Third Party Logistics

Providers (3PL)

3 PL

Third-party logistics (3PL) service providers

are companies who provide a range of
logistics activities for their clients. These are
companies independent from the buyers and
sellers but takes over some of their logistics
function.

3PL Defined

Businesses that provide one or many of the following

logistics services:
Transportation Management
Public/Contract Warehousing
Distribution Management
Freight Consolidation

Types of 3PL Providers

Transportation Based

Services extend beyond transportation to offer a

comprehensive set of logistics offerings.
Examples: UPS Logistics

Transportation
Incoming
Materials
Or
Products

Customs

Consol.
Center

Decon
Cente
Outsourced
r

Activities:
Transport arrangement
Customs clearance
Shipment visibility
Carrier mgmt / rate mgmt

Point of Sale/
Point of Use/
Customers

Benefits:
Shorter cycle time
Lower freight costs
Visibility of pipeline inventory
I

Types of 3PL Providers

Warehouse/Distribution Based

Many have former warehouse and/or distribution

experience.
Examples:Caterpillar Logistics, IBM

Contract Warehousing
Incoming
Products

Bulk
Warehouse

Distribution
Center

Outsourced

In-house

Customers
Retailers

Activities:

Benefits:

Labor & supervision

Receiving, storage, shipping

Lower capital investment

Lower fixed/variable cost ratio
Focus to the core
Professional service

Types of 3PL Providers

Financial Based

Provide freight payment and auditing, cost

accounting and control, and tools for monitoring,
booking, tracking, tracing, and managing
inventory.
Examples: GE Information Services,

Logistics Financial Services

Supplier

Manufacturers

Distributors

Customers /
Retailers

Activities:

Benefits:

Inventory finance (factoring,)

Distribution finance (asset based
lending, receivable finance)
Payment solutions ,
Leasing

Reduced cost of capital

Improved cash flow
Reduced capital investment

Why Use 3PLs?

Save time

Dont need to invest in:

Trucks
Training
Development

Help expand

New markets
International

No roads

Why Use Cont.

Narrow your focus

Allows you to focus on your strengths

Reach more customers more effectively

Can ensure delivery times

can help a company run leaner

Management Focus

Furthering your company

Consider potential benefits and drawbacks
3pls can increase profitability

Risks of Out-sourcing
Logistics

Loss of internal logistics management capabilities

Biased choice of service providers
Leakage of sensitive data and information
Service degradation

Less reliable? Longer order cycle time?

Emergency response?

Loss of control and representation

Reduced contact with final customer

3PL for outbound logistics interact with your customers, you

become less visible to your customers

13

Tips for Successful Implementation

1) Have an outsourcing strategy.
Know what your outsourcing strategy is. It needs to be well thought
out and measured against in house solutions and capabilities.
SWOT analysis. As a company you should understand the
strengths, weaknesses, opportunities and threats of outsourcing
logistics, rather than keeping them in house.

2) Do your homework.
Do a comprehensive study

Clearly document advantages, challenges, costs and benefits.

Document expectations

Set down expectations in clear terms and include current costs.

Tips Continued
Create a robust selection process.

Invite companies in to give a formal presentation without giving

requirements. This can help document their strengths and weaknesses.
Make a site visit to the 3PL, and talk with its existing customer.

3) Measure and review performance

Have a efficient and accurate measurement system.

Qualitative measures that focus on effectiveness and quantitative

measures that focus on efficient utilization.

Have an efficient costing system

This will help you to understand the costs involved in outsourcing.

Are we making money doing this?

Tips Continued
4) Create an Implementation Strategy
Create a project plan road map

Be clear who does what, create a project management team with

members from both organizations and review progress vs. planned
milestones.

5) Nurture the Relationship

Both Parties must nurture the relationship to make outsourcing
successful.

Create mutual trust, respect and a sense of integrity.

4PL Providers

Manage and direct the activities of multiple

3PLs, serving as an integrator
Refinement on the idea of 3PLs
4PLs are not asset based like 3PLs