3PL – A Third-Party Logistics Provider

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3PL – A Third-Party Logistics Provider

A third-party logistics provider (abbreviated 3PL) is a firm that provides outsourced or “third party” logistics services to companies for part, or sometimes all of their supply chain management functions. Third party logistics providers typically specialize in integrated warehousing and transportation services that can be scaled and customized to customer’s needs based on market conditions and the demands and delivery service requirements for their products and materials.

A 3PL company is a jack-of-all-trades; they usually have divisions in brokering, warehousing, and freight forwarding. They will handle air, ocean, and land freight. A 3PL will also offer services of storage, tracking, labeling, and inventory management. They are an all-around logistics provider.

A company would benefit from a 3PL in a situation where they wanted someone to store their product, manage the inventory of it, and handle the orders when a buyer wanted some of that product. A 3PL can offer a great service to reduce the workload and work force needed at a company that produces goods.

It is not out of the question for a 3PL and a broker to work together to handle shipments in and out of their warehousing facilities. This, in most cases, would not be considered double brokering.

A recent study found that 95 percent of the U.S.’s chief executives believe they should have some form of logistics strategy, and nearly 50 percent of the nation’s CEOs are currently incorporating supply chain planning into their overall business strategies.

One thing is certain: no matter how logistics is defined, the function accounts for 8.7 percent of the total U.S. Gross Domestic Product ($910 billion in 2002). It is growing dramatically in terms not just of services provided and outsourced but in terms of volume. The industry’s 3PL provider element alone counts for more than $78 billion and is estimated to be growing by 15-20 percent per year. Its benefits include:

  • Reduced need for personnel
  • Reduced transportation and distribution cost
  • Improved customer service
  • Improved cycle time
  • Free-up capital in manufacturers and marketers’ non-core areas




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