What is 3PL?

3PL stands for a third-party logistics provider. This is a company that provides third-party (or outsourced) logistics services for the partial or complete functions of their supply chain management. These types of logistics providers usually specialize in transportation, warehousing or integrated operation services that are able to be customized and scaled to the requirements of the customer. These requirements are commonly based on the delivery service requirements for their materials and products. Market conditions also play a major role in this process. This article will go into further detail about 3PL providers.

Types of 3PL providers

Third-party logistics providers can include courier companies and freight forwarders. Companies offering subcontracted transportation and logistics services can also be included.

3PL providers generally fall into four basic categories:

  • The Customer Developer: As far as the activities and processes of the company, this is the highest level that is able to be attained by a 3PL provider. This happens when the complete logistics function is taken over by the 3PL provider after it has successfully integrated itself with the customer.
  • The Customer Adapter: The customer asks for this type of 3PL provider. Once they are contacted, they take over all of the logistics activities of a company. Logistics are improved by a customer adapter, but a new service is not developed. There is generally a small customer base for this type of 3PL provider.
  • Service Developer: They will provide advanced value-added services to their customers that can include: security systems, specific packaging, cross-docking, tracing and tracking. These types of tasks are able to be performed by a service developer thanks to a focus on economies of scale and an excellent IT foundation.
  • Standard 3PL Provider: This is the most common type of 3PL provider. They typically perform tasks including pick and pack, distribution and warehousing. 3PL is not the primary activity of many of the companies that provide standard 3PL service.

Non-asset based logistics providers

This new model for 3PL operations has come into existence due in large part to technology advances and the associated increases in inter-company communications and the visibility of the supply chain. Many logistics companies are now doing business internationally. Therefore, there is a need to lower costs, increase velocity, lower risk and increase the visibility of the supply chain, all at the same time. In order to do this, a common technological solution was called for.

Non-asset based providers handle tasks such as issue resolution, customer service, tracking, auditing, financial settlement, freight quoting and consulting on transportation and packaging. However, they do not own any physical freight distribution assets. They also do not employ any warehouse personnel or truck drivers. This type of 3PL is made up of a team of domain experts with information technology assets and expertise in the accumulated freight industry. The role they fill is comparable to a broker or a freight agent. However, when it comes to the transportation of products, their involvement is much more hands on.

In order for them to be useful to their customers, non-asset based logistics providers must be able to show them a benefit in both operational and financial terms. They can do this by leveraging expertise in the areas of customer service, negotiations and operations in a way that complements the physical assets of the customer that were preexisting.

3PL providers are an essential part of getting merchandise from point A to point B. Different types of 3PL providers are available for companies to use, based on their specific needs. A company can either maintain partial control over their logistics, or give complete control to a 3PL provider.