It's a three-character abbreviation thrown around a lot in freight industry circles: 3PL. And it stands for third-party logistics company. But that's just the beginning in terms of explaining what a 3PL logistics company does. For a broad-strokes summary, a 3PL provider offers a wide variety of outsourced logistics and supply chain service solutions. Why do shippers of many shapes and sizes look to a 3PL to handle these responsibilities? Because the right one can provide a major competitive advantage.
Examples of 3PL Solutions
Third party logistics providers offer a vast array of solutions in the freight world. The only limit is really how much a shipper wants to handle themselves versus outsource to a 3PL company. A sampling of 3PL solutions include:
Reliable Capacity - Whether it be truckload, intermodal or a mixture, a 3PL has relationships with carriers to put together the best solution, so a shipper doesn't have to spend hours on end cobbling one together for each load.
State of the Art Technology - The right 3PL has the latest in freight and logistics technology, including powerful transportation management system (TMS), shipment tracking, payment & audit, carrier safety info, route & rate optimization and more. A shipper need only work with that 3PL to have access to all of it, rather than spending on individual pieces themselves.
Risk Management- Whether it's the risk of paying too much for capacity, the risk of legal and cargo liability or the risk of broker fraud, the right 3PL mitigates all of those areas for a shipper with its expertise, connections and a data-driven approach.
Consolidation & Pooling - Using those aforementioned relationships and technology, a 3PL can optimize LTL (less-than truckload) loads to improve transit and reduce costs - again saving the shipper from dealing with the legwork.
Inventory Management and Warehousing - Managing inventory and somewhat relatedly, managing warehouse space for products are certainly both full-time jobs, but a shipper can hand one or both over to a 3PL knowing that it is well-versed and well-equipped to take on these key logistics tasks - usually with a network of 3PL warehouse connections at the ready.
Order Fulfillment and Final Mile Delivery - The 3PL can handle the end-to-end operation of fulfilling orders and ensuring final-mile delivery coordination, so the shipper can basically set it, and forget it.
A Scalable Partnership - The shipper can choose how much or how little a 3PL does for its specific needs, anywhere from handling an individual shipment that's proven tricky, or running the company's entire logistics operation through a fully managed solution. And that relationship can fluctuate either direction as needs change.
Advantages of Outsourcing Logistics to a 3PL
The term outsourcing often has a negative connotation, but in freight transportation, it should be viewed as a positive. Outsourcing some or all logistics operations to a 3PL will likely only enhance a business and better position them against their competitors. Why? Because the company can focus on what it does best, without having to deal with the challenges of day to day shipping - something a 3PL does best, incidentally.
Businesses can rest assured they are not missing out on the best routes, best modes, best prices, best technology, etc., when they outsource freight operations. There's a reason why an Armstrong & Associates report indicated 90% of Fortune 500 companies use 3PL providers for outsourced logistics and supply chain services. And it's especially an opportunity for smaller businesses, as they'd otherwise lack the bandwidth and/or budget to spend the time and resources necessary to have a comparable in-house logistics shop.
Are you a small, mid-sized or large business looking for the right 3PL? Look no further than InTek. Just fill in our brief form, and we'll be happy to discuss solutions scaled to fit your needs. For more information about InTek, or logistics and supply chain issues in general, check out our Freight Guides.