiscaseacompanysimplycontractswithanoutsidemaintenanceshoptohandleitsfleetmaintenance.Full-serviceleasing:Inthiscaseacompanyleasestheequipment,maintenance,andreportingservices.Dedicatedcontractcarriage:Heretheoutsidevendorprovidesdrivers,equipmentandmanagementsupervisionofthefleetoperation.Thissegmentgrewatadoubledigitrateduringthe1980sbuthasslowedtobetween6-9%annualgrowthrate.Logisticsandstrategicpartnerships:Inthiscaseacompanyoutsourcesitsfleetoperationsaspartofoutsourcingmostofitslogisticsfunctions.Thiscombinedsectorisgrowingat10-13%annually.Thereareafewbasicrulesofthumbthatacompanycanuseindecidinghowandwheretouseaprivatefleet.Inadeliverysituationitisadvantageoustouseaprivatefleetwhenthevehiclesstayclosetothepointoforigination(e.g.routesaveragelessthan200milesroundtrip).Outsourcingtoadedicatedproviderworkswellwhentherearebackhaulsthatcanbesecuredtooffsetcosts.Eachcompanyhastodevelopamileagechartthatdepictsmodetousebasedoncertainparameters,includingmiles.Asamplechartisasshownbelowbutitmaynotbevalidinallsituationsandthecutoffswillvaryascostschange.Inpracticebesidesdistance,onealsohastoaccountfortheutilizationachievedifaprivatefleetisused.RoundtripmilesperhaulModeusedLessthanorequalto200milesPrivatefleetBetween200and500milesDedicatedBetween500and1,000milesForhireOver1,000milesIntermodalWarehousingOutsourcingofwarehousinghasbecomeamorewidelyavailableoptioninrecentyearsforbothmanufacturersandretailers.Whileestimatesofrevenuevarywidely,itisconservativelyprojectedthatthirdpartycompaniesproviding“contract”warehousingrepresentagrowing$4billionindustry7.Oneimportantfactorinestimatingchangingwarehousingspacerequirementsisthetrendtowardhigherinventoryturnsinmostgoodsdistributionchannels.Inwarehousing,theoptionsavailabletoacompanyare:OwnwarehousesoperatedbyselfOwnwarehousesoperatedbythirdpartyContractwarehousingPublicwarehousingOnceagainakeydecisionfacedbyacompanyconcernsthefractionoftotalwarehousingspacetobeallocatedtoeachoption.Theonlydifferencebetweencontractandpublicwarehousingisthedurationoftheagreement.Contractwarehousingtypicallyinvolveslongtermcontractswhilepublicwarehousinginvolvesabout30daycontracts.Hereitmightpayifacompanyconsidersthefluctuationinwarehousingrequirementswhendecidingtheallocationofspacebetweentheoptions.Publicwarehousingismostusefultocoverseasonalpeakdemandperiods.Howeveronehastobecarefulheresincepeakperiodscoincideformostindustriesandpublicwarehousingisscarcewhenmostneeded.Whengoingtoathirdpartyonehastoconsiderthelocationaswellastheirabilitytokeeptrackofinventoryaccuratelyandtheirabilitytoshipontimeandwithaccuracy.Onceagainitiscrucialtoconsidercoordinationcostswhenallorpartofthewarehousingiswithathirdparty.OperationsLogisticsandSupplyChainManagement?KelloggOperationsLogisticsandSupplyChainManagementKelloggGraduateSchoolofManagement■NonhwesteniUniversityAppendixAThefollowingappendixisanindextowhatwebelievearethevanguardcompanies/organizationsspecializingin3PL'sandwhoalsohaveapresenceontheWeb.DatawasgatheredthroughfocusedsearchesontheWebseekingcompanies/organizationsofferingservicesinorrelatedtothird-partylogistics.GiventhatourresearchwasrestrictedtotheWeb,wecannotstatethatwehaveexhaustedallrelatedentities,especiallysincetheWebisarelativelynewmediumwhichmaynotyethavebeenadoptedbyallentities.However,giventheWeb'seaseofaccessandubiquitousavailabilitywefeelthatwehavecovered