What is a 3PL and When Does It Make Sense to Use One?
Posted February 23rd, 2011
A 3PL (third-party logistics) firm provides multiple logistics services, with “one-stop shop” service to its customers for either part, or all of their supply chain management functions.
3PL providers typically specialize in integrated operation, warehousing, and transportation services, which they customize to customers’ needs based on market conditions and the delivery service requirements for the customers’ products and materials. Other 3PL services include cross-docking, inventory management, packaging, and freight forwarding.
Types of 3PLs include:
- Standard 3PL provider: The most basic type of 3PL firm, standard providers perform the most basic logistics, such as pick and pack, warehousing, and distribution.
- Service developer: This type of 3PL provider offers value-added services such as tracking and tracing, cross-docking, specific packaging, or providing a unique security system.
- Customer adapter: A customer adapter essentially takes over complete control of the hiring company’s logistics activities, improving those activities but not developing any new services. This type of 3PL inherits the logistical operation from the hiring company; it does not create its own.
- Customer developer: 3PL at the highest level, a customer developer integrates itself with the hiring customer and takes over their entire logistics function, performing extensive and detailed tasks. While a Customer Adapter will run a company’s logistics department, the Customer Developer will in essence become the company’s logistics department.
A recent study found that 95 percent of the U.S.’s chief executives believe they should have some form of logistics strategy, and nearly 50 percent of the nation’s CEOs are currently incorporating supply chain planning into their overall business strategies. Why?
Simply put, logistic and supply chain planning fulfill the need to move an asset or commodity from one location to another, at the right time, at the least cost. All types and sizes of companies, from small firms to multi-national businesses, can gain a competitive and economic advantage by outsourcing their supply chain and logistics functions. 3PLs offer cost-effective resources and expertise to make those functions faster and more efficient.
Using a 3PL frees up resources, allowing companies to focus on marketing and selling their products, not managing supply chains.
A smoothly running 3PL partnership reduces expensive distribution processes and the need for costly buffer inventories. 3PLs provide efficient decision making in an appropriate reaction time. Client companies also benefit from reduced administration overheads.
And if your company wants or needs to expand to overseas markets, 3PLs have the experience and expertise to manage more complex global supply chains.
3PL is one of the fastest growing trends in manufacturing because companies are moving from transaction strategies to relationship-based alliances such as partnerships. To learn more about how it can benefit your organization, and how Bayside Solutions can provide the right manufacturing professionals to get your supply chain flowing smoothly, call us today.
