3rd-Party Logistics Providers: Types of 3PLs & Outsourcing

We just recently discussed the use of 3rd party logistics (3PLs) solutions by shippers to remain competitive and also allow them to concentrate on their core proficiencies. As a third-party logistics solutions company, Fleet Concepts is continuously talking with possible shippers as clients that are a little confused regarding what precisely a 3PL business is as well as regarding what kind of 3rd party logistics business they must hire. As a 3PL, we are here to inform you, of course, the market has created many complications!

Our goal is to alleviate any confusion, and if you are a shipper, make it less complicated for you to select the ideal 3rd party logistics solutions business for your demands (as several logistics service providers are on the rise).

What are 3PL or Third-Party Logistics Services?

To many people, the interpretation of 3rd party logistics services or the significance of 3PL is slightly blurry& can be a bit unclear as there are several interpretations.

Nonetheless, in our viewpoint, the very best explanation of 3rd party logistics services is probably a mix of those two concepts, as third party logistics carriers are companies that give one or many of the following third-party logistics solutions:

• Transportation or Freight Management (including technology, freight audit & services around claims)
• Public/Contract Warehousing
• Distribution Management
• Freight Loan consolidation

Additionally, down in this blog post, we will, after that, describe the various kinds of services in a more categorical approach.

Currently, for a much more academic meaning. According to the CSCMP Glossary, they define third party logistics services and also 3PLs as:

3PL logistics business outsource all or a lot of a firm’s logistics procedures to specialized firms. The term “3PL” was first used in the early 1970s to identify intermodal marketing companies (IMCs) in transportation agreements. Until then, contracts for transportation had included just two events, the shipper & the carrier. When IMCs got in the picture – as intermediaries that approved shipments from the shippers and tendered them to the rail carriers – they became the 3rd party to the contract, the 3PL. The interpretation has widened to the point where nowadays, every company that provides some sort of logistics solution for hire calls itself a 3PL.

Ideally, these 3PL shipping solutions will integrate using a logistics provider. Services logistics providers offer transportation, warehousing, cross-docking, supply management, product packaging, and also freight forwarding.

The legal definition of a 3PL according to regulation is “A person that entirely receives, holds, or otherwise transports a consumer item in the ordinary course of business.”

What are the Different Types of 3rd Party Logistics Providers?

Once again, relying on who you ask, you will get several different answers on what types of third party logistics services that are around. As stated previously, the objective for you as a shipper is to understand your requirements and also possibly collect from this convenient checklist what your demands are to most accurately assess what sort of third party logistics services company you wish to look at hiring.

The following are the characteristics of the various types of third-party logistics solutions:

Transportation Based 3rd-Party Logistics Services

• Transport based 3PL solutions extend beyond transportation to supply a comprehensive collection of logistics offerings.
• Leveraged 3PLs utilize the assets of other companies.
• Non-leveraged 3PLs use assets belonging exclusively to the parent company

Examples: Ryder, FedEx Logistics

Warehouse/Distribution Based Third-Party Logistics Services

• Several have former warehouse and distribution experience.

Examples: Exel, DSC Logistics

Freight Forwarder Based 3rd-Party Logistics Solutions

• Extremely independent middleman with forwarder functions
• Non-asset owners that give a wide variety of logistics services

Examples: Kuehne & Nagle, Circle

Shipper/Management Based Third-Party Logistics Solutions

• Concentrated management of the shipping procedure from beginning to finish
• Shipper/Management based 3PL’s offer innovation, such as a transportation management system, and also incorporated freight management services to eliminate hefty procedures and troublesome attributes such as cases and audits (freight settlements).
• Shipper/Management based 3PL’s supply management of carrier relations for ongoing rate maintenance as well as negotiation.
• Shipper/Management based 3PL’s offer details, such as freight information as well as matrix records for much better exposure on future logistics results.

Examples: Fleet Concepts, GlobalTranz, Worldwide Express, AFS Logistics

Financial Based 3rd-Party Logistics Services

• Financial based 3PL’s Offer freight settlement & bookkeeping, cost accounting & tools for monitoring, booking, monitoring, mapping & managing supply.

Examples: GE Information Services, CTC, Cass Information Systems, FleetBoston

Information-based firms Third-Party Logistics Providers

• Considerable development and also advancement in this group of Internet-based, business-to-business, digital markets for transportation and logistics services

Examples: uShip, Transplace

Different Levels of Outsourcing in 3rd-Party Logistics Solutions

Not all third party logistics services are the same when it boils down to the relationship in the method you as a shipper will certainly outsource to them. So, after you understand what a 3PL is as well as the sorts of 3rd party logistics solutions, the complying with are the different sorts of levels of outsourcing you can see:

Transactional Outsourcing

• Outsourcing based on purchases
• No long term contracts and also no bonding between the 3PL and outsourcing company

Tactical Outsourcing

• Outsourcing on a long term basis with arranged contacts and incorporated IT systems
• Promotes cost-free details circulation and produce supply chain exposure

Strategic Outsourcing

• Outsourcing based on long-term relationships with successful results
• 3PL business become companions in supply chain management as well as establish transactional transparency

At Fleet Concepts, when our clients outsource to us, we have both a tactical (procedure elimination as well as automation, consisting of integrating our TMS with an ERP to see to it you have the right freight class) as well as a strategic partnership. This fact implies that some third-party logistics solutions can provide the previous two levels of outsourcing mentioned above. Nonetheless, on the transactional side, this is generally concentrated on price. In our viewpoint, for real long-term financial savings, the previous pair is the emphasis and not the first.

If you are making a single shipment, transactional third-party logistics solutions are for you. If you have a supply chain and make regular shipments, check out the tactical as well as calculated outsourcing third-party logistics companies.