Third party logistics (3PL)

• Also called: Logistics Outsourcing or Contract Logistics

- Perspectives behind 3PL :
- broad perspective : any logistics activity not performed in-house is
representative of third-party logistics
- narrow perspective : 3PL arrangements involve a long-term
perspective between buyer and seller and that the parties have a
relationship .
• the general idea behind third party logistics is that one company (say, a
manufacturer) allows a specialist company (provider) to provide it with
one or more logistics functions (e.g., warehousing, outbound
transportation)
• 3PL customers can demand a number of different activities
and the most common involve :
- inbound and outbound transportation
- carrier negotiation and contracting
- freight consolidation
-recently supplemental services such as : final product assembly,
product installation, and product repair .
• Benefits of using 3PL :

- a manufacturer can outsource all their transport, storage, packing and

distribution of their goods using a single 3PL company and that
indicates that there are 3PL companies offer multiple logistical
activities. Most 3PL companies are flexible so that you can select to use
as many or as few of their services depending on your requirements.
- And as a result 3PL users can focus on their core-functions and their
core-competencies.
 WHO ARE THE FIRST TWO PARTIES ??
• There are up to 6PL
• The more a company
moves from 1PL to 6PL
(and beyond) the more
of the company supply
chain managed by
outsourced companies
and the higher the level
of service integration.
 WHY TO CHOOSE 3PL SERVICES ?
• The decision to use 3PL services can be driven by :
- strategic considerations : in the sense that an organization believes
that one or more aspects of its supply chain(s) need to be transformed.

- tactical considerations : an organization might have an inefficient

distribution network, an inability to control internal costs, a costly or
inflexible workforce, outdated warehousing facilities, or outdated
information systems so it has to use 3PL services .
 Examples of 3PL providers
- DHL
- FedEx
- United parcel service
- XPO logistics
 Examples of 3PL users :
- Apple
- Ford
- Airbus
- HP
Pros and Cons of Third Party Logistics
 Pro: Someone Else Takes Care of the Tedious Tasks

• you do not have to worry about the labor-intensive steps in distribution

and inventory management. A team of dedicated professionals handles
all of that for you, so all you have to do is track your inventory
remotely.
• This frees up time for you to focus on more important elements of
running your business, and it saves you money in labor.
Con: You Lose Some Control over Your Inventory

• the biggest con to 3PL is the fact that you don't get to watch over the
process in person
• Nevertheless, you can monitor your inventory levels, deliveries,
incoming shipments, and more in real time if you work with a quality
3PL provider with real-time tracking programs.
• . You can still feel in control of your products because you are there
watching in the background.
Pro: You Have Specialists Working for You

• You can trust that you have a crew of knowledgeable professionals

in charge of your merchandise.
• You don't have to hire and train people that may not do their jobs
correctly.
• Chances are you are not a logistics expert, but your distribution
company will be. This ensures that your customers receive all the
services they need in an efficient manner – from labeling the
packages to completing the deliveries.
 Con: You Have to Find Someone You Can Trust

• As you may expect, not all 3PL providers are created equal. You
need to take the time to find a good company to work with from the
beginning.
• Once you have someone you can trust, you can rest assured that your
goods are being properly cared for.
• You may experience stress during the search, but it will all work out
when you find a reliable 3pl company.
Pro: Save Money in the Long Run

• 3pl is an investment that will take up some of your profits in the

beginning.
• With that in mind, most companies save money in the long run with
3PL providers because they are able to manage higher inventory
volumes more efficiently than they could on their own.
• The 3PL process also reduces the cost of labor across the board, from
sorters to deliverers and everyone in between.
 Con: Spend Money at the Beginning

• as we discussed above, that investment tends to pay off in the long

run. If you skimp on the cost of your warehousing and distribution,
you're going to get what you pay for.
• This will ultimately affect the way your customers see your
company, and it could hurt your profit margins in the future.
• Rather than risking a big loss down the line, you should invest in a
quality 3PL provider that will increase your ROI and boost your
customer satisfaction.
• ROI: a ratio between net profit and cost of investment.
Pro: Flexible Service Options

• Many 3PL companies will offer additional services to make it easier

for you to run and manage your business.
• For instance, you may outsource your customer service and
shipping needs to the warehouse's fulfillment center, which will
virtually stream your Third Party Logistics provider, the less you
will have to worry about on your own.
 Con: Bad Service Reflects on Your Company

• The fact is that there are bad 3PL warehouses out there, and their
inefficiency could make your company look bad.
• Your customers do not care who is in charge of getting the product to
them. All they care about is the end result. That is why it is so
important to look for a good distribution center early on so you can
avoid customer satisfaction issues in the future.
• Make sure your logistics team is experienced with the type of services
you need before you entrust them with your reputation.
Is Third Party Logistics Right for You?

• In most cases, the pros of Third Party Logistics greatly outweigh the
cons. You just have to make sure you find a company that you can
count on at the very beginning. If you're in the right hands, you will
enjoy years of stress-free inventory management for your business.
Resources used :
 Contemporary Logistics 12th edition
 Wikipedia https://en.wikipedia.org/wiki/Third-party_logistics
 AK logistics and supply chain.com
https://aklogisticsandsupplychain.com/2020/03/02/1pl-2pl-3pl-4pl-5p
l-6pl-the-advancement-of-party-logistics/
I think logistics.com
https://ithinklogistics.com/blog/logistics-and-its-types-difference-bet
ween-1pl-2pl-3pl-and-4pl/
 supply chain 247.com
https://www.supplychain247.com/article/2015_top_50_global_dome
stic_third_party_logistics_providers