3PL, also known as third-party logistics provides outsourcing like any other business or brand. It essentially includes workplace management, acquiring and fulfilling in-house activities. In simple words, it essentially means to maintain the storing, transporting, and shipping departments of a business. A 3PL professional service provider might run an independent business, offering warehouse reservations and transportation. It can also mean a network of services running under a more extensive supply chain management firm.
How does third-party logistics work?
Since online 3PL management services is a bit complex thing to explain in simple words. We will use a more straightforward example here. – “A book writer, for instance, hires a ghostwriter to write their book owing to hectic schedules. So, to keep things in flow, he requests the ghostwriter for some credible references. Thus, requesting them to connect him with an editor, publisher, and book cover creator. This entire channel of book writing, editing, publishing, and book cover art design comes under the third-party logistics umbrella. It means the ghostwriter alongside other professionals transform and transport the book to-and-fro for finalization.”
We hope now you understand how 3PL works as a process. Remember, the lodging and transferring and conveyance of anything under multiple persons and firms is third-party logistics. Let’s further discuss its historical account in brief as below:
The progress made by 3PLs to date
The components of third-party logistics can take back 100 years or so, but it wasn’t common than it is today. The Council of Supply Chain Management Professionals suggests the abbreviation to be 4 decades old. The 3PL formula was introduced in supply chain businesses in the 70s. Surprisingly, it’s pacing rapidly and becoming more popular with growing digital technologies.
We all know the automobile industry is becoming more swift industry-wise and as fast as cars. It was The Motor Carrier Act of the 1980s that allowed decentralization of the trucking industry. Thus, reducing trucking prices and increasing the competition among its counterparts. Every transportation component was broken down by keeping the 3PL concept in mind.
Afterwards, the 2008 Consumer Product Safety Improvement Act authorized the third-party logistics definition. The contract states: “The term third-party logistics provider means 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.” Even the Fortune 500 companies accredit their successful candidates on the basis of 3PL regulation. Today, more than 90% of modern companies employ third-party logistics than the 46% count in 2001. This survey was conducted by Armstrong & Associates.
Another factor that’s allowing 3PL managerial services to make headways in the supply chain management field is the internet. People, nowadays, enjoy online shopping from various departmental stores and international companies/brands. The increasing consumer demand for fast e-shopping services have left no option for online vendors than the 3PL concept.
Advantages of 3PL logistics for businesses
Third-party logistics allows business owners to perform hauling procedures by the push of a single button. Every supply chain department merges together to become one big 3PL unit. It allows companies handle different logistic areas including warehousing, packaging, fulfillment, trucking, and transportation.
A 3PL business model offers better performance and overall efficiency of business’s logistic side. It aids in running a smooth process from product manufacturing to shipping for its end consumer. Thus, business owners can concentrate on other in-house operations. We can compare this business function unit with a website and mobile app with many feasible features.
The 4 main types of 3PL Companies
We all know that the supply chain department is progressing in line with the up-and-coming eCommerce business model. Thanks to the latest mobile technologies that has empowered logistics handling at lightning speeds. Nowadays, we have the four most common types of 3PL models businesses and brands. They are as follows:
1. Standard 3PL Providers
Business owners and small vendors requiring the most elementary logistics model would go with this third-party logistics framework. These logistics providers offer two major supply chain procedures to make both ends meet. Warehousing and transportation services comes under standard 3PL contractors. The cost of this 3PL logistics model is low amid storage and conveyance of products.
2. 3PL Service Developers
This option is more feasible for online businesses and brands using the power of internet. These suppliers provide online management and IT infrastructure alongside transportation and storage facilities. Since this third-party logistic model uses internet, developers also offer security, product quality compliance, order information, and shipment tracking.
3. 3PL Customer Developers
This is the most expensive third-party supply chain management system. It is mostly used by larger corporations and emerging companies. The 3PL customer developer acquires control of a company’s logistic channels at the request of customer(s). It is also known as the clients’ logistics department. Many business bigwigs and celebrities might use this 3PL business model for moving expensive commodities or larger consignments.
4. 3PL Customer Adapters
As the name suggest, this third-party logistic model adapts to the clients wishes and motive for carrying various consignments activities. It handles all the shipment procedures from step A to step Z. On top of that, it also offers the best prices and cost maintenance for saving money. Surprisingly, businesses using this 3PL supply chain structure also get the chance to negotiate with carriers.
3PL vs. 4PL: The best Third-party Logistics battle
It’s common for the term 4PL (fourth-party logistics) spill on the table while discussing 3PL. The most common definition of 4PL is when a 3PL company outsource supply chain management for faster delivery. Some 3PL service providers act as managers to 4PL outsourcing companies. Fourth-Party Logistic firms, on the other hand, see themselves signing contracts for the entire supply chain management department. 4PL provides sometimes supervise 3PL activities to ensure every process runs in the pecking order. Hence, fourth-party logistic suppliers are also known as LLP (Lead Logistics providers).
In this day and age, you must have good terms and contacts with 3PL providers. Not only does it allow fast processing for in-house supply chain, but also help you deliver products to customers on time. We recommend you talk to your supply chain manager about it and safeguard positive relations with third-party logistic companies.