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A third party logistics (3PL) provider handles supply chain management logistics, a service that can include transportation, warehousing and delivery—or a combination of these services— but may also incorporate additional value-added services such as production or procurement. By outsourcing these functions, companies can achieve a cost savings over having to meet these demands internally.

In addition to the economic benefits, 3PLs can also deliver improved technical proficiency, through sophisticated IT systems that are often more advanced than those of the production or selling companies they serve. Since logistics is not a core business for many entities involved in global trade, the ability to turn these responsibilities over to a qualified 3PL provider allows companies to spend less time focusing on these tasks, and more time on the elements that made their respective businesses a success.



Transportation

If you're a shipper, booking a load for delivery to a customer can be more complicated than it seems. What mode of transportation should be used? Which carrier should you call? How do you know if you're getting a good rate?

Developing the expertise in house to answer all of these questions can be expensive and time consuming. That's where 3PLs come in. A third-party logistics provider will not usually provide transportation services, although it may be affilaited with a transportation service provider. Rather, 3PLs typically offer what is best described as transportation management services.

Analyzing routes and rates, negotiating the best rates and other contract terms—all of these transportation functions fall under the umbrella of many 3PLs. Many of these functions require at least two things: industry experience and powerful information systems. A 3PL providing transportation management services will have these in spades and will put them at the disposal of their customers, to get the best deals, to optimize shipping lanes and transportation modes, and to provide business intelligence which can help their customers make better decisions.

Warehousing & Distribution

The business of providing warehousing and distribution services has evolved in recent years. In the past, these tended to revove around standard, cookie-cutter types of offerings. Nowadays, warehousing and distribution has become more flexible and responsive to the needs of manufacturers and shippers. Warehousing is no longer thought of as the static storage of goods. Rather, products are strategically placed to best satisfy customer wants and needs.

Distribution is also no longer as cut and dried, thanks primarily to the trend toward just-in-time deliveries of merchandize and the growth of e-commerce which has required the delivery of items directly to consumers.

Many companies rely on third-party logisitcs providers (3PLs). for these services. The service offerings are often diverse and flexible and can be customized to the needs of shippers.

Warehousing facilities often specialize in specific types of products. Referigerated facilities have invested in the equipment required to keep perishable goods fresh. Food-grade facilities in the United States must be licensed by the Food and Drug Administration and are held to extemely high standards of cleanliness.

To the extent that shippers themselves are not operating these facilities, they rely upon 3PLs. Shippers with diverse warehousing and distribution needs will also often find 3PLs in a position to coordinate their complete strategy in this area.

  • Dedicated Warehousing

    Dedicated warehousing refers to an arrangement in which an entire facility is operated on behalf of a specific customer. Shippers and manufactuers that require major operations at specific locations may find this suitable.
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  • Shared Warehousing

    Shared warehousing refers to a situaiton in which more than one shipper occupies a given warehousing facility. Each customer is designated a specific area. It is the responsibility of the operator of the facilty to provide controls over the inventory of their several customers.
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  • Temp-Controlled

    Perishables such as flowers, food and pharamceuticals often are required to be stored in temperature controlled facilties. These facilities may be located within a general warehouse environment or an entire facility may be temperature controlled. The temperatuure controlled facility is usually operated in zones, to accommodate products with multiple temperature requirements.
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  • Bulk

    Specialized facilities are required for the storage of commodities, such as minerals and salt, that are storted in bulk.  Some bulk materials can be stored in open sheds rather than in enclosed buildings.
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  • Hazmat

    The storage of hazardous materials requires specialized facilities and expertise. Depending on the material in question, these facilities must sometimes be licensed by governmental authorities.
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  • Fulfillment

    Warehouse operators can help shippers fulfill customer orders. This may involve picking and packing items for shipment, arranging for transportation, and seeing to their delivery.
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  • Crossdocking

    Crossdocking streamlines the distribution process by breaking out incoming loads and immediately loading them on outbound trucks for delivery. Some facilities are optimized for this activity, which also requires the right expertise and information systems.
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  • Replenishment

    Shippers can arrange for their 3PLs to automatically replenish customer inventories. Orders are sent to the warehouse and the 3PL takes it from there, without the shipper having to be directly invovled.
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  • Pool Distribution

    Pool distribution is an alternative to less-than-truckload (LTL) transportation. Instead of shipping direct to a destination, a truckload is consigned to a regional center where it is broken out for separate shipment to several destinations, saving on costs.
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  • Retail Store Distribution

    Distribution 3PLs run routes to retail stores, delivering product to several destinations—perhaps on behalf of several customers—from a distribution center. The 3PL runs the distribution operation, leaving its customers with the time and resources to focus on their core businesses.
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  • Value-Added Services

    Value-added refers to services beyond the core warehousing and distribution offerings and can include packaging, kitting, testing, repairing and refurbishing, recycling, tracking and tracing, cross-docking, and consulting. The idea is to stremline processes and save on costs and carbon by collocating activities in a single location.

Reverse Logistics

At the simplest level, reverse logistics refers to the process of getting product returned by customers to some earlier point in the supply chain. It may involve getting them out of the stores and back to the vendors. Big retailers typically seek to please their customers by guaranteeing that they will take back any product the customer wishes to return for whatever reason.  These same megastores also have the leverage with their suppliers to demand that they take back anything returned to the retailer and to award a credit to their account.

