What is 3PL Logistics?
3PL is an abbreviation for the international classification of logistics companies.
Third Party Logistics (3PL) is a complex of logistics services, which includes delivery, storage, inventory management, order picking and dispatch to end consumer. They are involved in a company's logistics operations and comes into play as an intermediary or manager between the other two parties.
1PL, 2PL, 3PL, 4PL, 5PL Definitions
There are 5 different types of logistics available as per international classification: 1PL, 2PL, 3PL, 4PL, 5PL. PL means “Party Logistics” and the numbers indicate the depth of the company's involvement in the supply chain.
1PL - First-Party Logistics
The term first-party logistics (1PL) describes companies that use their own capacities (trucks, warehouses, etc.) to store and deliver goods to their customers. There are not many companies that use 1PL logistics module nowadays. Companies are giving at least part of their logistics tasks to specialized transport companies.
2PL - Second-Party Logistics
A 2nd party logistics involves the transport of goods from a particular transport area of the supply chain like rail, road, sea or air. Those companies usually owns assets such as vehicles or planes to transport products from one location to another.
3PL - Third-Party Logistics
3PL is a specialized logistics company that is able to take on a large number of logistics tasks. The functions of 3PL include warehousing, terminal operations, customs brokerage, supply chain management and many more.
4PL - Fourth-Party Logistics
4PL model is when an enterprise outsources management of logistics activities as well as the execution across the supply chain. The 4PL provider typically offers more strategic insight and management over the enterprise's supply chain. They act as a head administrator and takes care of every aspect of these supply chain companies.
5PL - Fifth-Party Logistics
A fifth party logistics provider is also known as a logistics aggregator. They will aggregate the demands of the 3PL and others into bulk volume for getting better rates with different types of airlines and shipping companies. This type of logistics is not asset based. It usually works seamlessly across all disciplines.
As per Wikipedia definition Third-party logistics is a logistics service provider or a range of services - from delivery and storage to order management and tracking goods movement.
The service provider provides full organization and management of transportation, accounting, stock management, preparation of import-export and freight documentation, storage, cargo handling and delivery to the end consumer. Many companies also offer assembly, packaging, and labelling support.
Companies that provide 3PL logistics services are usually called 3PL providers. A 3PL provider is a specialist company that provides a range of distribution, storage, transport and fulfillment services to customers.
It is important to understand what conditions company must meet in order to identify itself as a 3PL provider:
· Various warehouse terminals that meet modern storage requirements for various product categories.
· Own lease Vehicle Park with various tonnage and temperature transportation capabilities.
· IT software products and analysis services, for tracking and tracing the delivery status of different products.
The definition of 3PL logistics lists the services that 3PL Company should provide. Types of logistics services can vary widely, and many 3PL businesses specialize in different parts of the supply chain. In general, most logistics services fall into the following areas:
· Delivery: 3PL provider delivers goods to own warehouse and then transfers to the end customer.
· Storage: Providing temporary storage for goods in warehouses and similar locations
· Procurement: Ordering and receiving goods from elsewhere in the supply chain
· Order fulfillment: Receiving orders from customers, picking and packing and arranging for the orders to be completed and sent out
· Transportation: Arranging for the consolidation, deconsolidation, management and transportation of goods
Advantages of 3PL Logistics
· Reduced costs: The primary benefit of using a 3PL service to handle logistics is cost savings - for example, not having to maintain a warehouse or the staff to monitor supply chain operations.
· Improvement of the service quality: Specialized 3PL providers are constantly improving technologies, updating technical equipment and training employees in order to provide the best service to their customers.
· Flexible management as per season changes: With 3PL provider it is possible to quickly increase or decrease the volume of delivery without loss, since payment for such services occurs depending on the accepted and delivered cargo.
· Ability to focus on developing your own business: Most of the logistics and supply chain management issues and concerns are addressed and taken care by 3PL provider. This is very helpful especially when entering new markets.
3pl has been ruling the logistics sector for quite a time now, and it has been seen that people who make contracts with third-party firms always saves money on an overall basis. Not only that, but these logistics also meet the technical requirements of the clients. Their expertise is extremely superior that deals with delivery and product shipment on a much affordable cost and totally maintain the time boundary. By outsourcing the logistics area, companies can focus on their core competencies.