3rd Party Logistics
A supply chain practice where one or more logistic functions of a firm are outsourced. Explanation of 3rd Party Logistics (3PL). ('80)
Contributed by: Eric Goh See Khai
What is 3rd Party Logistics (3PL)? Description
3rd Party Logistics (3PL) is the supply chain practice where one or more logistics functions of a firm are outsourced to a 3PL provider. Typical outsourced logistics functions are: inbound freight, customs and freight consolidation, public warehousing, contract warehousing, order fulfillment, distribution, and management of outbound freight to the client's customers.
On top of this, also Value Added Services can be provided, such as: repackaging,
assembling and return logistics. The 3PL Provider manages and executes
these particular logistics functions using its own assets and resources, on
behalf of the client company.
The thoughts behind this are to keep the firm competitive by keeping it lean without owning much assets, allowing it to focus on niche areas and to reduce operational costs. Third Party Logistics is also referred to as Contract Logistics.
3PL is evolving from predominately transactional-based to more strategic in nature. At the same time 3PL is gradually evolving into 4PL. A Fourth Party Logistics provider is a supply chain services provider that searches the best logistical solutions for its client, typically without using own assets and resources. Relatively new is the term 5PL or even 7PL, indicating Total Supply Chain Management Outsourcing.
Origin of 3rd Party Logistics (3PL). History
In the 80s, there was increased globalization and an increased use of IT. These trends resulted in increased demands on firms and possibilities for companies to operate more competitive and lean. Some successful 3PL companies emerged, such as DHL/Exel, Kuehne + Nagel, Schenker , UPS, Panalpina, C.H. Robinson, TNT Logistics, Schneider, and NYK Logistics.
Usage of 3rd Party Logistics (3PL). Applications
Steps in 3rd Party Logistics (3PL). Process
The application of 3PL is normally done in a number of phases:
Strengths of 3rd Party Logistics (3PL). Benefits
3PL allows a firm to gain competitive advantage via:
Limitations of 3rd Party Logistics (3PL). Disadvantages and Risks
To implement 3PL successfully, one may need to bear in mind some possible pitfalls:
Assumptions of 3rd Party Logistics (3PL). Conditions
It can be inferred that the firm engaging this practice is likely:
Compare with 3rd Party Logistics (3PL): Vendor Managed Inventory | Outsourcing | Lean Manufacturing | CPFR | SERVQUAL | Customer Satisfaction Model | Quality Function Deployment | Core Competence | Business Process Reengineering | Vertical Integration | Value Chain | Benchmarking | Kraljic Model
Return to Management Hub: Supply Chain & Quality
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