The growth of 3PL companies began back in the 1980 s when businesses began to look for new ways

in which they could outsource logistics functions and concentrate on their core business. Third Party Logistics (3PL), the concept of a single professional logistics service provider managing the entire logistics functions of a company, had originated in the developed economies of Europe and America, to relieve industries from huge logistics costs apart from the hassles of dealing with multiple in-coherent logistics service providers. It proved to be immensely successful in improving logistics efficiency of majority of industries and quickly gained popularity, spreading across the globe.

A third-party logistics provider (abbreviated 3PL) is a firm that provides outsourced or "third party" logistics services to companies for part, or sometimes all of their supply chain management function. Third party logistics providers typically specialize in integrated warehousing and transportation services that can be scaled and customized to customers needs based on market conditions and the demands and delivery service requirements for their products and materials.

Third-party Logistics is simply the use of an outside company to perform all or part of the firm s materials management and product distribution function. -- Simchi-Levi (2000)

A relationship between a shipper and third party which, compared with the basic services, has more customized offerings, encompasses a broad number of service functions and is characterized by a long-term, more mutually beneficial relationship -- Murphy & Poist (1998)

There are three types of Third Party Logistics Company that operate today.

Asset Based Management Based Integrated Providers

Asset based third party logistics companies use their own trucks, warehouses and personnel to operate their business. Management based companies provide the technological and managerial functions to operate the logistics functions of their clients, but do so using the assets of other companies and do not necessarily own any assets. The third category, Integrated Providers, can either be asset based or management based companies that supplement their services with whatever services are needed by their clients.

Perform outsourced logistics activities Process management / Multiple activities More customized services Mutually beneficial and risk-sharing relationship Long-term commitments (1~ 3 years)

Transactional Outsourcing: Based on transactions, with no long term contracts and no bonding between the 3PL and the outsourcing company. Tactical Outsourcing: Outsourcing on a long term basis with negotiated contacts and integrated IT systems to facilitate free information flow and create supply chain visibility. Strategic Outsourcing: Based on long-term relationships with successful outcomes, 3PL companies become partners in supply chain management and establish transactional transparency.

The major advantage of using a third party logistics company is the potential for both cost savings and improvements in performance. As specialists, in effect 3PL companies should be able to provide greater levels of performance, thus resulting in a higher on time performance indicator. In addition, many third party logistics companies also operate on multiple contracts. As such, this should result in cost savings through economies of scale and the effects of operating in a wider network with opportunities such as backhaul.

Loss of control over the logistics function (especially for critical parts). More distance from clients. Loss of human touch. Discontinuity of services of 3PL provider. Differences of opinion or perception of the service level of the third party provider.

Saving time: It is a fact that by outsourcing all logistics and distribution to an outside firm will save the company time. This way the company can use this free time to grow their business and make it more profitable. Lack of Expertise: Many companies just don t have the personnel to handle the load. They may have the staff to do it, but the staff may not be knowledgeable or experienced in all phases of this work. Therefore, to handle such a task would be insurmountable.

DHL Logistics (1) $39,900 Germany Kuehne + Nagel (2) $20,220 Switzerland DB Schenker Logistics $12,503 Germany Geodis (3) $9,700 France CEVA Logistics (3) $9,523 Netherlands Panalpina (2) $8,394 Switzerland Logista (3) $8,190 United Kingdom CH Robinson Worldwide $7,130 USA Agility Logistics (2) $6,316 Kuwait UPS Supply Chain Solutions $6,293 USA

Computer Consumer Retail Chemical Medical Auto

61.4 56.2 53.8

82.2 75.9 71.1

Logistics optimization provides strength and value to the 3PL supply chain. Companies are allocating resources and money to make their logistics departments more efficient and economic. Through proper planning and using the right logistics optimization tools, companies can acquire considerable cost reduction across their logistics & distribution operation and can accomplish better delivery standards.