Third Party Logistics Companies: The Basic Facts

No one knows exactly where the term third party logistics or 3PL came from, yet, over time it has come to stand for a certain ways of handling or outsourcing logistic services to companies who became known as third party logistics companies. It may go back to the 1970s and 1980s but owes much to the technological advances in trucking and warehousing services that arose in the late 1980s and early 1990s. With technology playing a prominent role in the industry and the creation of software to address issues concerning logistics and inventory management, third party logistics companies have become an integral part of various industries.

What Are Third Party Logistics Companies?

The term third party logistics companies or 3PL refers to a firm that provides several types of logistic services. They are a company that works with shippers of various types to provide them with efficient and expert logistic services. The services may include such things as:

* Transportation management including specific software such as Transportation Management System (TMS)

* Inbound freight

* Warehousing

* Cross-docking

* Inventory management including management software

* Packaging

* Freight forwarding and negotiation for lower rates

* Forecasting freight bill auditing

* In-depth reporting

Third party logistics companies may offer their services to all industries, but most tend to focus or specialize on one specific type. Frozen food and wine and spirits are two such areas. Moreover, some companies will not be a generalist in what services they offer. They will look at one specific aspect of logistics. They may concentrate on warehousing or, perhaps, TMS.

What Are The Basic Types of Third Party Logistics Companies?

If you are considering hiring the services of third party logistics companies, it is important that you understand the various types available from which to choose. There are various ways of looking at third party logistics companies. Perhaps the simplest is to divide them into the following four basic types:

* Standard 3PL Provider: This common category of provider handles basic logistics tasks within a limited range. It is not their primary function nor is it all-inclusive. Instead, these companies tend to provide such things as warehousing, distribution, and related tasks.

* The 3PL Service Developer:  These third-party logistics companies provide services that are identical to those offered by a standard 3PL company as well as a little extra e.g. IT infrastructure and management such as tracking, cross docking, specific packing or unique security system. While more expensive than the standard 3PL companies, they are neither comprehensive nor tailored in their offerings.

* The 3PL Customer Adapter: This specific type of 3PL approach is requested by the client. It involves the 3PL company taking over but not instituting any new or novel logistic services. While the 3PL company exercises complete control over the client’s logistic services, it does not have any say in the creation of a new service.

* The 3PL Customer Developer: This type is considered the highest level of obtainable by a 3PL provider. In essence, the developer takes over all aspects of the logistics function of the client through careful integration. Such companies tend to specialize in very innovative solutions that can adapt according to the actual and perceived needs of the client company.

While many of these companies are asset based – owning their equipment, trucks, warehouses, and employees, there are also those who are non-asset or management based. This relatively new group of third party logistic companies, while relying on their technical expertise and managerial skills, does not use its assets nor necessarily owns them in performing their role in the supply chain

Third Party Logistics Companies

With the increased need for companies to create a leaner, meaner approach to their operation, many have turned to less expensive alternatives to handle their logistics. In the process, they have discovered the advantages of third-party logistics companies. Today these providers consistently play a significant role in making sure the supply chain increasingly operates smoothly and profitably.

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