How dose 3PL work?

How dose 3PL work

Third-party logistics(3PL) providers typically specialize in integrated operations of warehousing and transportation services that can be scaled and customized to customers’ needs, based on market conditions, to meet the demands and delivery service requirements for their products. Services often extend beyond logistics to include value-added services related to the production or procurement of goods, such as services that integrate parts of the supply chain. A provider of such integrated services is referenced as a third-party supply chain management provider (3PSCM), or as a 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 percent of Fortune 100 used some form of 3PL services.

Third-party logistics providers include freight forwarders, courier companies, and 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 quite 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.[4]
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.[5] 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.

First party logistics providers (1PL) are single service providers in a specific geographic area that specialize in certain goods or shipping methods. Examples are: carrying companies, port operators, depot companies. The logistics department of a producing firm can also be a first party logistics provider if they have own transport assets and warehouses.[9]

Second-party logistics providers (2PL) are service providers which provide their specialized logistics services in a larger (national) geographical area than the 1PL do. Often there are frame contracts between the 2PL and the customer, which regulate the conditions for the transport duties that are mostly placed short term. 2PLs provide own and external logistics resources like trucks, forklifts, warehouses etc. for transport, handling of cargo or warehouse management activities.Second-party logistics arose in the course of the globalization and the uprising trend of lean management when the companies began to outsource their logistics activities to focus on their own core companies. Examples are courier, express and parcel services; ocean carriers, freight forwarders and transshipment providers.

The most significant difference between a second party logistics provider and a third-party logistics provider is the fact that a 3PL provider is always integrated into the customer’s system. The 2PL is not integrated; in contrast to the 3PL, it is only an outsourced logistics provider with no system integration. A 2PL works often on call (e.g. express parcel services) whereas a 3PL is almost every time informed about the workload of the near future. As technology progresses, the methodology for notifying a 3PL of inbound workload usually falls on API integrations that connect, for example, an E-commerce store with a fulfilment center. Another point that differs 2 and 3PL is the specification and customizing of services. A 2PL normally only provides standardized services, whereas 3PLs often provide services that are customized and specialized to the needs of their customer. This is possible due to long term contracts that are usual in the third-party logistics market. Cost-effectiveness of a third-party logistics provider is only given over long periods of time with stable contract and profits. In contrast to that second party logistics services can’t be customized, concerning to the fluctuating market with hard competition and a price battle on a low level. And there we have another distinguishing point between 2PL and 3PL: Durability of contracts. 3PL contracts are long term contracts, whereas 2PL contracts are of low durability so that the customer is flexible in responding to market and price changes.

With companies operating globally, the need to increase supply chain visibility and reduce risk, improve velocity and reduce costs – all at the same time – requires a common technological solution.[10] Non-asset based providers perform functions such as consultation on packaging and transportation, freight quoting, financial settlement, auditing, tracking, customer service and issue resolution.[11] However, they do not employ any truck drivers or warehouse personnel, and they don’t own any physical freight distribution assets of their own – no trucks, no storage trailers, no pallets, and no warehousing. A non-assets based provider consists of a team of domain experts with accumulated freight industry expertise and information technology assets. They fill a role similar to freight agents or brokers but maintain a significantly greater degree of “hands-on” involvement in the transportation of products. These providers are 4PL and 5PL services.

A fourth party logistics provider has no owned transport assets or warehouse capacity. They have an allocative and integration function within a supply chain with the aim of increasing the efficiency of it. The idea of a fourth-party logistics provider was born in the seventies by the consulting company Accenture. Firms are outsourcing their selection of third-party logistics provider and the optimization process of the integration of these to a PL as an intermediary. That reduces costs and the 4PL have to have an overview of the whole logistics market to choose the ideal 3PL for all operative logistic activities. For being able to provide such an ideal solution fourth-party logistics providers need a good knowledge of the logistics branch and a good IT infrastructure. A fourth party logistics provider selects the 3PL providers from the market which are most suitable for the logistical issues of their customer. Unlike the allocative function of a 4PL in the supply chain, the core competence of a 3PL provider is the operative logistics.[12]

Fifth party logistics providers (5PL) provide supply chain management and offer system-oriented consulting and supply chain management services to their customers. Advancements in technology and the associated increases in supply chain visibility and inter-company communications have given rise to a relatively new model for third-party logistics operations – the “non-asset based logistics provider.

