Third-party logistics providers refer to those firms that usually provide outsourced logistic services for either full or partial functions of their supply chain management. They specialize in operations that are integrated such as transportation, warehousing, and light assembly services. Third party logistics services are usually customized and scaled in order to suit the needs of the customer and the prevailing market conditions, therefore, sometimes these services go beyond logistics such as value-added services that relate to the procurement or the production of goods.
Third-party logistics providers include both courier companies and freight forwarders. There are four categories of 3PL providers, that is,
(a). The standard third-party logistics provider- These perform tasks such as warehousing and, picking and packing
(b). Service developer- These offers more advanced services such as tracing and tracking together with providing a unique security system
(c). Customer adapter.
(d). Customer developer.
3PL providers are usually used for the following purposes;
Shipping and receiving
These providers manage the whole shipping process from the start to the end. They have transportation management systems that are designed to automate routine and streamline efficiency and time-consuming tasks such as accounting and payment of freight. They are also responsible for managing carrier relations, matrix reports, and freight data.
3PL providers also transport goods or services from one location to another. For example, they manage inventory shipment between a company and the buyer. In this case, a buyer orders goods from the company(it may be raw or finished good), pays for them and then the company pays a 3PL provider to deliver goods to the buyer.
Some third party logistics providers specialize in warehousing, that is, they handle the storage of goods.
There are those providers that offer distribution and wholesale services such as custom labeling, outbound order fulfillment, manufacturing, together with picking and packing. They efficiently distribute large quantities of products.
There are very many advantages to using a 3PL provider. such as;
Since these organizations are able to transport goods in different geographical locations and in large quantities, a business is able to predictably manage its resources such as turning their fixed costs into variable costs
Time and cost saving
The Information Technology systems and equipment of these logistics providers are updated and adapted so as to meet the requirements of customers and suppliers unlike the selling and producing companies who don’t have the resources, time or even expertise to adapt their equipment and systems so quickly.