Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company’s use of third-party businesses to outsource elements of the company’s distribution and fulfillment services.
Third-party logistics providers typically specialize in integrated operation, warehousing and transportation services which can be scaled and customized to customers’ needs based on market conditions, such as the demands and delivery service requirements for their products and materials. Often, these services go beyond logistics and include value-added services related to the production or procurement of goods, i.e., services that integrate parts of the supply chain. When this integration occurs, the provider is then called a third-party supply chain management provider (3PSCM) or supply chain management service provider (SCMSP). 3PL targets particular functions within supply management, such as warehousing, transportation, or raw material provision.
Third party logistics providers usually specialise in
- Integrating operations
- Transportation services
- Inventory management
- Freight forwarding
These services are scaled and customised to the customer’s specific needs based on their market conditions and the different demands and delivery service requirements for their products or materials.
There are thousands of 3PLs in the market that offer different models and perform different tasks. For example, certain 3PLs may only specialise in certain industries.
The 3PL have a large footprint throughout the country. This makes it viable for companies to service clients in remote regions at a much lower cost than doing it themselves.
Types of 3PL Providers
Basic activities: Pick and pack, warehousing and distribution.
2. Service Developer
Value-added services such as tracking and tracing, cross-docking and specific packaging
3. Customer Adapter
This comes in at the request of a customer. It is when the 3PL takes over complete logistics of the firm.
4. Customer Developer
This is the highest level of 3PL. This is when the 3PL integrates itself with the company, and ends up taking over the entire logistics operation.
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