A 3PL company provides all or part of the logistics services and supply chain management required by
their client companies. Typically, 3PL’s offer a range of warehousing and transportation services that
can be custom tailored to meet the specific needs of their customers and their changing supply chain
In recent years the growth of third party logistics has been extremely strong both in the number of 3PL
firms and the revenue they have generated. Most experts agree that this explosive growth can be
attributed to a number of key social and economic factors:
- Unprecedented growth of e-commerce
- A growing trend toward out-sourcing
- The growing trend toward strengthening relationships between manufactures, marketers and logistics
The importance of logistics is growing amongst manufacturers and marketers world-wide. A recent study
found that 95% of United States CEOs believed that they should have some type of logistics strategy
incorporated in the overall business plan and half of those CEOs were including supply chain management
and planning in their over-all business strategies.
Third party logistics is big business and it is growing. In 2002 logistics accounted for 8.7% of the
US Gross Domestic product. The logistics industry grew to $200 billion worldwide by 2008 and according
to some sources, is continuing to grow by approximately 14.5% per year.
Businesses are finding that developing a good relationship with a third party logistics firm is well
worth the effort. Some of the benefits achieved are:
Reduction in capital expenditure
- Reduced transportation and distribution cost – 3PL firms focus 100% of their attention on supply chain management. To survive in their competitive industry they must operate in an efficient and cost effective manner. Those savings are passed along to their customers.
- Reduced need for personnel – A 3PL firm provides all of the personnel necessary to get the job done. As a result, their clients experience a reduction in personnel required at their firm and see an accompanying reduction in payroll and benefit expense.
- Improved cycle time – Third party logistics firms know their business and operate in the most efficient way possible. Their expertise and experience allows them to perform logistics functions in minimal time resulting in improved cycle time for their clients.
- Better customer service – The high level of efficiency found in today’s logistics management has resulted in the ability to easily and quickly track products all the way through their supply chain from point of origin all the way to the end user.
- Reduced distribution and transportation costs – The profitability of logistics firms depends upon achieving the lowest transportation and distribution costs possible and those savings are passed on the their clients.
When using a third party logistics firm capital expenditure requirements are reduced or eliminated for
warehouse facilities, warehouse equipment, trucks and supporting personnel for those functions.
A manufacturer or marketer can apply those saving directly to their primary operations and profit
In the ever changing economic world of today it is essential to have a sound logistics strategy that
gives strong consideration to developing a relationship with an experienced third party logistics firm.