The term 3PL refers to hiring logistics from a third party.
A company that takes 1PL and
2PL intermediaries between these two parties is referred to as a third-party logistics provider or a
3PL.
Since the nineteen-eighties, 3PLs have become increasingly popular as many small
businesses recognize the need of externalizing their warehouse, transport and fulfillment
functions for economic reasons.
Mainly, the purpose of having a third-party logistic provider is to be sure that the
company has no expenses incurred in managing its supply chain. Otherwise, an organization
might require them in case of mergers or acquisitions when it finds out that its supply chain has
become so complex that it can no longer be managed internally.
A 3PL may either be asset-based, non-asset-based or in some cases both. In addition to
not having assets such as vehicles or bonded warehouses, this type of a 3pl relies on established
relationships with haulers, airlines and carriers who offer competitive cargo space rates.
Consequently, it is hard to differentiate between a transportation broker and a 3PL since they
tend to perform similar tasks at times.
In short, hiring a third-party logistic provider like this will substantially reduce your costs
compared with running everything yourself.
Although this may be possible for a huge conglomerate or a market dominant company,
majority of the small scale firms are bound to experience high costs of overheads in terms of
hiring a warehouse, operating their own transport system and employing a staff of logisticians.
Being able to maintain a long-term association with the carriers, 3PLs may end up
arranging for a slightly lower rate from the carriers for the service which are then extended to the
end consumers. Such connections can also help arranged for the space of the containers
particularly during the busy seasons of shipping.
The use of the third party can also relieve time and effort that can be put towards
operations that are more strategic such as production, marketing, and creation of new products.
4PL is a concept of higher evolution than the traditional third-party logistics and is
concerned with the delivery of the entire logistics function optimally rather than the bringing
together of many component parts of the total supply chain.
Though some of the functions of the 4PLs are similar to the 3PLs, most of the 4PLs are
non-assets based, and therefore the organization does not have own vehicles or storage. Their
general brief tends to be more strategic and advisory; they provide recommendations and guide
as to how a company’s supply chain network can be optimized to achieve greater returns.
A 4PL might manage the activities of other 3PLs that are involved in individual elements
of the supply chain. The nature of a 4PL is not very rigid and it might actually be found that
some of the big players in the 3PL marketplace are teaming up with clients to provide 4PL
services.
This means that engaging a 4PL can be a very appealing proposition to those companies
that have a highly articulated and extensive supply chain network. Thus, if a 4PL has a holistic
understanding of a supply chain and the technology that goes with it, then this kind of company
is likely to increase the efficiency of a supply chain.
Due to the fact that they usually have no investments in vehicles and warehouses, 4PLs
can be more flexible than the company with its own facilities.
REFERENCES:
Heisler, J. (2022). Operations management: Sustainability and supply chain management. New
York, NY: Pearson.
Linden, G., Dedrick, J., & Kraemer, K. L. (2021). Innovation and job creation in a global
economy: the case of Apple's iPod. Journal of International Commerce and Economics, 3(1),
223.
Locher, S. (2023). The supply chain revolution: Innovative sourcing and logistics for a fiercely
competitive world. New York, NY: AMACOM
Miser, B. (2023). My iPhone. Indianapolis, Idiana, United States of America.
Francis, J. (2020). Apple’s supply chain attracts criticism for performance but also praise for
sustainability. Forbes. Web.
Wright, C., & Kaine, S. (2020). Supply chains, production networks and the employment
relationship. Journal of Industrial Relations, 57(4), 483-501. Web.
IvyPanda. (2024, April 17). Operation Management Practices of the Apple Company.
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