What are third party logistics providers
The need for an outside logistics provider triggered the evolution of Third Party Logistics Providers which has been the most dominant and arguably the largest market in the world. 3PLs offered great advantages to the companies in terms of
• Economies of scale (merits from large truck fleets, warehouses, etc.)
• Access to world class processes and technologies
• Access to the resources not available in-house
• Risk sharing
• Adaptability to business changes
With all these advantages companies had better focus on their core competencies. However competition further intensified when they had all the time to focus on better competing.
Advantages of Third Party Logistics Providers include:
- Allows flexibility to expand and contract inventory levels
- Enhanced technology and supply chain visibility
- Improved customer service offerings
- Allows companies to focus on core competencies
- A more strategic and scientific approach to logistics challenges
- Lower or eliminate capital expenditures associated with equipment and facilities.
Third party logistics providers provide one or many of the following third party logistics services:
Transportation or Freight Management (including technology, freight accounting, and services around claims)
The following are the characteristics of the different types of third party logistics services:
Transportation Based Third Party Logistics Services
- Services extend beyond transportation to offer a comprehensive set of logistics offerings.
- Leveraged 3PLs use assets of other firms.
- Non-leveraged 3PLs use assets belonging solely to the parent firm.
Warehouse/Distribution Based Third Party Logistics Services
- Many have former warehouse and/or distribution experience.
Forwarder Based Third Party Logistics Services
- Very independent middlemen with forwarder roles.
- Non-asset owners that provide a wide range of logistics services.
Shipper/Management Based Third Party Logistics Services
- Focused on the management of the shipping process from beginning to end.
- Provides technology, such as a transportation management system, and integrated freight management services to eliminate heavy process and cumbersome features such as claims and accounting (freight payment and accounting)
- Provides management of carrier relations for ongoing rate maintenance and negotiation
- Gives information, such as freight data and matrix reports for better visibility and control on future logistics outcomes
Financial Based Third Party Logistics Services
- Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory.
Information-based firms Third Party Logistics Services
- Significant growth and development in this category of Internet-based, business-to-business, electronic markets for transportation and logistics services.
It is important to pay close attention to the expertise of the personnel of 3PL Companies that you intend to work with.