A Look at Third Party Logistics (3PL)
A 3PL is a firm that provides a one stop shop service to its customers of outsourced (or “third party”) logistics services for part, or all of their supply chain management functions. Originally 3PLs focused on logistics which was primarily transportation, warehousing and distribution and charged the client on a cost plus model.
Over the years their clients have started pushing more and more value added services (VAS) down to the 3PL. VAS falls outside of traditional supply chain/logistics expertise and is often labor intensive. Typically it is also billed at cost plus and the 3PL has little incentive to be efficient. If you couple their lack of expertise and resources with the lack of incentive, you end up with a inefficient and costly labor model. Also in the 3PL outsourcing world, manufacturers and businesses lose operational control of having product within their own facilities, inventory systems, and direct line of sight.