C.11 – Third-Party Logistics Services Providers

Author: Dr. Jean-Paul Rodrigue


a. Role and Function

Intermodal transport can be described as the transport of merchandise by at least two transport modes with a minimum of one stage being made by train, by truck, or by maritime modes. In other words, it is a cargo unit that is transferred from a transport mode to another. The optimal combination of modes allows transporters to achieve what is known as economies of scope. In a majority of cases, the first and/or last steps of the cargo itinerary consist of truck transportation and are to be minimized. More than ever, delivery firms’ activities are based on intermodal transport to optimize delivery times and, in turn, their overall efficiency.

Own account versus for hire. Services offered.

b. The System of Logistical Services

The UPS system is mostly aimed at servicing businesses since 80% of the traffic handled is business-to-business. To be effective, UPS relied on the efficiency of its distribution system. Reliability and efficiency are key issues in the establishment and management of freight distribution systems leaning on parcels. Optimal locations for the hubs are sought, as well as the possible delivery routes to avoid unnecessary movements, congestion, and assure timely deliveries. Every single parcel has to go through the UPS network regardless of its destination. It could be bound for the other side of the planet or addressed to the neighbor; the parcel will have to go through the distribution system, which has a hub-and-spoke structure. This distribution system involves three primary functions:

  • Consolidation. Collection of cargo assigned to specific routes. The cargo is then assembled at the closest distribution center.
  • Distribution. The distribution function works on a hub-to-hub basis. Depending on the distance involved, the mode used between hubs will either be trucking or air. Trucks are commonly used for distances less than 400 miles (600 km).
  • Last-mile. This step is the inverse of consolidation, as parcels have to be delivered to each individual destination. Fragmentation is commonly combined with consolidation, as a delivery truck route can be integrated with a pickup route. This can be achieved only with a high level of control on the logistical chain. In instances where there is not enough density to justify a commitment of distribution assets, a local contractor will cover the last mile.

c. Integration in City Logistics

Attention at providing new distribution services and Internet-based activities. The emergence of e-commerce is a significant growth segment The logistical expertise developed represents a major growth segment. These services cover a wide array of logistical activities including quick air or inexpensive ground delivery, global trade financing, Web retailing and call centers, warehousing and supply-chain management. All the major international transportation modes, namely containerized maritime shipping, have been integrated within distribution strategies. Non-Vessel Operating Common Carrier, implying booking large volumes of slots on containerships.

Using its existing infrastructures and management capabilities to expand in new business opportunities. Strategic alliances with major manufacturers and distributors takd over the management of the supply chain. Even large multinational corporations have difficulties managing their complex supply chains, since globalization has tremendously expanded their length and complexity.