Third Party Logistics: Who Are They and What Do They Do
Third Party Logistics or more commonly known as 3PLs is a relatively new type of business that was just legally defined in 2008. Although the type of business practice has been going on since the 70's and 80's, when companies started outsourcing more and more of their logistic services to third party companies hence the name 3PL. The acronym for Third Party Logistics is actually unknown, no one can say who started it but in 1996 a company, Accenture, registered a trademark and defined 3PL as "A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution." Presently the term is no longer registered and there are various definitions that explain what a 3PL does but the main fact is that a 3PL company is a firm that provide services to their customers of outsourced logistics. They specialize in integrated operations, warehousing and transportation services that can be scaled and customized to support customers’ needs based on market conditions, such as demands and delivery service requirements. With 3PLs mainly focusing on that, they usually have a value-added service related to production or the procurement of goods.
Many companies are turning to these third party companies since they have a proven method that works. It leaves the bigger companies time to focus on other aspects of their business. Even though they need to pay the 3PL companies, many big businesses find this to be more of a risk free approach to doing business. They also save on equipment cost together with the IT system required to run everything. Since 3PLs constantly keep up to date in those things they save time, resources, and expertise from being wasted by bigger companies. 3PLs are faster, more cost efficient and have all the technical requirements bigger companies don’t have. Although 3PLs are relatively straight forward in what they do, there are different types of them which include standard 3PL providers, service developers, the customer adapter, and the customer developer. The standard provider is the most basic out of all the providers; handling things such as distribution to businesses which is the most basic function of logistics, warehousing, and lastly pick & pack (part of a complete supply chain management process that is commonly used within the retail distribution of goods). For most of the standard providers function is not their main activity. Then there is the service developer; who offer their customers advanced value services like tracking and tracing (the process of determining the current and past locations of purchased items or property), cross-docking (a practice in the logistics of unloading materials from semi-trucks, or railroad cars and then loading those materials directly onto outbound trucks, railcars, or trailers with little to no storage in between), specific packing, or providing a unique security system. This type of 3PL provider focuses on IT foundation and choose to focus on economies. Their scope helps them provide these tasks. The customer adapter provider comes in at the request of the customer and essentially take over complete control of the company’s logistics activities. It improves the logistics dramatically, but doesn’t develop a new service. The customer base of this type is usually on the smaller side. The last type of business is the customer developer, this being the highest level a 3PL can reach due to its processes and activities. When the 3PL provider integrates itself with the customer and takes over their whole logistic function. Typically this type of 3PL has very few customers but usually put an extensive amount of detail into the tasks that they perform. A few reasons why big companies choose to invest in 3PLs are to provide supplementary