What does 3PL mean?
Let’s start with the basics. Usually abbreviated to 3PL, third party logistics refers to a range of outsourced services for just about every aspect of the supply chain. In other words, that’s everything involved in managing the movement of products from A to B.
These services exist because many businesses realise they can operate more efficiently by partnering with the expertise and resources of specialised 3PL providers. And by shifting the responsibility, those businesses end up saving money while focussing on the things they do best – like sales, marketing and product development. Sounds like a no brainer, right?
So, here’s an overview of the two main types of services offered by 3PL providers:
What they do
- Transport services
Transport 3PL providers manage the delivery (movement) of goods. They can do this by using other transportation services, or their own assets to meet the delivery needs of their partner. Courier services are a great example of transport 3PL providers.
- Warehouse and distribution
Simply – these are 3PLs that specialise in the storage, order fulfillment, or distribution of products. They can also handle and process product returns. That means the outsourcing business doesn’t need to tie up their own capital in costly warehouses and staff.
But 3PL partnerships don’t take a “one-size-fits-all” approach. There are various levels of service provided by 3PLs – all designed to meet the specific needs of their partners
How they do it (level of service)
- Standard
Standard 3PL providers provide the basic logistical functions involved in transport, warehousing, or distribution of products. Just as it says on the tin, they manage the movement, storage and distribution of products.
- Service Developer
These types of 3PL providers add a bit of extra value to the equation. For example, they might also provide the technology for delivery tracking, special packaging options, or the transfer of goods between different modes of transport.
- Customer adapter
A customer adapter 3PL won’t use their own assets to take care of their partner’s logistics needs. Instead, they’ll take over the existing operation already implemented by the partner.
- Customer developer
This is the highest level of 3PL partnership. In this scenario, the 3PL actually becomes the logistics department of their partner by taking over their existing operations (like a customer adapter) – but merging them with their own systems and technology.
So, that’s everything you need to know for a better understanding of how 3PLs really work. But most importantly – how they can save their partners valuable time and money!