Third Party Logistics

1. PAVITHRA CHARUMATHI A
RA1852001020052

2. What is 3PL?
Third Party Logistics (3PL) companies handle
outsourced procurement, transportation, and
distribution functions for client companies. Some
focus on specific segments, like product sourcing or
freight shipping. Others fill multiple needs, like
warehousing and distribution. We’ll explore how
different 3rd party logistics companies work and
how to choose the right 3PL solutions for your
ecommerce business.

3. Four Functions of 3PL Providers
1. Shipping and Receiving
Shipping and receiving 3PL providers are focused on the
management of the shipping process from start to finish.
Often, these companies feature technology, usually a
transportation management system (TMS), or integrated
freight management services. These technologies were
designed to streamline efficiency and automate routine,
but also time-consuming tasks, such as freight
payment and accounting. These 3PL providers also
include management of carrier relations, and freight
data and matrix reports for real-time visibility and
increased transparency throughout the shipping process.

4. 2. Transportation
Transportation 3PL providers are responsible for the
actual transport of goods or services between locations.
A common example is when a 3PL provider manages an
inventory shipment between a company and the buyer.
Many transportation 3PL providers often will leverage
other transportation firms to complete the duties for its
partner.
3. Warehousing
Warehousing 3PL providers are one of the most common
type of third-party logistics provider. A warehouse 3PL is
integrated into a company’s warehousing and
transportation procedures, and specializes in the storing
and distribution of goods and/or services. Many
warehouse 3PL providers offer customizable ways to
handle storage, distribution, and product transportation.

5. 4. Distribution
Many 3PL organizations also provide a wide variety of
distribution and wholesale services, including
outbound order fulfillment, picking and packing, custom
labeling, and manufacturing. The efficient distribution of
large product quantities can be a tough thing for a small
company to manage; by outsourcing distribution to a
third-party logistics provider, its employees can focus on
other core competence business tasks.

6. 3PL vs. 4PL
A fourth-party logistics (4PL) organization provides
many of the same services as a 3PL, but there are
some important differences. For starters, 4PLs have
a much more broadly defined role compared with a
3PL. According to the Council of Supply Chain
Management Professionals (CSCMP), a 4PL is
defined as “often a separate entity established as a
joint venture or long-term contract between a
primary client and one or more partners.” In a
nutshell, a 4PL is responsible for a supply chain’s
planning, management, and designing, from start to
end, rather than standard delivery, distribution, and
transportation functions.

7. Different types of third party logistics services:
1.Transportation Based Third Party Logistics
Services
• Services extend beyond transportation to offer a
comprehensive set of logistics offerings.
• Leveraged 3PLs use assets of other firms.
• Non-leveraged 3PLs use assets belonging solely to the
parent firm.
2.Warehouse/Distribution Based Third Party
Logistics Services
• Many have former warehouse and/or distribution
experience.
3.Forwarder Based Third Party Logistics Services
• Very independent middlemen with forwarder roles.
• Non-asset owners that provide a wide range of logistics
services.

8. 3.Shipper/Management Based Third Party Logistics Services
• Focused on the management of the shipping process from beginning
to end
• Provides technology, such as a transportation management system,
and integrated freight management services to eliminate heavy
process and cumbersome features such as claims and accounting
(freight payment and accounting)
• Provides management of carrier relations for ongoing rate
maintenance and negotiation
• Gives information, such as freight data and matrix reports for better
visibility and control on future logistics outcomes
4.Financial Based Third Party Logistics Services
• Provide freight payment and auditing, cost accounting and control,
and tools for monitoring, booking, tracking, tracing, and managing
inventory.
5.Information-based firms Third Party Logistics Services
• Significant growth and development in this category of Internet-
based, business-to-business, electronic markets for transportation
and logistics services.

9. Advantages of 3PL
(i)Scalability
A 3PL provider can scale a company’s space, labor, and
transportation depending on exactly what services are
required. Manufacturers, suppliers, and other producers can
more effectively and uniquely grow in new territories with
much less hassle. A 3PL is designed to optimize the logistics
functions – something you may have less expertise in – and
clear the path for enhanced business growth.
(ii)Time Savings and Cost Savings
A business recognizes that success relies on a certain level of
efficiency, and that’s where a 3PL can have a huge effect.
Rather than allocate money and resources toward building
and maintaining a warehouse, determining how to transport
goods and/or services, optimizing services, and keeping up
with new technologies through an in-house management
model, a 3PL eliminates those costs and frees up your key
employees to focus on the manufacturing, strategic planning,
and operational processes that better enable business growth.

10. (iii)Expansion
3PL services make it easier than ever to expand
businesses into emerging markets and new areas,
including emerging countries. By working with a 3PL, a
business can leverage new supply chains, improve
customer service, and access new markets it hasn’t been
able to access before. Distribution centers and
warehouses from third-party logistics providers, who
often build the necessary security and compliance
procedures into their service offerings and have obtained
the proper accreditation to offer global services, make
such expansion more accessible than ever.

11. Disadvantages of 3PL
(i)Loss of Control
When choosing a 3PL provider, an organization is giving up a certain
amount of control of the delivery. When a business decides to join
forces with a third-party logistics provider, they are entrusting the
3PL to meet the agreed-upon SLAs, and that requires a major leap of
faith for functions that can directly impact customer satisfaction. The
smooth exchange of critical EDI and non-EDI information can be at
risk if one party is using subpar B2B integration software.
Additionally, sharing certain proprietary information with a third
party (sourcing, order information, etc.) could leave companies
feeling vulnerable should there be a data breach.
(ii) Cost
While a 3PL can save a business lots of time and money, external
factors (tariffs, over-regulation, weather, etc.) can lead to escalating
costs. A 3PL company might make financial sense upfront, but you’re
at the mercy of this external trading partner and its own business
strategy. Once-standard transaction costs eventually can skyrocket as
your business consumes more services and may be more expensive
than an in-house logistics operation. Additionally, it’s often difficult
to establish a cost-effective partnership between a shipper and a 3PL,
and it’s something you’ll have little influence over.

12. (iii)Business Understanding
If you’re in a highly regulated industry or have very
specific needs (cold storage, temperature-controlled
delivery, etc.) a run-of-the-mill 3PL may not suit your
business. Additionally, 3PLs often have hundreds or
even thousands of customers and may not give you the
attention you’re seeking. How easy are they to contact
for support? How fast can they respond to your
requests? It’s critical to choose a 3PL that fully
understands your business, its goals, and how efficient
logistics and distribution can enable those goals.