Third-party logistics (3PL) involves outsourcing elements of logistics operations like transportation, warehousing, and distribution to an external provider. Companies utilize 3PL to reduce costs, improve efficiencies, and expand capabilities beyond their internal abilities. 3PL services are flexible and scalable based on a company's needs. Common reasons for using 3PL include lacking sufficient warehouse space or facing rising transportation costs. When evaluating 3PL providers, companies should consider capabilities like warehousing, transportation, distribution, and shipping/receiving. Larger, more established 3PL firms can offer integrated, end-to-end logistics execution.

1. THIRD PARTY LOGISTICS
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2. WHAT IS 3PL?
3PL, or third-party logistics, is essentially a variety of services and
processes that are provided to a business by an external company
for a variety of reasons such as wanting to reduce costs, improve
efficiencies and expand capabilities. 3PL services are usually
flexible and scalable based on the needs of the business, meaning
that they can be utilized on an as-needed basis, or as a long-term
solution depending on the goals and objectives of the business.

3. Why Choose 3PL?
There are many reasons why companies choose to go the 3PL service
route. Often, as a company grows, the need for warehouse space
increases beyond that business’ ability to manage it. 3PL
warehousing can be a good option for companies facing storage
capacity issues. Other companies may be challenged with increasing
transportation costs and investment in equipment and vehicles. The
large fleets of modern vehicles and equipment that are available
through 3PL providers are often a much more cost-effective
solution. Then there are US businesses looking to expand into the
Canadian market – a good 3PL will have the depth of experience to
help solve many logistics challenges involved with these scenarios.

4. Types of Third-Party Logistics Providers
Investigate four crucial capabilities when comparing 3PLs:
• Warehousing
• Transportation
• Distribution
• Shipping and receiving
• Size and specialization matter. Some 3PLs lack the native full-
service capability and specialize in one or two areas. Larger
established firms offer end-to-end execution and integrate
seamlessly.

5. Growth of 3pl
• Aspects of 3PLs probably date back hundreds, if not thousands, of
years. The Council of Supply Chain Management Professionals traces
the actual 3PL abbreviation to four decades ago. "The term 3PL was
first used in the early 1970s to identify intermodal marketing
companies … in transportation contracts," the council wrote in a
glossary. "Up to that point, contracts for transportation had featured
only two parties, the shipper and the carrier."
• The Motor Carrier Act of 1980 deregulated the trucking industry,
which reduced trucking rates and also increased the amount of
competition, all of which fed into 3PL concepts.
• The term 3PL got bandied about more by consultants and during
conferences in the 1990s, likely tied to evolving technology, including
the rise of the internet.

6. The benefits of 3PL
• The primary benefit of using a 3PL service to handle logistics, such
as packaging, warehousing, fulfillment and distribution, is cost
savings -- for example, not having to maintain a warehouse or the
staff to monitor supply chain operations.
• A 3PL service likely offers better performance on efforts such as
shipping while also enjoying an easier ability to scale its
operations. If the publishing company in the example above
suddenly needs to ship more copies of a popular title, a fulfillment
center will have an easier time meeting that demand than if the
publisher itself had to ship additional copies of the book.

7. Services of 3pl
• Inventory storage and management
• Picking and packing
• Freight forwarding
• Shipping/distribution
• Customs brokerage
• Contract management
• IT solutions
• Cross-docking

8. Pros of 3PL
• Finding the right 3PL can save you time and money, through
economies of scale (eg. Shipping Rates)
• It works well with both local and international distribution, and
you can get speedier delivery by benefiting from their multiple
storage locations
• It works well for a fast growing business with large order volumes
• You can still opt to control customer service and returns

9. Cons of 3PL
• You have less control over your inventory and the customer
experience
• Finding the right provider who you can trust and rely on can be
time consuming
• 3PL can be an expensive cost, especially when you only have small
quantities of orders
• Generally, 3PL providers won’t handle perishable, hazardous, or
flammable goods

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