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Third Party Logistics Providers (3PL)

Third party logistics (3PL) providers are independent companies that provide logistics services like transportation, warehousing, and distribution for other companies. There are different types of 3PLs including transportation-based, warehouse/distribution-based, and financial-based. Companies use 3PLs to save time and money by outsourcing logistics functions rather than handling them in-house. It is important for companies to thoroughly research and select a 3PL, clearly define expectations, and closely monitor the relationship for successful implementation of outsourced logistics.

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Pooja Tripathi
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81 views16 pages

Third Party Logistics Providers (3PL)

Third party logistics (3PL) providers are independent companies that provide logistics services like transportation, warehousing, and distribution for other companies. There are different types of 3PLs including transportation-based, warehouse/distribution-based, and financial-based. Companies use 3PLs to save time and money by outsourcing logistics functions rather than handling them in-house. It is important for companies to thoroughly research and select a 3PL, clearly define expectations, and closely monitor the relationship for successful implementation of outsourced logistics.

Uploaded by

Pooja Tripathi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Third Party Logistics

Providers
(3PL)
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.
3PL Defined
 Businesses that provide one or many of the following
logistics services:
 Transportation Management

 Public/Contract Warehousing

 Distribution Management

 Freight Consolidation
Types of 3PL Providers

 Transportation Based
 Services extend beyond transportation to offer a
comprehensive set of logistics offerings.
 Examples: UPS Logistics
Types of 3PL Providers
 Warehouse/Distribution Based
 Many have former warehouse and/or distribution
experience.
 Examples:Caterpillar Logistics, IBM
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
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,
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
Why Use 3PL’s?
 Save time
 Don’t need to invest in:
 Trucks
 Training
 Develo
pment
 Help expand
 New markets
 International
 No roads
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
Management Focus
 Furthering your company
 Consider potential benefits and drawbacks
 3pl’s can increase profitability
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
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.
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?”
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.
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

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