3rd party logistics (abbreviated 3PL , or sometimes TPL ) in logistics and supply chain management is the use of companies from third-party businesses to outsource elements distribution and fulfillment of company services.
Third-party logistics providers typically specialize in integrated, warehousing and transportation services that can be scaled and tailored to customer needs based on market conditions, such as demands and delivery service requirements for their products and materials. Often, these services go beyond logistics and include value-added services related to the production or procurement of goods, that is, services that integrate parts of the supply chain. When this integration occurs, the provider is then called a third-party supply chain management provider (3PSCM) or supply chain management service provider (SCMSP). 3PL targets specific functions in supply management, such as warehousing, transportation, or the supply of raw materials.
The global 3PL market reached $ 750 billion in 2014, and grew to $ 157 billion in the US; demand growth for 3PL services in the US (7.4% YoY) exceeded US economic growth in 2014. By 2014, 80 percent of Fortune 500 and 96 companies of Fortune 100 use some form of 3PL services.
The global third-party logistics market is expected to grow around 5 percent CAGR during 2016 to 2024 (forecast period). The companies operate for the shipping industry to oversee the logistics business (forecasting, warehousing, & shipping management software). The market will reach a size of about USD 1, 054 billion in 2024.
Video Third-party logistics
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Third party logistics providers including shipping companies, courier companies, and other companies that integrate & amp; offering logistics services and subcontract transportation. Hertz and Alfredsson (2003) describe four categories of 3PL providers:
- 3PL Standard Provider: This is the most basic form of 3PL providers. They will do activities like, pick and pack, warehousing, and distribution (business) - the most basic logistics functions. For most of these companies, the 3PL function is not their main activity.
- Service Developers: These 3PL providers will offer their customers advanced value-added services such as: tracking and tracking, cross-docking, custom packaging, or providing a unique security system. A solid IT platform and a focus on economies of scale and scope will allow this type of 3PL provider to perform this type of task.
- Customer Adapter: This 3PL provider comes at customers' request and essentially takes full control over the company's logistics activities. 3PL providers dramatically improve logistics, but do not develop new services. The customer base for this 3PL provider type is usually pretty small.
- Customer Developers: This is the highest level that 3PL providers can attain with respect to their processes and activities. This happens when 3PL providers integrate themselves with customers and take over all of their logistics functions. These providers will have multiple customers, but will perform extensive and detailed tasks for them.
Outsourcing may involve part of the logistics operation, leaving some products or operating steps untouched because internal logistics can do the job better or cheaper than external providers. Another important point is the customer orientation of the 3PL provider. The provider must comply with the company's structure and requirements. This suitability is more important than pure cost savings, as the 3PL provider survey shows clearly: Customer orientation in the form of adaptability to change customer needs, reliability and flexibility of third-party logistics providers is mentioned as far more important than pure cost savings.
Leading logistics provider
3PL providers without their own assets are called lead logistics providers. Leading logistics providers have the advantage that they have specialized expertise in the industry combined with low overhead costs, but lower negotiation forces and fewer resources than third-party providers have been based on a typically large corporate size, a good customer base and established network system. 3PL providers can sacrifice efficiency by choosing their own assets to maximize their own efficiency. Leading logistics providers may also be less bureaucratic with shorter decision-making cycles due to smaller company sizes.
Maps Third-party logistics
Layers
The first-party logistics provider (1PL) is a single service provider in a specific geographic area that specializes in certain goods or delivery methods. For example: bring a company, a port operator, a depot company. Logistics departments from producing companies can also be the first party logistics providers if they have their own assets and warehouses.
Second-party logistics providers (2PL) are service providers that provide their specialized logistics services in a larger (national) geographical area than 1PL does. Often there is a contract frame between 2PL and the customer, which governs the conditions for most transportation assignments placed in the short term. 2PL provides its own and external logistics resources such as trucks, forklifts, warehouses, etc. For transportation, cargo handling or warehouse management activities. Second-party logistics emerged in the course of globalization and lean improvement trends, as companies began to outsource their logistics activities to focus on their core companies. Examples are: courier service, express mail, and parcel; ocean carriers, shipping companies and transshipment providers.
The most significant difference between second-party logistics providers and third-party logistics providers is the fact that 3PL providers are always integrated within the customer system. 2PL is not integrated, in contrast to 3PL he is the only logged-out outsourced provider with no system integration. A 2PL works frequently on calls (eg express packet service) whereas 3PL is almost at all times notified of workload in the near future. Another thing that distinguishes 2 and 3PL is service specification and customization. 2PL usually only provides standard services, while 3PL often provides tailor-made and customized services for their customers' needs. This is possible because of the usual long-term contracts in third party logistics markets. The cost effectiveness of third-party logistics providers is only given for a long time with a stable contract and profit. Unlike second-party logistics services that can not be customized, it deals with markets that fluctuate with fierce competition and price fights at low levels. And there we have another differentiation point between 2PL and 3PL: Contract endurance. The 3PL contract is a long-term contract, while the 2PL contract has low durability, so customers are flexible in responding to market and price changes.
