3PL (third-party logistics)

A 3PL (third-party logistics) provider offers outsourced logistics services, which encompass anything that involves management of one or more facets of procurement and fulfillment activities. In business, 3PL has a broad meaning that applies to any service contract that involves storing or shipping items. A 3PL service may be a single provider, such as transportation or warehouse storage, or it can be a systemwide bundle of services capable of handling supply chain management.

How third-party logistics work

Here is an example of how 3PL arrangements operate: A book publisher hires writers, editors and graphic designers to produce publications, but it may not want to handle the consumer ordering process or transportation of book shipments. Instead, the book publisher uses a fulfillment center to process its online orders and hires a trucking carrier to haul its freight. The fulfillment center and carrier both act as 3PL providers. It’s possible for a single 3PL provider to fulfill and ship book orders, too.

By contracting with a 3PL provider, the book company can use supply and distribution services only when needed, thus controlling costs more effectively while focusing on its core competency of producing books.

The growth of 3PLs

Aspects of 3PLs probably date back hundreds, if not thousands, of years. The Council of Supply Chain Management Professionals traces the actual 3PL abbreviation to four decades ago. “The term 3PL was first used in the early 1970s to identify intermodal marketing companies … in transportation contracts,” the council wrote in a glossary. “Up to that point, contracts for transportation had featured only two parties, the shipper and the carrier.”