I interviewed Jose Vitorelli who discussed The Concept of Hiring a 3PL: A Good Decision or Not?
It’s good to speak with you today, Jose. We’ve done interviews in the past, and today I’m looking forward to hearing your views on the concept of hiring a 3PL and whether or not it’s a good decision. Can you first provide a brief background of yourself?
Sure. Thank you very much, Dustin, to be with you and the supply chain expert community. It’s always a pleasure to exchange ideas. I always listen to your program; it’s a very rich, very high concept, and it’s a pleasure being with you.
I would like to introduce myself. I’m Jose Vitorelli. I’m professional of the supply chain and logistics industry. Currently, I’m dedicated to develop solutions and innovations for global accounts in Latin America for DHL. DHL is part of the DeutschePost-DHL group. I would like to share with the audience some findings on my study made by CAPGEMINY3PL studies; it’sannual study and they provide in this study what the shippers most value when they’re hiring a 3PL.
3PL, just for the audience knows, we are considering a firm that deals with the freight management of its customer at different levels, covering part or all of the supply chain industry. They can be a courier, a freight forwarder, or a firm that takes care of the integrated contracted logistics and other transportation services. Taking that, I’d like to share that 3PL in the recent years, they have been growing strongly since the process of delivery goods is also increasing. Of course, since we are going to a new year, 2015, maybe it’s good for the shippers or for the ones who are dealing with outsourcing or planning outsource to share some of the stuff in a way that the shippers or planner can take advantage of it.
My point is basically on the 3PL growing, and some of the companies try to make a lot of investments in the sectors, and 3PLs nowadays, some of them are supporting business during the whole supply chain. Some of the concepts are in terms of the coverage. These studies, they have interesting findings that I would like to share with you.
First of all, from a recent study, we noticed that most of the shippers are valuing in 55 percent of the research; they continue improvement. Fifty-five percent is a lot in terms of the comparison. Forty-nine percent of the shippers value the experience in the industry; and 42 percent value ongoing relationships. In addition to the shippers, they’re also looking for a strategy to control costs or to working the balance between centralization and decentralization of all the shippers’ decisions. It’s interesting to share with the customers what they most value in terms of the 3PL.
Another important point, Dustin, brought up by this study shows that that shippers are looking to work in a straight collaboration with the 3PL providers. Some of them say their relationships have grown in a collaborative over the recent years with shippers even more likely than 3PLs. Collaboration is creating a positive environment between both providers and the shippers, so shippers needand are looking for a close relationship with their providers.
Finally, I think the question is if a shipper should hire or not a 3PL, taking all these points that we brought. I think if you’re a shipper or you’re looking to hire or not, you will have to consider factors in terms of your infrastructure or your requirements to reach your end customers. Sometimes the decision for hiring 3PL companies can go into a lot of aspects. I would like to share some of the main aspects that 3PL could be usefulwhen you’re planning your logistics through a provider.
Some of them are, first, expertise. 3PLsbreathe logistics as their core business. Shippers sometimes believe they could handle traffic and transportation better than a 3PL. In most of the cases, this probably could be real, but, of course, if you consider that these guys are really experts in handling their supply chains.Maybe it’s a comparison, comparing what we’re looking for.
Efficiency, I think it’s one of the other topics in addition to today, the expertise in terms of the third-party company also having the infrastructure, in terms of the technology that’s translating and hiring service level to shippers and helping the shippers to save costs with some good quality.
The other topic would be technology. I think 3PLs, most of the way they invest in technology very heavily, and they are updateand they try to provide visibility to their shippers. It’s an important point. Nevertheless, in terms of technology, I would just like to say that shippers have to be careful because, sometimes the 3PL, they outsource—it’s like a 4PL—they outsource their technology, so you have to keep an eye on that.
Also, I think the core competency of these 3PLs in terms of their knowledge could release the shippers to be dedicated to their real core business and try to take advantage of it. Of course, the coverage, some of the 3PLs, they have their own structure worldwide or regionally wide, so it’s important to consider with good 3PL facilities or distribution network or operational staff that could support shippers on their logistics to reach their customers wherever they are, in the other part of the world—China, Europe, America—so you have to consider their coverage.
Of course, some of the shippers can consider that this is probably not a good idea, and we have to respect it because sometimes 3PLs, some of them could not be on a good service level. The best we could suggest for these shippers, of course, take a look, evaluate. If possible, try to consult as many 3PLs to know their technology, their core competencies, their expertise to make sure you’re planning correctly and you’re looking to have an even better year with your supply chain and with your core business.
Thank you. As a summary, when would it not be a good idea to outsource to a 3PL?
Let’s say, for example, in terms of technology, if your 3PL doesn’t have enough technology or they outsource, this is probably a risk because you need to evaluate how trustful the system is or maybe the outsourcing implies additional costs to their shippers. If the 3PL has a core competency that is not related to your sector—some of the 3PLs even specialized in sectors, like engineering and manufacturing, life& sciences, like automotive. We have a lot of expertise, and it’s important to look for a 3PL that could really add to your core competency and your strategy.
It’s important to look, for example, if you have global coverage, to hire a 3PL that could covers in terms of worldwide coverage. It’s important to consider it, of course. You have to be controlling your core business. You’ll probably know more than a 3PL how to manage your inventory. On the other hand, in the world, there are competing in terms of their supply chains,you’d better try to see possibilitieslooking for a 3PL that will charge you, for example, not for the whole inventory, butper cost of activitiesso there are lot of possibilities and you have to balance what is good or what is not in terms of you decision in your supply chain.
And thanks Jose for sharing today.
It’s a pleasure Dustin to be with your audience and I will available any time you need.
About Jose Vitorelli
Customer Solutions and Innovation