What is Third Party Logistics
Third-party
logistics - (abbreviated 3PL) describes businesses that provide one or
many of a variety of logistics-related services. Types of services
would include public warehousing, contract warehousing, transportation management,
distribution management, and freight consolidation. A 3PL provider may take
over all receiving, storage, value added, shipping, and transportation
responsibilities for a client and conduct them in the 3PL's warehouse using the
3PL's equipment and employees, or may manage one or all of these functions in
the client's facility using the client's equipment, or any combination of the
above.
Third
party logistics providers typically specialize in integrated operation, warehousing
and transportation
services that can be scaled and customized to customers'
needs based on market conditions and the demands and delivery service
requirements for their products and materials.Hertz and Alfredsson (2003) describe four categories of 3PL providers:
·
Standard
3PL provider: this is the
most basic form of a 3PL provider. They would perform activities such as, pick and pack,
warehousing, and distribution (business) – the most basic
functions of logistics. For a majority of these firms, the 3PL function is not
their main activity.
·
Service
developer: this type of
3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking,
specific packaging, or providing a unique security system. A solid IT
foundation and a focus on economies of scale and scope will enable this
type of 3PL provider to perform these types of tasks.
·
The
customer adapter: this
type of 3PL provider comes in at the request of the customer and essentially
takes over complete control of the company's logistics activities. The 3PL
provider improves the logistics dramatically, but do not develop a new service.
The customer base for this type of 3PL provider is typically quite small.
·
The
customer developer: this
is the highest level that a 3PL provider can attain with respect to its
processes and activities. This occurs when the 3PL provider integrates itself
with the customer and takes over their entire logistics function. These
providers will have few customers, but will perform extensive and detailed
tasks for them.