Logistics Service forms and Third Party Logistics
The logistics industry is vast. It covers a wide range of services that all have an impact on how a product gets from the maker to the recipient. No matter where your business fits in the production and shipment line, it’s always a good idea to get a feel for how a product gets from Point A to Point B. Here we will explore different types of logistics services and how they may impact your business or customers.
Before a product is shipped, it is typically held at a warehouse or transported between a series of warehouses. While some companies choose to have their own independent warehouses, many work with third party logistics providers like Overflo. We receive, store, and ship out items on our client’s behalf, eliminating the need to pay for a complete warehouse on your own.
Warehousing is a very flexible part of the field. Your storage needs will determine how much space you require for your products, how long you need that space, how easily accessible your products need to be, and more. For instance, a company selling Christmas trees may require long-term storage for their products during the first half of the year, followed by quick inventory changes as it gets closer to Christmas. Warehousing is a fundamental component of logistics, and it is a service that we are proud to offer here at Overflow.
Large orders and large items are often shipped through freight services. This may involve a combination of vehicles – trucks, trains, cargo ships, and more. Freight shipping may also require drayage services, which transport an order from a port to a warehouse for storage. Much like warehousing, freight shipping is a complex and ever-changing field with constant fluctuations in demand, labor shortages, shipping times, etc. It’s our job at Overflo to make sure that items are shipped in a timely manner no matter what is happening in the industry so our clients and their customers can receive their products as needed.
Courier shipping is what most people think of when they picture a “shipping company” (FedEx, UPS, and other local couriers). Courier shipping is reserved for small orders or those that require a high level of care. Courier shipping is faster than freight shipping because it focuses on small orders, not large sets of items, but it is also more expensive if you are trying to ship large, freight-worthy inventory. Most retailers reserve courier shipping for the very last step in logistics, where the product goes directly from the warehouse to the buyer.
Making It All Work
Our role as a third party logistics provider is to ensure that all of these services and others associated with logistics seamlessly flow together. This requires a great deal of coordination, organization, and time management, but it is something that we have perfected over the years. If you are looking for a 3PL provider for your business, feel free to reach out to Overflo for more information about what we can do for you.
Third-party logistics (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a company’s use of third-party businesses to outsource elements of the company’s distribution, warehousing, and fulfillment services.
Third-party logistics providers typically specialize in integrated operation, warehousing and transportation services which can be scaled and customized to customers’ needs based on market conditions, such as the demands and delivery service requirements for their products and materials. Often, these services go beyond logistics and include value-added services related to the production or procurement of goods, i.e., services that integrate parts of the supply chain. When this integration occurs, the provider is then called a third-party supply chain management provider (3PSCM) or supply chain management service provider (SCMSP). 3PL targets particular functions within supply management, such as warehousing, transportation, or raw material provision.
The global 3PL market reached $75 billion in 2014, and grew to $157 billion in the US; demand growth for 3PL services in the US (7.4% YoY) outpaced the growth of the US economy in 2014., As of 2014, 80 percent of all Fortune 500 companies and 96 of the Fortune 100 used some form of 3PL services.
The global third-party logistics market is predicted to grow at around 5 percent CAGR during 2016 to 2024 (forecast period). Its companies operate for the shipping industry to supervise logistic undertakings (forecasting, warehousing, & conveyance management software). The market will attain a size of about USD 1, 054 billion by 2024.
Third-party logistics providers include freight forwarders, courier companies, as well as other companies integrating & offering subcontracted logistics and transportation services. Hertz and Alfredsson (2003) describe four categories of 3PL providers:
Standard 3PL Provider: this is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) – the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
Service Developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.
The Customer Adapter: this type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company’s logistics activities. The 3PL provider improves the logistics dramatically, but does not develop a new service. The customer base for this type of 3PL provider is typically quite small.
The Customer Developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.
Outsourcing may involve a subset of an operation’s logistics, leaving some products or operating steps untouched because the in-house logistics is able to do the work better or cheaper than an external provider. Another important point is the customer orientation of the 3PL provider. The provider has to fit to the structures and the requirements of the company. This fit is more important than the pure cost savings, like a survey of 3PL providers shows clearly: The customer orientation in form of adaptability to changing customer needs, reliability and the flexibility of third-party logistics provider were mentioned as much more important than pure cost savings.