A 3PL is a third-party logistics services provider that manages logistics activities on behalf of a customer shipper.
What Is a 3PL?
3PL stands for third-party logistics, which is the process of outsourcing logistics management activities to an organization specializing in solutions across the end-to-end supply chain network. Third-party logistics providers specialize in supply chain operations like transportation and warehousing that can be customized to meet customer needs based on market conditions.
3PL solutions often include fulfillment services like receiving, freight shipping, inventory management, warehousing, and related services. Third-party logistics providers often support value-added services during the production and procurement of goods.
What Are Types of 3PL Providers?
The 3PL provider offers order fulfillment services, commonly for eCommerce companies. Different types of 3PL providers offer specialized services within the supply chain network. A 3PL’s services can have a singular focus, or third-party logistics providers can provide numerous activities required to support a customer’s needs.
Common 3PL solutions include:
- Shipping/Receiving
- FTL freight shipping
- LTL freight shipping
- Reverse logistics
- Warehousing
- Order processing
- Kitting/customization
- Picking/packing
- Inventory management
A logistics 3PL provider may offer additional services, such as:
- Processing returns
- Order customization
- Customer service
Some types of 3PL providers are specialized in certain areas, such as temperature-controlled goods, bulky items, or hazardous materials.
What Are the Top 3PLs by Size and Revenue?
The top 3PL companies globally by size and gross logistics revenue/turnover, according to Armstrong & Associates, Inc., include the following:
- Kuehne + Nagel
- DHL Supply Chain & Global Forwarding
- DSV
- DB Schenker
- C.H. Robinson
Armstrong & Associates provides 3PL market research and consulting, compiling an annual list of the top 50 global third-party logistics providers. Armstrong & Associates compiles a yearly list of the top 3PL firms in the U.S., which includes the following:
- C.H. Robinson
- Expeditors
- UPS Supply Chain Solutions
- Kuehne + Nagel (Americas)
- J.B. Hunt
What Solutions Do 3PLs Provide?
While third-party logistics providers can support a variety of logistics management activities, the top 3PL solutions include:
- Inventory Management: Visibility into inventory and the ability to manage it.
- Split Inventory: Distributed inventory between different warehouses.
- B2B and DTC Fulfillment: Managing both B2C and B2B types of fulfillment for multichannel logistics.
- Kitting and Customization: Custom packaging, notes, or other personalized experiences.
- Fast Shipping: Offering two-day and free shipping options to satisfy customers.
- International Fulfillment: Scaling to global markets.
- Returns Management: Handling returns and returning items to inventory.
- Analytics: Offering analytics tools to track data and gain insights.
Get our brochure highlighting how MercuryGate TMS helps 3PLs.
When to Use a 3PL
Third-party logistics organizations are helpful for smaller shippers and eCommerce businesses that may need help to handle all of their operations in-house. For instance, owning and managing a warehouse and taking care of all aspects of fulfillment is difficult, especially without a lot of capital or employees.
A 3PL makes logistics more possible for many businesses by storing inventory and providing numerous logistics services. Merchants can manage their part of the business without worrying about this aspect, as they outsource it to a 3PL.
3PL vs. 4PL: What’s the Difference?
Both 3PLs and 4PLs cover logistics and fulfillment outsourcing. While a 3PL handles specific logistics activities for a merchant, a fourth-party logistics (4PL) organization manages the entire supply chain.
Often referred to as a lead logistics provider, or LLP, a 4PL may manage different partners and other 3PLs for a customer, handling aspects like technology, fulfillment, and transportation.
Benefits of Using 3PLs
Beyond giving smaller businesses a chance to handle order fulfillment at more significant levels, 3PLs offer important benefits to businesses:
- Wholesale prices: Outsourcing with a 3PL allows merchants to buy products in advance at wholesale prices, saving on the cost of each one.
- Product sourcing options: Businesses can be flexible in sourcing products from numerous manufacturers, combining them in a single warehouse, and shipping them together. This method provides more options, flexibility, and cost savings.
- Ability to scale: A 3PL allows a business to scale its operations without purchasing warehouses, hiring more employees, or adding to in-house processes and technology.
- Fast delivery: Choosing a 3PL with strategic warehouse locations enables businesses to fulfill orders and deliver them quickly.
- A better return process: A 3PL can handle returns, taking over the customer service aspect of a product return, processing the returns, and adding the items back into inventory when possible.
How a Transportation Management System Helps Shippers and 3PLs
A transportation management system (TMS) simplifies processes for shippers and 3PLs.
How a TMS helps 3PLs manage transportation:
- Automating repetitive, labor-intensive logistics tasks.
- Creating real-time visibility for managing supply chains.
- Collecting data and turning it into business intelligence to improve performance.
How a TMS helps shippers manage 3PLs:
- Providing tools that help with all logistics stages.
- Offering Final Mile service that optimizes the final stage of delivery.
- Centralizing data to manage claims.
How MercuryGate Helps Shippers and 3PLs
As a 3PL helps manage logistics processes for shippers, technology is integral to executing a range of logistics tasks. MercuryGate TMS provides tools tailored to the logistics arena to support 3PLs in managing processes and clients. Likewise, MercuryGate TMS helps shippers manage 3PLs and their roles in the logistics process.
Learn how MercuryGate TMS for 3PLs provides advanced logistics capabilities in third-party logistics.
