Third Party Logistics- Role in Supply Chain

Third Party Logistics Definition

Third Party Logistics (3PL) services have become an integral part of supply chain. The growth of 3 PL provides opportunities for starting a venture with minimum risks as they have captive customers.

“A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.” ( 2008 US legislation)

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What is Third Party Logistics (3PL)

Outsourcing all or much of a company’s logistics operations to a specialized company.

The term "3PL" was first used in the early 1970s to identify intermodal marketing companies (IMCs) in transportation contracts. Up to that point, contracts for transportation had featured only two parties, the shipper and the carrier. When IMCs entered the picture—as intermediaries that accepted shipments from the shippers and tendered them to the rail carriers—they became the third party to the contract, the 3PL. Preferably, these services are integrated, or “bundled,” together by the provider. 

 Services they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. ( Source: Council of Supply Chain management Professionals) 

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Third party Logistics- Evolution

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Why 3 PL

          Pressure from shareholders to increase shareholder value

          Pressure from customers to improve service at lower costs

          Reduce capital investments in non-revenue producing assets

          Emergence of professional 3P logistics service providers

   3P logistics is a readily accepted means of increasing performance of non-core supply chain activities.

   Outsourcing allows organizations to focus on their

          Core competencies

          To provide a differentiated level of customer service

          To take advantage of greater operational flexibility

Services Provided by 3 PL

          Collection of Materials

          Storage of Materials

          Picking & Packing of Materials

          Processing of Materials

          Cross docking

          Invoicing

          Collection & deposit of Cheques

          Managing Information flow & Networks

          Value added services like Bar Coding, Scanning, Packing of warranty cards, promotional material packaging.

          Customs clearance formalities

          Excise & Sales Documentation

          Transportation of goods

          Claims settlement & legal formalities

Emergence of 4 PL

The 4PL acts as a single point of interface with the client organization and provides the management of multiple service providers through a teaming partnership or an alliance.

The Fourth Party Logistics provider is a supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.

To be successful, a 4PL leverages a full range of service providers (3PLs, IT providers, contract logistics providers, call centers, etc.) along with the capabilities of the client and its supply chain partners

4 PL can be termed as a strategic partner further adding value to the supply chain.

Opportunities

The emergence of e- commerce, integration of global markets provides huge opportunities for the growth of 3 PL. The advantage for a startup 3PL entrepreneur is i) Not highly Capital Intensive ii) Lower Risk factor  

A Successful Collaborative Model

In India Reliance funded 3 PL providers for their HDPE/ LDPE business. Reliance participation gives confidence to 3 PL as the investment brings in strategic inputs from the big brother.