Logistics Service Providers Overview

Logistics Service Providers

• Logistics services have grown in scale and scope recently
• Own-account transportation involves a company providing its own transport services internally. Many companies no longer handle all their logistics internally.
• Companies increasingly use logistics service providers (LSPs)

Classifying Logistics Service Providers (LSPs)

• Freight carriers transport large packages, often not offering door-to-door service. Examples: trucking companies, trains, airlines.
• Couriers gained popularity in the 1980s and 1990s, specializing in transporting valuable documents and products quickly (often door-to-door). Examples include mail services.
• Freight forwarders act as intermediaries, arranging deliveries using multiple carriers and couriers. They benefit from a wide network of vendors and are flexible. However, they rely on passenger air traffic, so fluctuations can affect their ability to take on a job. Costs are a sum of elements like pickup, handling, shipping and delivery. Example: Agility.
• Freight Integrators own and operate their own fleet, handling the entire process from pickup to delivery. They manage the logistics with expert management, providing a scheduled network. Example: FedEx, UPS, DHL.
• Non-Vessel Operating Common Carrier (NVOCC) ocean carriers that provide services without owning their own vessels. They act as intermediaries, leasing or renting space from larger shippers and reselling it to smaller shippers. This facilitates transport for smaller businesses.

LSPs versus 3PLs

• There's significant overlap between LSP categories.
• Some companies that operate ships also handle freight forwarding, and all logistics providers fall under LSP.
• Many freight companies have developed broader services and are now known as third-party logistics (3PL) providers.

Typical 3PL Services

• Transportation via multiple modes.
• Warehousing and storage capacity.
• Picking and packing multiple SKUs into shipments.
• Light manufacturing on behalf of OEM's.
• Vendor-managed inventory, customs clearance.
• Trade financing, currency exposure management.
• Reverse logistics, handling repairs and returns.
• Parts distribution and managing critical spare inventories.
• Inventory management.

Top 20 Global 3PLs (2019)

• A list of the top 20 global 3PL companies by revenue in 2019. DHL Supply Chain and Global Forwarding was at the top with 27302 revenue(in millions). This list includes companies like DHL, Kuehne + Nagel, Nippon Express, DB Schenker, etc.

Fourth-Party Logistics (4PLs)

• Fourth-party logistics providers (4PLs) offer total supply chain solutions.
• They act as integrators, managing resources of their organization along with complementary service providers.
• They outsource the entire supply chain, including tech integration, monitoring and planning.
• The distinction between 3PL and 4PL is becoming increasingly blurred.

Fifth-Party Logistics (5PLs)

• Fifth-party logistics (5PLs) represent recent types of LSPs, using technology solutions across complex networks, including multiple supply chains.
• Suitable for ecommerce companies.

Selecting LSPs and Services

• Key considerations in selecting an LSP include:
  • Services required
  • Costs and costing approach
  • Carriage terms (Incoterms) and insurance
  • Speed and transit time
  • Performance metrics and reliability.
  • Information systems, documentation
  • Core versus value-added services
  • Staffing issues, reverse logistics
  • Implementation details, provider history, client references.
  • Digitisation and end-to-end supply chain transparency.

Explore the various types of logistics service providers and their roles in modern transportation. Learn about own-account transportation, freight carriers, couriers, and freight forwarders, and understand how companies are shifting to external logistics solutions. This quiz covers key concepts in logistics and supply chain management.