What is 3PL (Third-Party Logistics)?
A third-party logistics provider, sometimes called a 3PL or 3PL company, is a firm that provides outsourced logistics and transportation/distribution services to client companies for part, or all, of their supply chain management functions. Logistic services encompass anything that involves management of the way resources are moved to the areas where they are required. The 3PL industry includes logistics solution providers and the shippers whose business processes they support. Logistics can include warehousing, transportation and distribution management, pick & pack, order and inventory management, forecasting, and much more.
There are a variety of 3PLs that have different models and perform different tasks. Every 3PL company is different. Some 3PLs specialize in certain industries, specific geographies, commodities, or modes of transport while others might specialize in one specific area of logistics such as auditing inbound and outbound shipments, reducing freight rates, warehousing, or providing logistics related software for reporting and technology. A standard 3PL will bring best practices, but make their own decisions of how to manage your logistics function.
Third-party logistics providers have taken on an increasingly important role for manufacturers and retailers. Manufacturers need absolutely reliable sources of supply. Retailers need flexible links to suppliers (who can often be located in remote regions) with low-cost production. 3PLs provide the expertise, reach, reliability, and flexibility that corporations need. The 3PLs provide transportation, consolidation, forwarding and customs brokerage, warehousing, fulfillment, distribution and virtually any logistics and trade-related services that their customers need.
Benefits of Using A 3PL Company:
There are many benefits of using a third-party logistics provider:
- Saves money on things like equipment and distribution centers so you have an overall reduction of capital expenditures.
- Benefit from 3PL’s leveraging of experience and expertise to reduce costs (lower transportation rates), increase operational efficiency, and continuously improve the operation of your supply chains. Third-party providers typically have significant buying power due to the volume of freight they deal with and their ability to leverage load consolidation and backhaul opportunities.
- A 3PL takes away the worries of warehousing and logistics, so you can focus on manufacturing, marketing, selling your product, and growing your business.
- You can meet global market demands and gain a competitive edge by reengineering distribution networks. Specialized logistics software tracks the history of your product, when and where every piece ships, when new stock arrives, and how many arrive so you stay in the know.
- If your company’s business is seasonal in nature, using a 3PL provider allows you to scale your warehousing space, labor, and transportation to provide full support during the peak months of your business, while cutting back during slower months.
- 3PL providers offer greater flexibility and supplementary supply chain support to test the waters in new regional markets or countries where your company doesn’t currently have a presence without taking the full plunge and opening a new distribution center. You can quickly build a multi-location distribution network with lower risk, without the significant capital investment associated with building out a network on your own.
At Phase V, we make your business our business. We are here to help with your fulfillment needs so call us today to discuss your business and what we can do to help you be more successful.