Third-Party Logistics Companies (3PL)

third party logistics companiesLet’s begin with defining the terms “third-party logistics” and “third-party logistics provider”. The Council of Supply Chain Management Professionals (CSCMP) provides a very extensive glossary that defines all of the terms in logistics. These two terms are defined by CSCMP as:

Third-Party Logistics (3PL): Outsourcing all or much of a company’s logistics operations to a specialized company. The term “3PL” was first used in the early 1970s to identify intermodal marketing companies (IMCs) in transportation contracts. Up to that point, contracts for transportation had featured only two parties, the shipper and the carrier. When IMCs entered the picture – as intermediaries that accepted shipments from the shippers and tendered them to the rail carriers – they became the third party to the contract, the 3PL. Definition has broadened to the point where these days, every company that offers some kind of logistics service for hire calls itself a 3PL. Preferably, these services are integrated, or “bundled,” together by the provider. Services they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. In 2008 legislation passed declaring that the legal definition of a 3PL is “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”

 

Third-Party Logistics Provider: A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or “bundled” together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding.

 

logistics companies - 3PLThird party logistics companies (3PL) are becoming an important part of today’s supply chain. These logistics companies offer services that allow businesses to outsource part or all of their supply chain management functions. Many 3PL companies offer a wide range of services including: inbound freight, freight consolidation, warehousing, distribution, order fulfillment and outbound freight. The growth of 3PL companies has been driven by the need for businesses to become leaner, reducing assets and allowing focus on core business processes.

 

Rise Of Third Party Logistics Providers
The growth of 3PL companies began back in the 1980’s when businesses began to look for new ways in which they could outsource logistics functions and concentrate on their core business. As companies saw the benefits of outsourcing delivery and warehousing functions, the number of third party logistics companies began to rise offering an ever increasing number of services. The increasing numbers of 3PL’s inevitably led to increased competition between these firms, which led to greater savings for the companies who employed them. The last decade has seen the 3PL provider transitioning from a local or regional business to one that offers national or global coverage.

 

Selecting A 3PL Company
Deciding to a use a third party logistics company is a decision that depends on a variety of factors that differ from business to business. The decision to outsource certain business functions will depend on the company’s plans; future objectives, product lines, expansion, acquisitions, etc.
Once a decision has been made to outsource certain processes, a company will begin a search for the right 3PL that fits all their requirements at the best possible price. Our logistics directory aims at helping you find the best logistics company to establish a long lasting and profitable relationship with.

 

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