In the case of manufacturers, it may mean the process of receiving defective products back for repair and eventual return to the customer. Some manufacturers recover, remanufacture and resell traded-in goods. Others use returned products for parts. Some returned items may contain materials that are worth recycling.

The receipt and disposition of returned items pose logistics challenges. They must be received in an efficient manner, and disposed of or shipped on properly. Some will be sent to repair centers and then shipped back to customers.

As with any logistics process, shippers had better pay close attention to the costs involved. Turning a blind eye to the costs of processing returned products will cause those costs to mushroom out of control. Properly managing reverse logistics also has reputational value: no manufacturer wants their items to end up where they don't belong.

  • Receipt

    3PLs that provide reverse logistics services in the first instance receive and keep track of returned items on behalf of their customers, reporting to them the items received, why they were returned and recommending next steps. Find A Partner

  • Restocking

    Returned items that have been examined and determined to be eligible for resale are arranged to be placed back into inventory or onto store shelves. Information systems are updated reflecting the return from the customer and the new addition to inventory. Find A Partner

  • Vendor Return

    In the case of returns to retail outlets, many of these items must be shipped on to the retailers’ vendors. Return logistics specialists automatically arrange for this process based on their customers’ rules. Find A Partner

  • Repair

    Some retruned items can be repaired and returned to customers or to inventory or resold in after-markets. Reverse logistics 3PLs often set up repair shops in their facilities, thereby streamlining those processes. Find A Partner

  • Recycling

    Returned items, notably cellphones and other electronics that cannot re-enter the stream of commerce, often contain materials that can be recycled for the benfit of their orginal manufactuers. Reverse logistic 3PLs set up recycling operations so that this is done expeditiously. Find A Partner

  • Recall Management

    Some products are returned to their manufacturers as a result of recalls. By locating recall hubs in logistics centers, the items are checked and then efficiently moved to the next stage of their life cycle. Find A Partner

  • Testing

    Repaired and refurbished items must be tested before they are retrurned to customers or re-enter the stream of commerce. 3PLs often develop testing expertise as part of their reverse logisitcs offerings. Find A Partner

  • Disposal

    Returned items that are of no further use must be disposed of properly. Some may contain hazardous materials which are are subject to government disposal regulations. Still others may be placed with an appropriate recycling facility. Find A Partner

Value-Added Services

Most companies start a 3PL relationship procuring basic services like transportation, warehousing and distribution. Taking things to the next level will often mean supplementing core services with value-added services.

Combining additional activities and processes to these basic logistics functions can streamline the supply chain, save on costs, boost customer service and enhance the bottom line. Outsourcing allows shippers to focus on their core competencies and to direct capital toward marketing, research and development. Many 3PLs pride themselves on offering their customers new and innovative ways to improve effectiveness in supply-chain management. They want their customers to view them as strategic partners, who are able to take an active role in helping them solve supply-chain management issues.

Different 3PLs offer capabilities in different areas and each company's needs will be different as well. Many 3PLs tout services such as packaging, kitting, testing, repairing and refurbishing, recycling, tracking and tracing, cross-docking, and consulting. Some of these functions involve finishing the last steps in the manufacturing process to ready products for customers. Others tout cargo consolidation capabilities and advanced IT tools that provide real-time visibility to cargo and inventory and customs compliance analytics, among other things.

Signing up for more services allows 3PLs to offer their customers lower rates. Bundling activities in a single location also lowers the carbon footpint of a company's logistics activities.

  • Pick & Pack

    An essential function for fulfilling orders from warehouses, 3PLs provide the personnel, equipment and information systems to receive customer orders and fill them by retireving product from warehouse locations and packing them for shipping.
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  • Labeling

    Manufacturers often want to leave product labeling to the last minute because they ship to many different locations and different jurisdictions may require different kinds of labeling for some products. Performing this function at the distribution center allows labeling to happen once the destination of a given product has been identified.
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  • Packaging

    Manufacturers doing business globally may package products differently depending in where they are going, for marketing, cultural or regulatory reasons. Performing this function at the distribution center allows packaging to take place in direct response to demand signals.
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  • Kitting

    Kitting refers to the pre-building of components or inserts that are later incorporated into finished products or packages. Building them in advance allows them to be easily dropped into the finished product, speeding the time to shelf.
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  • Inventory Management

    Inventory management involves planing to ensure that items are available when they are needed, and that neither too much nor too little is purchased. 3PLs can help in this area with information systems that provide visibility to company’s inventory and reporting on inventory levels and their use.
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  • Warehouse Design

    The art and science of warehouse design is constantly evolving to maximize productivity and efficiency. 3PL warehouse operators clearly have a leg up in this area.
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  • Subassembly

    Building modules or componentry to be later incoporated into finished products at the location from which they are to be shipped boosts efficiency, especially when a company is able to apply product variants immediately before delivery to customers.
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  • Material Insertion

    The instructions, warnings and warrranty information on products may vary depending where they are being shipped, for marketing, cultural, and/or legal reasons. It makes sense for these materials to be inserted right before shipping, once the destination of the product has been identified.
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  • Repackaging

    Products sometimes need to be repackaged because they have been returned by the original purchaser or because the original packaging is not suited to the product’s destination. 3PLs often set up repackaging shops in distrubution centers to streamline these efforts.
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  • Testing

    It pays to perform product testing in distribution centers when, for example, the product has been processed, reapired, or refurbished in that location. 3PLs often invest in testing equipment for just that purpose.
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