Definition: Third Party Logistics providers ("3PL") are utilized by many ecommerce businesses to oversee and manage their supply chain management. 3PLs specialize in optimizing the supply chain, allowing online stores to focus on marketing and other business operations.
In today’s competitive business market, keeping costs down while increasing the speed and efficiency of a company’s logistics operations is imperative. The military was the first to coin the term 3PL, as it developed this method for efficiently transferring resources to areas where they are most needed. 3PL has continued to grow as the deregulation of interstate trucking reduced barriers to entry in the freight management industry.
Services offered by third party logistics providers encompass more than just shipping. Some providers focus on specific locales and geographies. With increased technological advances, many providers have expanded their services by integrating shipping services with public and contract warehousing as well as commodities and freight consolidation. A number of firms also offer different types of freight transportation to customers.
Technology is at the core of third party logistics. Warehousing has grown from the simple storing of products to focusing on optimized inventory control and the efficient provisioning of goods. Companies that use third party logistics may offer additional services including forecasts, in-depth reporting, transportation management software and freight bill auditing.
Many logistics providers have moved toward globalization through organic growth and strategic acquisitions and mergers. By expanding their reach worldwide, 3PL providers have enabled numerous businesses to expand their own businesses to markets where it would previously have been cost prohibitive to do so.
A benefit of using a third party logistics provider is that it can improve logistics operations for a business of any size. Logistics providers can provide a business with as few or as many services as are needed. For example, a smaller company may only require shipping or warehousing of goods, while a larger company may want the provider to offer them a bundle of services to manage their entire supply chain. Increased efficiency in these areas allows a business to successfully grow while effectively managing their bottom line.