With companies operating globally, the need to increase supply chain visibility and reduce risk, increase speed and reduce costs - all at the same time - requires a common technology solution. Non-asset-based providers perform functions such as consultations on packaging and transportation, citing expenses, financial settlements, audits, tracking, customer service, and problem solving. However, they do not hire truck drivers or warehouse personnel, and they have no assets distributing their own physical goods - no trucks, no storage trailers, no pallets, and no warehousing. Non-asset based providers consist of a team of domain experts with cargo industry expertise and accumulated information technology assets. They fill in roles similar to shipping agents or brokers, but retain a much greater degree of "hands" involvement in product transportation. This provider is a 4PL and 5PL service.
Fourth-party logistics providers do not have their own transportation assets or warehouse capacity. They have the allocative function and integration in the supply chain with the aim of improving efficiency. The idea of ​​a fourth-party logistics provider was born in the seventies by consulting firm Accenture. The Company outsourced the selection of third party logistics providers and this integration optimization process to the OT as an intermediary. It reduces costs and 4PL should have an overview of the entire logistics market to choose 3PL ideal for all operative logistics activities. To be able to provide an ideal solution like a fourth-party logistics provider requires a good knowledge of logistics branches and a good IT infrastructure. Fourth-party logistics providers choose 3PL providers from the most appropriate market for their customer logistics issues. Unlike the allocative function of 4PL in the supply chain, the core competency of the 3PL provider is operative logistics.
The fifth party logistics provider (5PL) provides supply chain management and offers system-oriented systems consulting and supply chain management services to their customers. Technological advances and related improvements in supply chain visibility and intercompany communications have led to a relatively new model for third party logistics operations - "non-asset-based logistics providers."
Transport on request
On-demand transport is a relatively new term created by 3PL providers to describe their broker, ad-hoc, and "flyer" offerings. On-demand transportation has become a mandatory capability for today's successful 3PL providers in offering clients specific solutions to supply chain needs.
This shipment usually does not move under the "winning lowest-level" scenario and can be very beneficial for 3PL who wins the business. Charges cited to customers for on-demand services are based on specific circumstances and availability and can vary greatly from normal "published" rates.
On-demand transport is a growing niche growing in the 3PL industry.
Special transport modes that may be subject to on-demand models include (but are not limited to) the following:
- FTL, or Full Truck Load
- LTL, or Less from Truckload
- Hotshot (direct, exclusive courier)
- Next Flights, sometimes also referred to as Best Flight (commercial airline shipping)
- Accelerated International
Transport on demand is a term to reflect what has come to be known as the broker's "smile and call" which essentially serves as a telemarketing call center. Brokers do not have the obligation to successfully deliver all payloads (as opposed to contract logistics providers) and almost all sales representatives are overwhelming (and 100%) assigned, and most days the workers are spent on sales through cold calls. Smile-and-call brokers usually require a 15% gross profit margin (the difference between what the sender pays the broker and what the broker pays the operator), and the commission compensation scheme means that the turnover of personnel in the call center is close to 100% per year.
For occasional senders, smile-and-call brokers can provide an easy way to have the items shipped. But a deep lack of expertise due to constant turnover combined with a 15% price margin, means that a traffic professional capable enough to obtain transportation services is far more economical and reliable.
Horizontal Alliance
Raue & amp; Wieland (2015) illustrates examples of horizontal alliances among logistics service providers, ie, cooperation between two or more potentially competitive logistics companies. Logistics companies can benefit from double that kind of alliance. On the one hand, they can "access real resources that can be exploited directly". This includes expanding the public transport network, their warehouse infrastructure and the ability to provide more complex service packages by combining resources. On the other hand, LSP can "access intangible resources, which can not be exploited directly". This includes knowledge and information and, in turn, innovation.
Benefits
Cost and time savings
Logistics is the core competence of third party logistics providers. The provider may have better associated knowledge and better expertise than a company that produces or sells, and may also have more global networks that allow greater time and cost efficiency.
The equipment and IT systems of 3PL providers are constantly updated and customized to suit the needs of their customers and their customers' suppliers. Producing or selling a company often does not have the time, resources, or expertise to quickly adjust their equipment and systems.
Low capital commitment
If most or all of the operating functions are outsourced to a 3PL provider, it is usually unnecessary for a client to own a warehouse or own transport facility, lowering the amount of capital needed for a client's business. This is especially advantageous if a company's warehouse has a high variation in utilization capacity, leading to repurchase of warehouse capacity and reduced profitability.
Focus
Logistics outsourcing allows companies with limited logistics expertise to focus on their core business. Increased complexity in business shows that companies benefit from not devoting resources to areas where they are unskilled.
Flexibility
Third-party logistics providers can provide greater flexibility for geographic distribution and can offer a variety of services that are greater than the client can provide. It also allows companies to manage their resources more easily including the size of the workforce, and converting fixed costs into variable costs.
Disadvantages
Loss of control
One of the disadvantages is the loss of client control by using third party logistics. With outgoing logistics, 3PL providers typically assume communication and interaction with the company's customers or suppliers. To mitigate this, some 3PL's efforts to establish themselves as their clients, such as applying client logos to their assets and dressing their employees like their client employees.
IT
IT systems providers and clients should be able to operate. Technology helps increase visibility for clients by updating ongoing status through the Shipping Management Software and Electronic Data Exchange (EDI) which does involve costs but can help avoid penalties due to subsequent financial delays and losses such as from unloading in time.
See also
- Freight
- Submit
References
Source of the article : Wikipedia
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