Third-Party Logistics or 3PL is a popular denotation in supply chain management. The companies which are known for outsourcing all resources needed to run the supply chain functions of any organization are categorized as 3PL companies. From packaging, transportation, distribution to the warehouse, and inventory management, everything comes under the purview of third-party logistics.
Third-party logistics has gained massive popularity globally, predominantly in the retail space. As the retail market continues to grow, online retail therapy emerges to be the latest trend, eCommerce platforms stand as the rule of the day. With inflation of eCommerce space, 3PL companies have gained immense importance and have proved to be the heart and soul of the business. Moreover, the companies who generally outsource their supply chain functions, use these services as on when required. As the facilities like domestic and overseas logistics, storage and inventory management, tracking of orders and return orders, fleet and freight management, shipping and forwarding, and stock quality control are used on a contractual basis; it eventually saves the cost of the parent company. In the long run, it helps the company to augment its core competencies and principal business functions.
Types of 3PL Companies
Globally you will come across various types of 3PL providers. Some of them specialize in one particular function, such as inventory management or transportation, or provide an array of related features to ensure seamless supply chain operations for a company. Various types of 3PL companies categorized based on their primary services.
1. Warehouse and distribution based 3PL Facilities
Many 3Pl companies have structured and functional warehouses. These companies have expertise on board to manage warehousing, storage, and distribution services. Repository management is one of the fortes of these companies. Leading 3PL companies specializing in warehouse management functions offer top-notch services like hi-tech product scanning, address checker, accurate order tracking, and tracing services.
2. Transportation based 3PL Facilities
Transportation is the heart of supply chain functions. Nothing beats the importance of logistic services specializing in swift and seamless transportation amenities. You will come across two types of transportation services: the leveraged 3PLs use assets of other companies while the non-leveraged 3PLs use assets of the parent company only. Mostly these companies work on a global dais and manage overseas offshore transportation as well.
3. Shipper Management based 3PL Facilities
Some 3PL companies are globally reputed for handling the nitty-gritty of shipping processes. These companies have highly proficient teams to handle freight management, freight payment, and carrier relationship management. However, maintaining and analyzing freight data matrix reports is also one of the critical responsibilities of these organizations.
Though small in number and not so popular as other types. Forwarders do play a significant role in maintaining hassle-free logistic services. These companies work as intermediate agencies that facilitate mid-way transactions and import and export marine and air freight forwarding.
5. Financial function based 3PL Facilities
One of the most essential and imperative types is financial service provider logistic companies. They play a vital role in cost accounting, auditing, freight payment, booking, tracking, monitoring, and analysis.
Relation Between 3PL Company and the Parent Company
Every company that subcontracts its supply chain functions establishes a different kind of relations with its 3PL entities. These business relations or transaction types depend on the nature of the business and the utility of the supply chain.
1. Transactional Outsourcing: Such type of outsourcing is based merely on one-time transactions. There is no long-term business relation.
2. Strategic Outsourcing: This refers to long term transactions. Here the 3PL company eventually becomes a partner of the parent company in their supply chain function.
In a nutshell, every company whose one of the main functions is supply chain require the intervention of 3PL companies. These outsourcing units manage end to end supply chain management, from storage and inventory to tracking order and freight management. We hope this article was enough to provide a basic understanding.