A third party logistics (3PL) service provider is defined as an "external supplier that performs all or part of a company's logistics functions." It is desirable that these suppliers provide multiple services and that these services are integrated in the way they are managed and delivered.

The several types of 3PLs are transportation-based, distribution-based, forwarder-based, financial-based, and information-based suppliers.

Asset-based providers serve customers with tangible equipment and facilities, while nonasset-based providers leverage the resources of other companies.

3PLs provide a variety of transportation services, including freight movement, freight management, intermediary services, and specialty services.

Customer demands for integration of 3PL services have led to significant expansion and acquisition activities among major service providers

The 3PL industry is a growing and substantial force in logistics, with more than $788 billion spent globally on 3PL services in 2015

. When outsourcing labor-intensive logistics operations, companies seek cost reduction, the ability to focus on core competencies, and service improvement.

According to an annual study of 3PL users, customers are satisfied with their 3PL relationships and credit 3PLs with helping them attain goals related to reduction of operating costs, fixed asset investment, and order cycle time.

There are six steps involved in the development and implementation of a successful 3PL relationship. The ultimate goal of the process is to develop outstanding customer service capabilities and cost-efficient operations.

Although the industry is poised for future growth, 3PLs must support customers' needs through strategic innovation, technological strength, capacity access, talent availability, omni-channel agility, and sustainability expertise.

Customers can use private carriage instead of 3PLs, but they must be able to manage their own fleet in a cost-efficient manner.

Questions:

1. What are some of the more frequently outsourced logistics activities? Less frequently outsourced?

2. Describe the six steps involved in establishing and managing 3PL relationships. Which step(s) do you feel is (are) most critical?

3. If you were given the task of outsourcing your company's transportation operations, what types of capabilities and core competencies would you seek in a 3PL service provider?

4. Discuss the strategic needs and challenges that transportation managers face. How can 3PL service providers help them improve performance and reduce costs?