Defining a 3PL: What are the Qualifications?

As technology becomes increasingly ubiquitous, and location almost a non-issue, especially in the developed world, logistics can make sure your products get to where they need to be, on-time and intact. Many companies do not have expertise in this area or enough manpower to coordinate and fulfill these deliveries, so they outsource logistics.

Sometimes, they hire a third-party logistics (or 3PL) operator, and other times they only use a distributor. The two concepts are very different. Allow us to explain in more detail.

What is “3PL”?

At its most basic, third-party logistics is a contracted service. The term 3PL is borrowed from the military. While it can refer to any service that involves moving or storing items, 3PL generally refers to a complete management of supply chain logistics.

How is a 3PL Different from a Distributor?

Whereas third-party logistics providers manage complete logistics chains, distributors are responsible for only part of it, and they have duties outside the logistics chain. Generally, they oversee payment and procurement. In exchange, they take somewhere between five and 20 percent. Third-party logistics providers do so much more and in a much different way.

3PL Qualifications

To qualify as third-party logistics services, a 3PL has to integrate with your supply chain on a contract basis. When you hire a third-party logistics company, you are contracting with them, and that makes them part of your company. They get paid like any other service contract, so no matter how much you sell, the cost remains the same. In addition, the services are fixed and reliable. A distributor could choose to drop you or promote a product ahead of yours, but a 3PL is legally bound to work on your company’s behalf.

Distribution is one element of third-party logistics, but 3PL also includes managing customs, warehousing items, fulfilling orders, and handling freight. Many also provide cross-docking, customer service, fulfillment, information technology, imports management, inventory management, merchandising, warehousing, and even some basic accounting and bookkeeping services.

The Evolution of 3PL

Third-party logistics evolved as a way of remedying the problems companies face when their distributors have different goals. As the technology has made the world smaller for many businesses, this basic need is taking on a more dynamic role. Whereas distributors are somewhat static in their approach -- the distributor format has not changed in years -- third-party logistics providers are continually evolving how they can better serve their clients. This means adding on additional services, like bookkeeping or merchandising. The services available may expand even more as 3PL providers become more integrated into client systems.

Roughly 75 percent of manufacturers and suppliers in the United States use a third-party logistics service or think they may want to. After all, logistics' activities comprise between 15 and 20 percent of the cost of most finished products –- why spend that money on a distributor that doesn’t have your company’s best interests in mind?

If you have a product you would like to get to market and would like to discuss how third-party logistics can help, contact The Apparel Logistics Group for a free consultation.

Posted: 9/10/2015 3:06:30 PM by Global Administrator | with 0 comments

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