What is a 3PL logistics provider and how do you choose one for your company?
A 3PL logistics provider is nothing other than a service provider who acts as an intermediary between trading companies and their end customers. It is therefore mandated to take care of all services, from logistics to goods transportation and storage. In this article, we explainthe advantages of service provision and how to choose the right service provider.
What is a 3PL logistics provider?
3PL stands for "Third Party Logistics". In French, this translates as "Logistique externalisée" or "Logistique tierce".
This is a logistics company that provides its customers with services such as the management of :
- their supply chain
- their orders
- their shipments
- their storage
These outsourced services also include logistics and product transport management.
Once a 3PL logistics provider has entered the supply chain, it is responsible for handling the company's goods and delivering them to end customers.
What are the differences between in situ and ex situ 3PL?
In situ and ex situ logistics are two distinct approaches to goods flow management. In situ logistics focuses on the storage and handling of products on the very site where they are used or produced, while ex situ logistics involves the movement of goods to centralized storage facilities or distribution centers. The main difference lies in the location of product storage and handling: on site for in situ logistics, and off-site for ex situ logistics.
Would you like to outsource the logistics management of your warehouse?
What are the differences between 1PL, 2PL, 3PL, 4PL and 5PL logistics providers?
Logistics service providers are categorized according to their level of involvement in the logistics and transport chain. For this hierarchy, the term "PL", which stands for "Party Logistics", is preceded by a number indicating the services offered by the provider.
1PL
1PL stands for "First Party Logistics". The service provider is therefore only a first-tier subcontractor. In fact, it simply offers transport services to companies.
The 1PL is chosen by companies wishing to outsource the transport of their products to service providers who own drivers and a fleet of trucks. Although the customer no longer handles transport, he still controls the logistics warehouses.
2PL
2PL stands for "Second Party Logistics". In this case, the service covers not only transport, but also the customer's product inventories.
3PL
3PL stands for "Third Party Logistics", and represents a higher degree of involvement in the logistics and transport chain. In addition to transporting and storing products, the 3PL provider is responsible for managing and organizing these two activities.
4PL
If a company calls on a 4PL (Fourth Party Logistics) provider, it's because it needs a consultant/auditor for its 3PL provider.
The role of a 4PL is therefore simply to optimize and enhance the company's business with the help of a 3PL. As such, it has no logistical infrastructure of its own, and acts solely as an advisor.
5PL
Last but not least, the 5PL ("Fifth Party Logistics") provider offers both 3PL and 4PL services.
The role of a 4PL is therefore simply to optimize and enhance the company's business with the help of a 3PL. As such, it has no logistical infrastructure of its own, and acts solely as an advisor.
The advantages of using a 3PL logistics provider
Outsourcing logistics to a 3PL provider offers a number of advantages. These include cost and risk reduction.
Cost reduction
The first advantage of using a 3PL logistics provider is that you don't have to pay for company and staff costs. This means short-term savings for the company.
What's more, outsourcing logistics enables us to offer end customers more competitive shipping prices. Indeed, the shipping costs of 3PL providers are particularly competitive, not least because of the sheer volume of products they handle.
Flexibility and scalability
The advantage with 3PL providers is that they offer companies flexible, customized solutions that enable them to adapt very quickly to fluctuations in customer demand.
Indeed, if market demand is very strong, companies can adjust their production capacity and ask their logistics provider to increase storage space.
Expertise and specialization
Generally speaking, a 3PL provider is specialized in the service it offers to the structure that contracts it. Indeed, service providers are increasingly specializing in a particular field to optimize their expertise.
Also, a 3PL has additional experience and knowledge that the company does not have. It is therefore able to anticipate and avoid any problems.
Technology and innovation
As a rule, the 3PL logistics provider uses modern technologies and optimized processes to manage inventory and product distribution more efficiently. This results in a higher quality of service.
What's more, all the digital tools used by the provider help to increase the visibility of the supply chain process, as well as the transit of shipments.
Risk reduction
3PL providers have many years' experience behind them. So there's very little chance of them making mistakes in the supply chain or in storage.
How to choose the right 3PL logistics provider?
To choose the right logistics provider, it's imperative to consider the various selection criteria and turn to a 3PL that shares the company's culture and values.
Selection criteria
The first selection criterion is price. The company must choose its service provider on the basis of its rates. These vary according to product type, volume, destination and urgency of order.
The second criterion is adaptability. The service provider must be able to adapt to the company's various logistical needs. For example, it must be able to react quickly to any increase in market demand.
It is also essential to consider the technology offered by the 3PL. Choose a service provider with advanced technology and automation, especially for order preparation and shipping.
The final selection criterion is the 3PL's reputation. It must have a good brand image and good references.
Importance of cultural compatibility and values
Cultural mismatches between company and service provider can have serious consequences. For example, if the company's culture is one of rapid dispatch, but the 3PL doesn't share this notion, collaboration between the two will be impossible.
The same applies to values. If the company's core value is meticulous order preparation, but the service provider botches this stage, the partnership won't work, and end customers will be dissatisfied.
Common mistakes to avoid when selecting a 3PL
When selecting a 3PL logistics provider, companies need to be careful not to make these four common mistakes.
Not clearly defining your needs
If a company doesn't clearly define its needs, it will never be able to find a service provider who effectively meets its requirements.
For example, if the company is operating in a brand-new, still uncertain sector where market demand is constantly fluctuating, it will need a 3PL capable of adjusting storage space quickly.
Focus on cost alone
Generally speaking, the 3PLs that charge low prices are those with little expertise, almost no flexibility and no advanced technological tools.
Do not check the service provider's references or track record
To find the best 3PL provider, don't hesitate to ask your business contacts for advice, and ask former customers to tell you about their experiences.
Ignoring the importance of technology and innovation
For efficient work that meets the demands of the digital age, it's essential that the service provider has smart digital tools and software.
This optimizes all supply chain processes, including storage and transport.
The future of 3PL logistics
In recent years, 3PL logistics has continued to evolve. And with the arrival of new technologies, there's no end in sight.
Current and future trends in logistics
Current and future trends in the logistics sector include artificial intelligence and AGVs.
The former is capable, among other things, of predicting consumer trends, and hence future order peaks, automating order preparation and optimizing flow management.
The latter are motorized, autonomous logistics and intralogistics robots capable of moving goods, thus optimizing warehouse inventory management.
The impact of technology
Technology is having a major impact on logistics. Indeed, service providers no longer have the right to make mistakes. Since all players in the sector are investing in state-of-the-art technological tools, those who have not made the shift risk losing a large number of customers.
How can companies prepare for the future?
Robots are certain to become increasingly intelligent and autonomous, performing all tasks without human intervention.
To prepare for this, companies can already anticipate the arrival of essential new professions, such as data analysts.
The key to success will be to hire agile professionals capable of adapting to new technologies.
Ces contenus peuvent vous intéresser
Do you have a need or a question?
Our Onet Logistique experts are at your disposal to answer all your requests for information or quotes.