Staudt and Stranz (2009) refer to a case study that reveals Ocean Spray Cranberries, Inc is an agricultural cooperative owned by more than 750 cranberry growers in the United States and Canada. The company has distribution centers located in Bordentown, New Jersey; Kenosha, Wisconsin; Sulphur Springs, Texas; and Henderson, Nevada. These centers are responsible for producing canned and bottled juice, juice drinks, and food products. Each August presents a challenge for Ocean Spray Cranberries, Inc as it needs to increase production at its Lakeville, Massachusetts-based headquarters to meet the high demand for the upcoming holiday season.
Ocean Spray had been handling its transportation operations internally. However, the company determined that prioritizing its core competency would enable them to maintain their position as a leader in the shelf-stable juice drink category. Ocean Spray is convinced that centralizing their transportation operations, standardizing them, and expanding into new markets will be advantageous for their business. Though it may be challenging for Ocean Spray to enhance their transportation capabilities to support the expansion of their logistic network, they are considering investing in a third-party logistics provider to concentrate on their core competency and revamp their transportation logistics.
The benefits of 3PL are a result of the growing trend of outsourcing logistic activities. This trend has led shippers to have to choose a suitable third-party logistics provider (Soh, 2009). Finding the right provider can be a difficult task as it needs to fit both the user and company requirements. Ocean Spray’s expansion of their logistics network enables the 3PL to handle distribution, packing, warehousing, and assembly. By combining their resources and expertise, they can help maximize profitability and dependability.
One of the benefits of utilizing a 3PL provider is the access to a vast resource network (Langley, 2012). An article states that 3PLs offer an extensive network that surpasses in-house supply chains, providing numerous advantages. By tapping into the resource network of a 3PL, supply chain processes can be executed efficiently and cost-effectively. Additionally, leveraging relationships and volume discounts enables 3PLs to deliver the quickest service possible. This accessibility to various resources allows companies like Ocean Spray to enjoy benefits that would otherwise be unavailable to them.
In addition, 3PLs allow companies to establish strong relationships and networks which may result in potential future services and resources. According to a survey conducted by Langley (2012), 3PLs are meeting shippers’ expectations and a significant majority of shipper respondents (86%) consider their 3PL relationships highly successful. Furthermore, the scalability and flexibility provided by 3PL providers is another advantage. As companies aim to expand and increase their revenue, the flexibility offered by their 3PL providers enables them to do so with ease.
PL providers have the capability to adjust transportation and space according to the inventory needs of a company. They can facilitate the expansion of companies into previously inaccessible locations, which would be advantageous for Ocean Spray’s goal of expanding its logistics network. According to an article, sixteen companies reported revenue data and collectively generated over $23 billion in North American revenues in 2009 due to the utilization of 3PL providers (Lieb, 2010).
Furthermore, according to Lieb (2010), three CEOs reported that their companies were highly profitable, while some described their companies as marginally profitable. Another benefit of using 3PL providers is the ability to continuously optimize the supply chain. These providers have the necessary resources to make improvements and adjustments at every stage of the process, ensuring that both company and user requirements are met using the most cost-effective, efficient, and expedient methods available. Partridge (2008) notes that 3PLs enable shippers to save costs and resources while also enhancing service levels.
Similarly, Verizon company utilizes the services of 3PL provider, New Breed, in order to develop an automated warehouse fulfillment solution. This solution enables same-day processing of Verizon’s direct-to-consumer orders (Patridge, 2008). New Breed operates in all three of Verizon’s distribution centers and offers real-time visibility of orders and inventory by tracking each serialized unit. Additionally, New Breed achieves a remarkable 99.9 percent accuracy in shipping 20,500 consumer orders daily for Verizon. Any orders received before 5 p.m are shipped the same day, ensuring efficient and prompt service (Patridge, 2008). To exemplify this efficiency, a customer reports that after making a call to Verizon on Monday afternoon to request a battery replacement, the replacement was quickly received by Tuesday morning (Patridge, 2008). This clearly demonstrates the effectiveness and speed that 3PLs bring to a company’s operations.
Despite the benefits that 3PL providers bring to many companies, they can also pose certain challenges for customers. One of these challenges is maintaining quality, which can ultimately impact customer satisfaction negatively (Hudaziak, 2012).
Customers in the 3PL market have high expectations, including operational efficiencies and strategic development (Hudaziak, 2012). Therefore, it is crucial to eliminate internal waste and inefficiencies in 3PL processes to improve customer satisfaction and overall performance (Hudaziak, 2012). Changing inventory policies can result in a loss of client business or ownership (Hudaziak, 2012). As a result, 3PLs cannot afford errors that may cause shipment delays. A recommendation is to prioritize accuracy and efficiency in order to avoid any setbacks.
Ocean Spray Cranberries found that establishing a transportation-based 3PL provider would be the most suitable option. They gave Exel providers the chance to ship their products, and Exel was recognized for their exceptional service and timely deliveries. Ocean Spray valued Exel’s dedication and commitment in providing service every day. Therefore, it is recommended that the company maintains a strong relationship with their carriers, as understanding each other’s needs is crucial for meeting business and customer requirements.
