3PL Providers’ Role in Transforming Businesses
3PL providers are generally the stakeholders that provide 3PL services. They have become the backbone of today’s businesses. In fact, according to the Outsourced Supply Chain Research, on average across 21 areas of supply chain management, 75% of shippers think at least some level of third-party support is ideal. This blog will focus on the role of 3PL providers in modern fulfilment, the types of 3PL providers available, and how to choose the best one for your business.
What is a Third-Party Logistics Provider?
Third-Party Logistic (3PL) providers are external companies that offer outsourced logistics services to other companies and businesses working on B2B model, B2C model, or D2C model. The deals with warehousing, transportation, inventory management, and fulfilment. 3PL provders are also called 3PL companies and 3PL centres. For instance, Kun Fulfilment is a 3PL provider that works with various businesses managing their supply chain.
According to RXO Research, 75 percent of shippers believe at least some level of outsourcing is the ideal approach. Likewise, looking at the average across all modes, 82% of shippers rely on third-party providers to procure capacity for at least some of their freight, with 38% using 3PLs for a majority of their shipments.
Difference between Standard Logistics Provider and Full Service 3PL Provider
| Standard Logistics Provider | Full-Service 3PL Provider |
| A standard logistics provider offers basic transportation and warehousing services without additional value-added solutions. | A full-service 3PL provider offers a complete range of logistics services, including warehousing, transportation, inventory management, order fulfilment, and supply chain optimisation. |
| Primarily focuses on moving goods from one location to another with minimal involvement in other logistics functions. | Provides end-to-end logistics solutions, managing all aspects of the supply chain from procurement to final delivery. |
| Usually operates within a limited scope, handling only specific logistics functions like freight transportation or storage. | Offers an integrated logistics approach, including distribution, reverse logistics, customs brokerage, and even e-commerce fulfilment. |
| Typically does not provide technology-driven solutions such as real-time tracking, data analytics, or advanced inventory management. | Utilises advanced logistics technology, including transportation management systems (TMS), warehouse management systems (WMS), and real-time tracking tools. |
| Works on a transactional basis, where services are provided as needed without deep integration into a company’s supply chain strategy. | Works as a strategic partner, often forming long-term relationships to optimise and streamline supply chain operations. |
| Best suited for businesses that only need simple freight or warehousing services without additional logistics complexities. | Best suited for businesses looking for a comprehensive logistics solution with customised services and continuous supply chain improvements. |
| Offers limited scalability and flexibility, requiring businesses to coordinate multiple logistics functions themselves. | Provides scalable and flexible solutions that adapt to business growth and fluctuating supply chain demands. |
| Mainly focuses on cost-effective basic logistics services without offering strategic supply chain consulting. | Helps businesses reduce costs and improve efficiency through strategic supply chain planning and optimisation. |
| Does not take responsibility for overall logistics strategy or supply chain efficiency. | Acts as an extension of the business, managing and optimising the entire logistics process. |
Difference between 3PL and 4PL Providers
| 3PL (Third-Party Logistics) Provider | 4PL (Fourth-Party Logistics) Provider |
| A 3PL provider offers outsourced logistics services such as warehousing, transportation, freight forwarding, and distribution to businesses. | A 4PL provider manages and optimises the entire supply chain by integrating multiple 3PL services and acting as a strategic partner. |
| Focuses on executing specific logistics tasks like transportation, storage, and inventory management. | Focuses on end-to-end supply chain management, including planning, strategy, and coordination of multiple logistics providers. |
| The company still retains some control over its supply chain, while the 3PL executes specific functions. | The 4PL takes full control and oversight of the supply chain, offering a centralised point of management. |
| Works directly with a business to handle logistics operations but does not take full responsibility for the entire supply chain. | Serves as a single point of contact for all logistics needs, overseeing multiple 3PL providers and ensuring supply chain efficiency. |
| Typically owns or operates physical assets like trucks, warehouses, and fulfilment centres. | Generally asset-free and focuses on managing relationships with 3PLs, technology providers, and suppliers. |
| Best suited for companies that need help with specific logistics tasks but still want to manage other aspects of their supply chain. | Best suited for companies looking for a complete supply chain outsourcing solution with strategic oversight and optimisation. |
| Offers technology solutions such as warehouse management systems (WMS) and transportation management systems (TMS) to improve logistics efficiency. | Provides advanced technology, data analytics, and supply chain visibility tools to optimise the entire logistics network. |
| Helps reduce logistics costs by offering transportation and warehousing efficiencies. | Helps reduce overall supply chain costs through optimisation, process improvement, and strategic planning. |
| Commonly used by businesses that need assistance with warehousing, shipping, and order fulfilment. | Commonly used by large corporations or businesses looking to streamline and fully integrate their supply chains. |
| Works on a contractual basis with businesses, handling specific logistics tasks as per agreements. | Operates on a more strategic partnership level, often involving long-term contracts and high-level consulting. |
Types of 3PL Logistics Providers
There are various types of 3PL providers based on their specialisation and capabilities. Therefore, choosing the right one depends on business size, industry, and logistics needs.
1- Asset-Based 3PL Providers
Asset-Based 3PL providers own their own infrastructure, i.e., assets. These include warehouses, trucks, and distribution centres. Hence, these providers are ideal for businesses that outsource all their logistics to their warehouses, getting end-to-end logistics solutions from the companies. It is most useful for large-scale retailers.
2- Non-Asset-Based 3PL Providers
These providers don’t own their own infrastructure. However, they instead act as intermediaries, coordinating logistics services on behalf of their clients. They’re ideal for businesses looking for warehousing solutions and fulfilling thier orders to customers at the individual level, including reverse logistics services. flexible and cost-effective solutions. The providers work best for small e-commerce businesses that might use a non-asset-based 3PL provider to handle their shipping and returns.
3- Specialised 3PL Providers
Last but not least, specialised 3PL providers focus on specific industries or services, such as healthcare logistics or e-commerce fulfilment. They’re ideal for businesses with unique requirements. For instance, a UK-based pharmaceutical company might partner with specialised 3PL providers UK to handle temperature-sensitive products.
How to Choose a 3PL Provider
Selecting the right 3PL provider is crucial for optimising logistics and ensuring smooth operations. Here are key factors to consider
- See if the 3PL provider you are considering has vast industry experience in every sector or particularly in your sector.
- Is the provider capable of handling seasonal demand fluctuation, and will it adapt with the growth of your business?
- Do the services provided by 3PL provider align with your needs and budget? Means to Cost-Benefit analysis before confirming 3PL logistics service provider.
- Does the team you are signing up for stand among the top 3PL providers in the region, specifically in terms of technology and automation?
- Last but not least, is it strategically located enough to ensure faster shipping of your logistics?
Bottom line
3PL providers not only ease doing business but also act as gamechangers for businesses aiming to reduce logistics costs and bring success to them. Kun Fulfilment is a 3PL service provider that stands among the largest 3PL providers that help businesses to achieve faster deliveries, enhanced customer satisfaction, and long-term growth in today’s competitive market. At Kun, we combine cutting-edge technology, industry expertise, and a customer-centric approach to deliver tailored 3PL solutions.
