Notes

3PL - Are You a Reliable Partner?

The 3PL or logistics partner relationship is a strategic business arrangement between an enterprise and a third-party logistics provider. Third-party logistics management refers to the use of third-parties to complete part or all of an enterprise's logistics requirements. In a broad sense, it involves the outsourcing of non-core activities or functions by a business firm in exchange for a fixed fee. In more narrow terms, it refers to the use of a third party to perform or facilitate certain tasks traditionally performed by an in-house employee or team. More specifically, it refers to a commercial entity's use of a third party to warehouse, transport, and deliver its goods and raw materials to customers, agents, and other purchasers.


The term 3PL may be used in connection with many aspects of the shipping industry. For example, an airline company may hire a third party logistics services provider to handle its warehousing requirements, such as the inventory pick and pack process. A shipper's 3PL needs are determined by regulations set forth by the United States Department of Transportation. In general, the 3PL must fulfill orders for freight transportation from the carrier to the ultimate destination point. The shipper, however, retains full rights to the shipped goods until delivery, and only pays for actual transportation costs.


A 3PL provider, on the other hand, is not an actual employee of the carrier nor does it maintain a direct-hire workforce. Instead, a 3PL provider acts as a logistics partner that facilitates the carrier's business requirements. The 3PL provides storage, transportation, and warehousing services to help the carrier meet orders from customers. A 3PL will typically contract with a carrier for its storage needs and for general freight transportation needs.


The need for an outside warehousing capability arises when an enterprise is either expanding its product offering or is undergoing a significant contraction. For instance, food services providers face tremendous customer demands, as consumers become more sophisticated about diet and fitness. Grocery stores face similar issues as their competitors. The experience of a third-party logistics provider can solve both of these problems by providing additional warehousing capacity and expertise. However, some companies require a more specific solution.


Companies that require additional storage capability should look for a provider that is capable of meeting demand for that additional capacity. Some 3PL providers are capable of building and storing large-scale, long-term structures such as pallet ships. Other 3PLs are capable of short-term storage needs, including temporary warehouse facilities. These types of businesses require a flexible strategy for access to additional resources.


A provider that is experienced in providing warehousing capabilities should be considered for fulfillment as well as transportation needs. Ideally, a warehousing and transportation logistics provider should have experience in all areas of these activities. An experienced third-party logistics provider can help an enterprise define their needs, develop a logistical plan, determine the appropriate carriers, and complete other responsibilities associated with fulfilling their order. If the third-party provider is not an experienced and reliable provider of these services, the enterprise could experience unexpected consequences.


The transportation needs of an enterprise usually involve a trucking arrangement. Unless the company has purchased their own fleet of trucks and delivery drivers, they must contract with a third-party logistics provider. In addition to ensuring adequate fuel and driver availability, an efficient delivery system is critical to cost-effectiveness and operational effectiveness. The availability of a third-party carrier can significantly reduce the time necessary to deliver finished goods to their destination.


With an efficient warehousing and transportation network, a 3PL company can reduce the downtime associated with in-house inefficiencies. This downtime, in turn, can allow a business to meet the immediate demands of their customers. By delegating warehousing and transportation responsibilities to a qualified logistics expert, an enterprise can focus on what they do best-making sales or growing their bottom line. The benefits of working with an experienced 3PL provider include access to a comprehensive network of providers, highly trained and motivated staff, and access to a full suite of tools and reporting solutions designed to optimize all aspects of warehousing and transportation.

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