If you’ve ever wondered exactly what third-party logistics (3PL) providers do, we’ve got the answers you need. From transportation to warehousing and supply chain management to logistics operations, 3PL providers offer a wide range of services to commercial and industrial customers.
What is a third-party logistics provider?
A 3PL provider is a specialist company that provides a range of distribution, storage, transport and fulfillment services to customers. These customers outsource these types of operations to the 3PL business and rely on the 3PL provider to offer end-to-end management of specific services. 3PL providers are a vital part of supply chain management and they are used by the vast majority of large businesses around the world.
How does a third-party logistics provider tell the customer what services it will provide?
All the services offered by a 3PL provider will be carefully documented and explained in contracts, agreements and service level agreements (SLAs). These documents will detail the scope, duration, cost and other vital aspects of any services that the 3PL provider offers.
What are the main services offered by a third-party logistics provider?
Types of logistics services can vary widely, and many 3PL businesses specialize in different parts of the supply chain. In general, most logistics services fall into the following areas:
- Procurement: Ordering and receiving goods from elsewhere in the supply chain
- Order fulfillment: Receiving orders from customers, picking and packing and arranging for the orders to be completed and sent out
- Storage: Providing temporary storage for goods in warehouses and similar locations
- Transportation: Arranging for the consolidation, deconsolidation, management and transportation of goods
3PL providers also offer a range of supplementary services including IT systems integration, inventory management, data exchange, reporting, reverse logistics and other offerings.
What are 3PL procurement and receiving services?
Procurement is based on ordering and receiving goods from upstream in the supply chain. As part of a procurement and receiving service, a 3PL provider may:
- Manage inventory on behalf of their customer
- Identify when stock levels are running low and raise orders with suppliers and manufacturers
- Arrange for the transport of goods from the supplier or manufacturer to the 3PL warehouse
- Receive goods into the 3PL warehouse and manage storage until the goods are ordered or required elsewhere
What are 3PL order fulfillment services?
One of the main responsibilities of a 3PL business is order management, fulfillment and distribution. As part of an order fulfillment service, a 3PL provider may:
- Receive requests for goods from their customers, members of the public or others
- Manage inventory and deduct from stock levels when orders are received
- Pick the requested item from storage in their warehouse
- Pack the requested item so that it can be shipped onwards
- Arrange for loading and distribution of the item to its destination
Order fulfillment, picking and packing can happen between different nodes of the supply chain, as part of eCommerce or drop shipping orders, for onward distribution to 3PL customers or other logistics providers or as part of retail or other commercial services.
What are 3PL storage and warehousing services?
One of the primary functions of a 3PL provider is to manage the safe storage of goods until they are needed elsewhere. As part of their storage services, a 3PL business may provide:
- Public warehousing that can be assigned to customers based on priority, capacity and demand
- Contract warehousing that is preassigned and rented out to a specific customer for a specific duration
- Specialist storage for different types of products like chemicals, food or goods that need to be kept in particular environments
- High-security storage for valuable, volatile or otherwise sensitive goods
- In-warehouse tracking and positioning for the easy identification, storage and retrieval of goods
- Inventory management and auditing to ensure the accurate receipt, stock level management and distribution of goods
What are 3PL distribution services?
The final type of service offered by 3PL providers is distribution. This involves the transport of goods from the provider’s storage facilities to other parts of the supply chain or end customers. As part of their distribution services, a 3PL business may offer:
- Various types of distribution methods including drayage, cross-docking, intermodal transport, brokerage, drop deck and lowboy transport, full container load (FCL), less than container load (LCL), less than truckload (LTL) and truckload (TL)
- Fleet optimization for the efficient delivery of goods based on AI mapping and modeling
- Tracking of goods using GPS and Internet of Things (IoT) devices
- Consolidation and deconsolidation of goods
What are some other services offered by 3PL providers?
3PL businesses often provide additional services to those listed above.
Freight forwarders typically organize and manage shipments on behalf of other businesses. A freight forwarder may also be a 3PL provider, or they may work with logistics companies to rent out space in distribution fleets, manage relationships with clients and providers, create schedules and report on progress. Freight forwarders work across many different types of transportation, by land, sea and air.
Moving goods between methods of transport
Although there are several methods for changing types of transportation, a couple of the main ones are:
- Intermodal transport using shipping containers that are designed to integrate easily with various types of transport
- Cross-docking which allows for the easy unloading, transferal and loading of goods, including consolidation and deconsolidation
These two types of mode transferal can be combined for greater efficiency.
Reverse logistics allows customers to return products and goods that are not fit-for-purpose. Reverse logistics allows a customer to send the item back and deals with refunds, sending products onward and the management or disposal of unwanted inventory.
Environmentally controlled freight
Certain goods need to be transported in specialist environments. Specialist vehicles are equipped with ways to control temperature, light levels, humidity and other factors to preserve goods as they reach their destination.
Consolidation and deconsolidation
Consolidation means that a 3PL provider will combine goods from multiple shipments into one shipment so they can be transported together. Deconsolidation is the opposite, splitting goods from a shipment into smaller shipments intended for different recipients and destinations.
We hope you’ve found these answers about third-party logistics services useful.
Blume Logistics creates a robust network for logistics tendering, tracking, event capture, POD verification and settlement initiation. By connecting a global ecosystem of multi-modal carriers to manage every move, Blume Logistics unites carriers—from ocean to rail to long haul—with first- and last-mile drayage for real-time event and cost tracking.