Third-party logistics

Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company's use of third party businesses to outsource elements of the company's distribution and fulfillment services.

Third party logistics providers typically specialize in integrated operation, warehousing and transportation services which can be scaled and customized to customers' needs based on market conditions, such as the demands and delivery service requirements for their products and materials. Often, these services go beyond logistics and include value-added services related to the production or procurement of goods, i.e., services that integrate parts of the supply chain. When this integration occurs, the provider is then called a third-party supply chain management provider (3PSCM) or supply chain management service provider (SCMSP). 3PL targets particular functions within supply management, such as warehousing, transportation, or raw material provision.

The global 3PL market reached $750 billion in 2014, and grew to $157 billion in the US; demand growth for 3PL services in the US (7.4% YoY) outpaced the growth of the US economy in 2014. As of 2014, 80 percent of all Fortune 500 companies and 96 of the Fortune 100 used some form of 3PL services.

Third-party logistics providers include freight forwarders, courier companies, as well as other companies integrating & offering subcontracted logistics and transportation services. Hertz and Alfredsson (2003) describe four categories of 3PL providers:

Outsourcing may involve a subset of an operation's logistics, leaving some products or operating steps untouched because the in-house logistics is able to do the work better or cheaper than an external provider. Another important point is the customer orientation of the 3PL provider. The provider has to fit to the structures and the requirements of the company. This fit is more important than the pure cost savings, like a survey of 3PL providers shows clearly: The customer orientation in form of adaptability to changing customer needs, reliability and the flexibility of third party logistics provider were mentioned as much more important than pure cost savings. [www.3PLFCL.com "3PL Freight Chain Logistics Service Provider"]

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