Tips on How to Import Goods from China Successfully with ChinaDivision

ChinaDivision is a shipping & logistics company specializing in importation of goods from China to both North America and Europe. We’ll fulfill all orders on your behalf so that you can rest easy and focus on what’s more important for the business, that being market expansion and outreach.(import from China)

Import from China
Import Goods from China

How it works:

The company uses cutting-edge technology to streamline such processes like fulfillment, delivery, and returns. Meaning you can now start shipping items to new markets hassle-free at just a single click of the button. Below are the steps you should take.

I. Visit our website and contact a business development officer to review the products, target market, inventory needs and other necessary factors that come to play. (import from China)

II. The next stage is sourcing which can be done either by yourself or with help from our experts, which is highly recommended. We are your 1-stop solution for all sourcing & manufacturing needs.

III. Setting up inventory. It involves tasks such as receiving products, retaining merchandise samples and stock control which all require strict attention to detail. Our qualified warehouse team, in conjunction with custom Warehouse Management Systems will handle all the procedures and help manage your inventory internationally in real-time.(import from China)

IV. Picking, Packaging, and Shipping. Before making the orders public, a personal account manager and representative from our development team will help in processing to ensure that all systems have been fully-integrated and are operational. After the preliminary testing phase is done, you can now proceed forth with shipping.

V. Managing Shipments and Inventory. Handling logistics the correct way often takes time and resources, but luckily on how to import from China ChinaDivision has a global logistics infrastructure which makes meeting international orders easier.

VI. Returns. In cases where making a return is necessary, just contact one of our experts to review the products, inventory needs, overall target market and answer any questions you might be having.

Services on offer

a) Inventory management. We have the facilities to keep all your stock inventory at our warehouses, and when sourcing from China ChinaDivision shall pick, pack & ship the items within just a few minutes. This process also includes receiving incoming products, retaining QA merchandise samples and rotating stock with maximum attention to detail.

b) Growth management. Even when expanding portfolio, you can still take advantage of ChinaDivision’s immense infrastructure and save costs as well as time needed to implement new systems or services to your business. For instance, if orders aren’t going out within 24hrs after receiving them then chances are that you’re missing out on delivery deadlines. Let experts from our company take control of the fulfillment process and help manage your growing business expertly. Similarly, we can outsource our staff if those working with you are already overstretched. This helps in preventing cases of incorrect orders, revenue loss and frustrated customers that may occur due to an overstretched workforce. Remember that poor operations can have negative impact on your brand, and that’s why ChinaDivision is ready to help build back brand loyalty by improving the customer experience.(import from China)

China Warehousing

Factors that make ChinaDivision stand out from the rest

a) Every procurement process is automatically synchronized, you only need to log into our software to perform tasks. They also have great Enterprise features such as CRM, ERP, Analytics and so on. These offer a complete 2-way synchronization system between marketplaces that allow selling of Chinese products online.

b) Staff members are professional, caring and ready to work with all types of customers. Moreover, they have a strong policy on insurance and customers are given full ownership of case during the purchase process.

c) Items are sent out carefully packaged to minimize chances of breakage during delivery, plus orders are fulfilled fast and usually take less than a week to meet. Fragile items will be kept separately from others with an additional layer of protection to avoid hard-surface contact during transportation.

In summary, as the No.1 China sourcing agent ChinaDivision promises to give you the level of support that only a dedicated order fulfillment center can provide. Likewise, the center is ready to customize shipping labels as well as packaging slips to showcase your firm’s profile info & logo. Very few shipping logistics companies allow their customers to do this, but we offer such services because our clients are special to us. During peak holiday season when there are excess orders to be met, we can work overtime just to ensure they are completed.