Third-Party Logistics (3PL)

Logistics has been an important part of every economy and every business entity. The worldwide trend in globalization has led to many companies outsourcing their logistics function to Third-Party Logistics (3PL) companies, so as to focus on their core competencies. DefinitionAccording to the Council of Supply Chain Management Professionals, 3PL is defined as "a firm [that] provides multiple logistics services for use by customers. Preferably, these services are integrated, or bundled together, by the provider. Among the services 3PLs provide are contract transportation and transportation procurement warehousing, cross-docking, inventory management, packaging and freight forwarding logistics management and consulting freight audit and consulting shipment tracking and tracing Reverse logistics and value added services

Market Trends 3PL marketplace for each of the regions are demanding, clearly the markets for 3PL services continue to change, and the expectations both buyers and sellers of 3PL services have for each other continue to rise. 3PL customers throughout the world seek competency in areas such as operating efficiency and effectiveness, cost management, service delivery, information technology (IT), and globalization. Also, todays marketplace is seeing more productive and meaningful 3PL-customer relationships evolving. And yet, customers are still able to identify areas for 3PL providers to improve.

 Objectives of 3PL A number of key objectives, includes implementing capable IT, instituting effective management relationship processes integrating services technologies globally delivering comprehensive solutions that create value for 3PL users and their supply chains. Considering that customer demands for performance and sophistication are accelerating, improving in areas such as these is imperative for 3PL providers.

Major Reasons why it is Needed1. Save Time & Money Third-party logistics companies are able to reduce the amount of infrastructure investments in equipment, software, facilities and personnel. 2. Shares Responsibility Most reputable 3PLs have invested in 3PL because it eliminates many overhead cost and save the resources to use where its needed. There is no need to worry about the paperwork, billing, audits, training, staffing, and optimization involved to get your goods where they need to go because 3PL takes the responsibility for the performance. 3. Economies of scale Third-party logistics companies can provide large discounts through economies of scale. 3PLs are able to achieve much lower operating costs per load due to their ability to leverage their entire business for substantial discounts with trucking companies. These economies of scale can also be seen in the processing, technology systems.

4. Increase in growth-

3PLs have the systems, manpower and the know-how to process and enhance efficiency and increase in growth with the help of expertise. Benefits (Advantages)There are a multitude of benefits companies gain by outsourcing supply chain management to a value-added 3pl. Third party logistics offers an all in one solution for assembly, packaging ,warehousing, and distribution. Utilizing a 3pl provides businesses with a reliable logistics advantage, and maximizes profitability through combined knowledge and resources. Some more benefits are Resource Network3pl providers have a vast resource network available that provides advantages over in-house supply chains. Using a 3pls resource network, each step in the supply chain can be executed in the most efficient, cost effective way. 3PLs can leverage relationships and volume discounts, which results in lower overhead and the fastest possible service. Choosing a 3PL provider allows your company to benefit from resources which are unavailable in-house. Save Time and MoneyOutsourcing logistics will save a wealth of time and money for your company. Using a 3PL provider eliminates the need to invest in warehouse space, technology, transportation, and staff to execute the logistics process. 3PL providers can save from costly mistakes, and allow your business to build a global logistical network with lower risk and higher return. 3PLs save you the time needed to carry out the supply chain. Expertise3PLs are knowledgeable of industry best practices, and stay up to date with the latest developments in technology. 3PL software is capable of advanced reporting, inventory management, and provides visibility to monitor the entire process. 3PL experts employ Just in Time practices to ensure the correct amount of inventory is shipped when and where you need it. Outsourcing logistics allows your company to focus on your core competencies, and leaves the rest to the experts. 3PL services will allow

you to have peace of mind knowing your logistics needs are being handled by reliable, seasoned professionals. Scalability and FlexibilityA benefit of using a 3PL provider is the ability to scale space, labor, and transportation according to inventory needs. Businesses with seasonal periods can enjoy stress free transitions between industry ups and downs, having the ability to utilize more space and resources when needed. Using a 3PL provider allows your business to grow into new regions without barriers. 3PL providers have distribution centers and warehouses strategically located to allow for quick shipping of goods to anywhere in the world. Decentralized distribution offers lower costs, and provides quicker delivery times. 3PL providers have the resources to seamlessly support growth into new markets. Continuous Optimization3PL providers have the resources at hand to make adjustments and improvements to each link in the supply chain. 3PL professionals will ensure your needs are met, by using the fastest, most efficient, and cost effective methods. 3PLs have the tools to restructure the supply chain, and use technology that ensures the proper amount of goods arrive when and where you need them. Sophisticated management software can analyze and monitor practices to eliminate inefficiencies and streamline the supply chain. Outsourcing 3PL services will ensure continuous improvements are made to your logistics process. Third Party Logistics providers can help maximize profits, reduce wait times, and improve customer service.

Disadvantages3PL companies follow the economic principle of specialization by building up logistical infrastructures, methodologies and computer based algorithms to maximize shipping efficiency, then offer this expertise to businesses. These companies sell their services by saying that they cut a companys logistical costs. These rates can be especially

attractive to smaller businesses. This is because 3PL firms have an economy of scale in logistical support. As great as this sounds though, there are definitely drawbacks to hiring a 3PL and those disadvantages are Lack of Direct OversightOne of the downsides of using 3PL services is that the client businesses have no direct control over their operation. They are relying on the 3PL company to consistently come through in delivering the promised services. This lack of direct control means that client companies are at the mercy of any problems the 3PL company faces. Beyond the possible loss of business, the damage that results from 3PL services failing to deliver certain products on time are the client company's problem, not the 3PL services. Pricing Models3PL services promote their service as the most cost efficient way to get logistics done. While this may be true, contracting with such a service means that the company is locked into the pricing model specified in the business agreement. By handing logistics over to a 3PL service, companies are forgoing the possibility that an in-house logistics department could figure out a cheaper and more efficient solution. DependencyHanding over logistics to a 3PL service is a large commitment. Businesses need a reliable structure to function. Logistical downtime can translate into large amounts of lost productivity and revenue. Consequently, while the free market dictates that a business which is dissatisfied with its 3PL service could always find another, or develop its own logistical infrastructure, the reality is not so simple. Switching the nature of a company's logistical support can cost the company a great deal in unforeseen costs resulting from the transition. When businesses contract with 3PL services it creates a dependency which is no small matter to change. This dependency puts the client company in uncomfortable situations if pricing schemes or service reliability from the 3PL service is not working out as expected. Gives up direct control-

A company gives up direct control of their products and moves through the supply chain. This can be stressful, especially with a new relationship since the customer is at the mercy of the 3PL. If they do not deliver on time or as promised, the customer is the one that will be dealing with the consequences, not as much the 3PL. This is one of the major concerns of outsourcing since it can sometimes create more stress on the business. Conclusion A 3PLs ultimate goal is to increase efficiency, cut freight spend, deliver with fewer issues on time and overall become a partner with your business for years to come. Logistics service providers expand into the 3PL sector for business reasons-to grow revenues and especially to grow profits. Being a logistics service provider, whether a freight forwarder, warehouse, carrier or other type of provider means an ongoing effort to maintain and gain customers in a very competitive environment. The 3PL arena provides an option to this situation. Good 3PLs may have five times better profit margin with their 3PL business as compared with the core service. All the parties involved can improve long-term success in the marketplace, and fulfill the requirement of more effective logistics and supply chain solutions. Companies would like to choose 3PL services to use track and trace tools, event management and supply chain visibility. The Effect of Current Economic Uncertainties shows there is a need for 3PL Services and 3PLs clearly have a role to play in devising and enacting both short-term and long-term approaches.