Third Party Logistics In Supply Chain Definition
In business, third-party logistics (3PL) is the transfer of ownership and responsibility for the management of goods and materials from one company to another. In other words, it is the outsourcing of the entire process or a part of the process of moving goods from suppliers to customers.
There are many reasons why companies choose to outsource their logistics functions. The most common reason is to save money. When done correctly, outsourcing can lead to cost savings in several areas, including:
* Transportation – by consolidating shipments and using economies of scale to negotiate lower rates with carriers
* Inventory management – by reducing inventory levels and associated carrying costs
* Warehousing – by using larger and more efficient facilities than a company could maintain on its own
Other reasons for outsourcing logistics include:
* Access to expertise – many 3PL providers have developed deep expertise in managing supply chains, which can be leveraged to improve efficiency and effectiveness
* Improved service levels – by working with a 3PL that specializes in a particular type of transportation or has a strong network of carrier relationships, companies can often improve service levels at a lower cost than if they managed the function themselves
* Flexibility – 3PLs can provide companies with the flexibility to scale up or down as needed, which can be helpful when demand fluctuates
