3PL Explained: What is its role in Supply Chain Management?
Updated: Jan 18
Third Party Logistics: Who, What, When, Where, Why, and How?
Understanding the world of third party logistics can be complicated and intimidating. There are endless acronyms and lingo that can take years of experience to become fluent in. This blog post looks to simplify and explain third party logistics in a way that everyone can understand, through the 5 Ws and H.
Third party logistics providers are businesses professionals that take care of the logistical parts of your business, by using personalized solutions for your products/services and your customers. Most importantly, they are members of your team with your goals in mind, seeking to satisfy customers. They aren't just for major enterprises either; in fact, smaller companies often find it more sustainable to outsource activities such as warehousing and distribution to 3PLs, as they may lack the resources to build and maintain in-house business units dedicated to these functions.
Third-party logistics is a business model that offers services on a fee-for-service or contractual basis, allowing you to outsource operational logistics activities, from warehousing, all the way through to delivery. Ultimately they enable you to focus on your business by taking away all of the headaches associated with the moving parts of your business.
They can provide any number of logistical services affecting a supply chain, which may differ from company to company, as 3PL clients typically outsource a customized set of services based on unique needs, including (but not limited to):
Pick and packing
Packaging and freight forwarding
Last Mile Delivery
The logistics industry may have a lengthy history, but the third party logistics (3PL) sector is less than 40 years old. The 3PL industry has evolved over the years to meet the change of customer's preferences and increased involvement in the logistical process . But the trend of outsourcing logistics services to third parties gained momentum in the 1980s. This shift can be attributed to the Motor Carrier Act of 1980, which deregulated the trucking industry and allowed warehousing companies to easily move into freight management.
In the 1990s emerging global markets led to the popularity of global logistics as companies expanded their product reach. With new worldwide trade zones presenting new challenges for companies that were used to the domestic market, 3PLs closed the gap for logistical services in the marketplace. Supply chains have only increased in complexity, creating more demand for efficient transportation management. Both domestically and internationally, 3PL providers offer integrated logistics services to help shippers address those complexities, and continue innovating today, and into the future as technology like warehouse management systems (WMS) have taken the world of logistics and supply chain to new levels.
If you are ready to take your business to new levels, here are some indicators of when you should consider working with a 3PL:
You’ve run out of storage space for your inventory.
You want to offer your customers expedited shipping.
You want to save money on storage and shipping.
You find yourself wanting room to grow with your company
You’re spending more time shipping your products/delivering your services than the time it takes to produce it
Third party logistics providers exist all over the country and world, forming vast networks, and spanning millions of miles. Chicago and Houston happen to be two of the largest hubs in the US and are where Supply Chain Warehouse is currently located.
Grow your Business
Increase Efficiency and Cost Savings
Check out our blog post "5 Reasons to Use Supply Chain Warehouses"
Third party logistics providers make all their services possible by mapping out a supply chain network and working with experts to get your products/services where they need to be, when they need to be, in the shortest time possible for the best price. They use tools like the previously mentioned warehouse management system (WMS), their extensive logistics sector knowledge, industry resources, and new technologies like QR codes to organize your products.
Let us know if this blog post helped you to better understand third party logistics and leave any additional questions in the comments below!