What is the true Definition of A Third Party Logistics Provider?

According to Wikipedia:  A third party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides service to its customers of outsourced (or “Third Party”) logistics services for part, or all of their supply chain management functions. Third party logistics providers typically specialize in integrated operation, warehousing and transportation services that can be scaled and customized to customers’ needs based on market conditions, such as the demands and delivery service requirements for their products and materials.
Often, these services go beyond logistics and include value-added services related to the production or procurement of goods, i.e., services that integrate parts of the supply chain. When this integration occurs, the provider is then called a third-party supply chain management provider (3PSCM) or supply chain management service provider (SCMSP).
3PL targets a particular function in supply management, such as warehousing, transportation, or raw material provision.

A standard definition of just what a third party logistics provider is can vary from contract to contract. Is everyone who thinks they are engaged in a “third-party contract” really involved in a “third-party contract?”
If a distributor, for example, has a truck pull up to their door a few times a day or week to deliver goods to their customers, is this truck their 3PL provider? The answer is NO.

The definition of a third party logistics provider is as confusing as the term supply chain. Even logistics professional struggle with the term. Many companies refer to trucking, ocean freight services or warehousing as 3PL Services.
Warehousing, transportation and storage by itself is not considered 3PL Services and the company that warehouses and transports the goods is not necessarily a 3pl provider. It is just a warehouse or a transport company.

Many companies require a transport company to deliver the gods from point A to Point B since it does not make sense in some cases to own your own trucks. These transport companies might not be 3PL providers. If that transport company is involved in the warehousing and distribution of the product then it can be called  third party logistics provider.

Many freight forwarding companies and shipping companies have added services to become 3PL Companies. For example, large freight forwarders will ship your container, handle the necessary customs paper work, deliver the container to their warehouse and distribute the product to end users.

Keep in mind that 3PL companies outsource some of the services to other 3PL companies, for example a customs broker who wants a piece of the action outsources warehousing and distribution to other companies while they appear as the provider of these services.

Is it a wise decision to outsource all these functions to one 3PL Company?

The answer is : it all depends on the end result. in some cases, the 3PL provider is unable to give provide the best transportation rates including ocean or inland therefore, a company my opt to use another 3PL provider. This has given rise to 4PL Companies that will manage the other 3PL companies making sure that the customer gets the best service and the best rates possible.

What is a 7PL Company ?

7PL is still considered a concept. Some 4PL companies offer back office support such as accounting, customer service, billing and receivables management. This concept is called by some 7PL Services. This concept is becoming a reality very quickly.

In a nut shell, the number of companies calling themselves 3PL providers has risen but the reality is that most of them do not offer the true services a 3PL is supposed to provide. As mentioned earlier providing these services without integration.

Whether it is a third party logistics provider, a fourth party logistics provider or a 7PL Provider, the bottom line is which one will be able to offer end to end solutions.

7PL is the natural Evolution of 3 PL and 4 PL.

What is a 3 PL

3PL + 4PL= 7PL. The need for an outside logistics provider triggered the evolution of 3PL services which has been the most dominant and arguably the largest market in the world. 3PLs offered great advantages to the companies in terms of

• Economies of scale (merits from large truck fleets, warehouses, etc.)
• Access to world class processes and technologies
• Access to the resources not available in-house
• Risk sharing
• Adaptability to business changes

With all these advantages companies had better focus on their core competencies. However competition further intensified when they had all the time to focus on better competing.

What is 4PL

When competition intensified, globalization reached the peak and world looked so flat that the services provided by 3PLs seemed just not enough. This created an opportunity for the rise of 4PLs, a non asset based service provider assists companies by integrating resources, capabilities and technology of its own and coordinate with various 3PLs (Transportation, warehousing, air freight, shipping, customs clearing etc) along with load planning, tracking, shipment consolidating, carrier performance management, billing and payments etc. 4PL provides a comprehensive supply chain solution in package that in turn helps companies manage complexity and time as well.

While companies thrive for better results in the bottom line and more value and better impact on the entire supply chain, a new concept is taking birth & it’s called 7PL!

What is 7PL

Its 3PL+4PL=7PL. Yes it is the combination of 3PLs with 4PL i.e. one service provider can provide a client with both 3PL and the services of 4PL. 7PL overseas the entire logistics system, where all the services are provided under one roof. This gives customers an easy way to deal with 7PL under one contract, one bill and single point of contact to manage entire logistics.

7PL is being used to describe a turnkey solution where instead of dealing with several people for various services like inbound, outbound and warehousing, The concept is ‘one contract, one bill’. 7PL is the combination of 3PL and 4PL into one (3PL + 4PL = 7PL). One logistics service provider provides a client with both 3PL and 4PL services under one roof. 7PL is referred to as a turnkey solution where instead of dealing with several people for various logistics services like inbound, outbound and warehousing, clients deal with one person under the ‘one contract, one bill’ concept.