Third-party logistics (3PL) providers are companies that provide logistics services like transportation, warehousing, and distribution for other companies. 3PLs allow companies to focus on their core business while outsourcing logistics functions. Common types of 3PLs include transportation-based, warehouse/distribution-based, and financial-based providers. Using 3PLs can help companies save time and money, expand markets, and focus on their strengths. However, there are also risks like loss of control and visibility with customers. Choosing the right 3PL requires thorough due diligence and establishing clear expectations, performance measures, and a process for managing the relationship.

1. Third Party Logistics
Providers (3PL)

2. 3 PL
 Third-party logistics (3PL) service providers
are companies who provide a range of
logistics activities for their clients. These are
companies independent from the buyers and
sellers but takes over some of their logistics
function.

3. 3PL Defined
 Businesses that provide one or many of the following
logistics services:
 Transportation Management
 Public/Contract Warehousing
 Distribution Management
 Freight Consolidation

4. Types of 3PL Providers
 Transportation Based
 Services extend beyond transportation to offer a
comprehensive set of logistics offerings.
 Examples: UPS Logistics

5. Transportation
Customs
Incoming Point of Sale/
Materials Consol. De-
Point of Use/
Or Center con
Customers
Products Cente
Outsourced
r
Activities:
Benefits:
Transport arrangement
Customs clearance Shorter cycle time
Shipment visibility Lower freight costs
Carrier mgmt / rate mgmt Visibility of pipeline inventory
I

6. Types of 3PL Providers
 Warehouse/Distribution Based
 Many have former warehouse and/or distribution
experience.
 Examples:Caterpillar Logistics, IBM

7. Contract Warehousing
Incoming Bulk Distribution Customers
Products Warehouse Center Retailers
Outsourced In-house
Activities: Benefits:
Labor & supervision Lower capital investment
Receiving, storage, shipping Lower fixed/variable cost ratio
Focus to the core
Professional service

8. Types of 3PL Providers
 Financial Based
 Provide freight payment and auditing, cost
accounting and control, and tools for monitoring,
booking, tracking, tracing, and managing
inventory.
 Examples: GE Information Services,

9. Logistics Financial Services
Customers /
Supplier Manufacturers Distributors Retailers
Activities: Benefits:
Inventory finance (factoring,) Reduced cost of capital
Distribution finance (asset based Improved cash flow
lending, receivable finance) Reduced capital investment
Payment solutions ,
Leasing

10. Why Use 3PL’s?
 Save time
 Don’t need to invest in:
 Trucks
 Training
 Development
 Help expand
 New markets
 International
 No roads

11. Why Use Cont.
 Narrow your focus
 Allows you to focus on your strengths
 Reach more customers more effectively
 Can ensure delivery times
 can help a company run leaner

12. Management Focus
 Furthering your company
 Consider potential benefits and drawbacks
 3pl’s can increase profitability

13. Risks of Out-sourcing
Logistics
 Loss of internal logistics management capabilities
 Biased choice of service providers
 Leakage of sensitive data and information
 Service degradation
 Less reliable? Longer order cycle time?
 Emergency response?
 Loss of control and representation
 Reduced contact with final customer
 3PL for outbound logistics interact with your customers, you
become less visible to your customers
13

14. Tips for Successful Implementation
1) Have an outsourcing strategy.
 Know what your outsourcing strategy is. It needs to be well thought
out and measured against in house solutions and capabilities.
 SWOT analysis. As a company you should understand the strengths,
weaknesses, opportunities and threats of outsourcing logistics, rather
than keeping them in house.
2) Do your homework.
 Do a comprehensive study
 Clearly document advantages, challenges, costs and benefits.
 Document expectations
 Set down expectations in clear terms and include current costs.

15. Tips Continued…
 Create a robust selection process.
 Invite companies in to give a formal presentation without giving
requirements. This can help document their strengths and weaknesses.
 Make a site visit to the 3PL, and talk with its existing customer.
3) Measure and review performance
 Have a efficient and accurate measurement system.
 Qualitative measures that focus on effectiveness and quantitative
measures that focus on efficient utilization.
 Have an efficient costing system
 This will help you to understand the costs involved in outsourcing.
 “Are we making money doing this?”

16. Tips Continued…
4) Create an Implementation Strategy
 Create a project plan road map
 Be clear who does what, create a project management team with
members from both organizations and review progress vs. planned
milestones.
5) Nurture the Relationship
 Both Parties must nurture the relationship to make outsourcing
successful.
 Create mutual trust, respect and a sense of integrity.

17. 4PL Providers
 Manage and direct the activities of multiple
3PLs, serving as an integrator
 Refinement on the idea of 3PLs
 4PLs are not asset based like 3PLs