An Introduction To 3pl Management Essay

An Introduction To 3pl Management Essay According to Coyle et al, while the emergence and growth of the third party logistics industry was a major phenomenon of the 1990s, thoughts differ as to how best to define this type of logistics provider and what services might be included. Basically, 3PL firms are typically external suppliers that provide all or part of an organization’s logistics function. Some of the multiple services which are also integrated in nature, provided by the 3PL firms are transportation-based, warehouse/distribution-based, forwarder-based, financial-based and information-based. Directly related to 3PL is the growing need for fourth-party logistics (4PL), which is the relationship that provides a wide range of integrative supply chain services to organizations. (Coyle et al., 2003). Thus, it is the potential development of the next phase of outsourcing and should be taken seriously by logisticians/supply chain practicians. 2.1 Categorization of 3PL services provided Rushton et al., (2010) note that 3PL firms provide either dedicated/exclusive operation or multi-user/shared operation to their clients. Dedicated service provision refers to a situation where the 3PL firm provides a complete logistics or distribution function. In this case, the 3PL firm provides the client with all dedicated outsourced services and meet decision criteria/distribution requirements exclusively, on international, national or regional levels. This type of service is more common in the UK but it is also used in Europe and North America. Multi-user function on the other hand, relates to the operations of the 3PL firm which cater for a group of client companies, mostly within the service provider’s operation, instead of just a single client. For instance, the clients may all be producers or dealers of similar goods and their products may all be delivered to the same or similar customers – pharmaceuticals products to retailers, food to hotels or restaurant, etc. From the case study, the existing 3PL provider operates as a dedicated service provider at ATC. It is important for ATC to recognize that the selection of a 3PL contractor is part of the procurement of service and therefore the right processes should be followed to ensure that ATC gets value for its money. This paper therefore examines among other things the steps/processes, service level agreement, benefits, factors and areas that ATC should consider to realize the full benefits of outsourcing its distribution function to a 3PL contractor. 2.2 Drivers/Benefits of Outsourcing The major drivers have been categorized into four (4) namely organizational, financial, service and physical factors, (Rushton et al., 2010). With regard to organizational factors, one of the key reasons for ATC to outsource its distribution function is the opportunity for ATC to concentrate on their core business or core competence. Simply put, outsourcing allows everyone to focus on what they do best. Funds which ATC would otherwise have used to procure vehicles and other equipment for distribution purposes could be invested in other operational areas to bring growth and profitability to the organization. Moreover, the use of a 3PL firm can enable ATC to have access to wider knowledge. This could be done through the chance to use cutting edge technology like RFID (Radio Frequency Identification Device), track and trace, GIS (Geographic Information Systems), or by having access to a wider management know-how and awareness away from that of ATC, in order to be in tune with the technological pace.