Wednesday, June 18, 2008


What is 3PL?
Also known as contract logistics, 3PL or 3rd party logistics is the supply chain practice where one or more logistics functions of a firm are outsourced to a 3PL provider. Typical outsourced logistics functions are: inbound freight, customs & freight consolidation, distribution, and management of outbound freight to the client’s customers. Other value added services can be provided, such as: repacking, assembling and return logistics. The 3PL provider manages and executes these particular logistics function using its own assets and resources, on behalf of the client company.
The benefits include lean organization (without owning much assets), focus on core competencies and reduced operational costs.
3PL is gradually evolving into 4PL wherein the supply chain service provider that searches the best logistical solutions for its client, typically without using own assets and resources. Relatively new is the term 5PL or even 7PL, indicating total supply chain management.
Four categories of 3PL provider
Standard 3PL provider: This is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) – the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
Service developer: This type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.
The customer adapter: This type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company’s logistics activities. The 3PL provider improves the logistics dramatically, but do not develop a new service. The customer base for this type of 3PL provider is typically quite small.
The customer developer: This is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.

Collaboration the key to success:
Supply chain collaboration between a 3PL and a customer occurs when both organizations work toward a common set of goals and objectives, and when there is a meaningful exchange of information relating to planning, management, execution, and performance measurement. Collaborative relationships thrive on the dedication of both parties to share responsibilities of people, process and technology, in order to drive change and improvement in the overall business relationship. To be effective, the collaboration process should involve not only 3PL and their customers, but customers-customers, suppliers and other key stakeholders. In reality, 3PL’s are in a great position to facilitate collaboration between customer organizations and its trading partners.
Benefits of collaboration
1) A seamless, 360 degree view of supply chain (upstream to suppliers and downstream to customers)
2) Access to 3PL’s experience and expertise.
3) Improved customer service at lower cost
4) Reduced inventory and stockouts as a result of collaborative forecasting activities.
In general, the executives believe that benefits of 3PL outweighs cost.

The logistics providers in India includes:,

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