Growth in global trade and developments in the supply chain and logistics industries continue to shape the way companies handle their business.
The modern company, from that small startup to global multinationals, increasingly finds it easier to have someone else cater to certain logistics needs in their business operations. The outsourced services go to companies we call third-party logistics providers or 3PL companies.
The type of logistics service you outsource, and what you get, largely depends on what your needs are. Again, the competitive nature of business has meant that you are likely to look for a third-party logistics provider that consistently ranks among the very best logistics companies globally.
Here we look at what a 3PL company is, sample the top 10 and highlight the benefits of using 3PLs.
What is a 3PL Company?
A 3PL company is a logistics services provider that handles the shipping, transport, warehousing or such other operations as outsourced by another company.
3PLs are integral links within the supply chain as they help businesses scale their services, improve on production and meet their customer needs.
There are 3PL companies that specialize in providing a single service and there are those that offer several of these services. So a company can provide transportation only, while another would handle distribution and warehousing- all in one bundle.
Demand for 3PL services has grown as companies look for ways to cost-effectively handle operations while providing services that meet customer satisfaction.
Who Are the Top 10 Logistics Companies?
United Parcel Service is a U.S.-based company, the largest logistics provider whose services span the globe. UPS handles supply chain logistics (mostly in package delivery). Its services include transportation (freight trucking), international shipping and distribution.
The company is worth over $22 billion, operates in 220 countries and employs an estimated 450,000 people.
FedEx Corporation is a major logistics company headquartered in Memphis Tennessee. The $18.1 billion U.S multinational provides transportation, shipping, and package tracking services. Its customers range from global e-commerce platforms to small retail businesses across the globe.
DHL is a leading logistics company that offers its services to customers worldwide. The company, worth over $10.8 billion in 2018, provides a suite of top range services. Companies use DHL for international parcel delivery, transportation (rail, road, air, and ocean), and general courier services among other services.
- H. Robinson Worldwide, Inc.
C.H. Robinson Worldwide, Inc. (CHRW) offers third-party logistics services to a wide customer base across the globe. It is one of the largest carriers in the world and specializes in handling freight transport for food and beverage companies. The company had revenue of $14.87 in 2018.
- B. Hunt Transport Services
J.B. Hunt is a U.S.-based logistics company that provides delivery and freight transportation services across the Americas region. This Fortune 500 company is worth over $4 billion and offers a host of supply chain solutions to its customers in Mexico, the U.S., and Canada.
Nippon Express is a Japan-based logistics company that offers solutions in procurement and distribution logistics. Its services are spread across Asia, the U.S., Europe, and Africa. Nippon employs close to 40,000 people.
XPO Logistics, Inc.
XPO Logistics, Inc. is a Connecticut, U.S.A based company that provides transport and logistics services. Its operations span the U.S., Canada, Europe, and Asia. The company has one of the largest trucking services thanks to its acquisition of Con-way Services. XPO Logistics has operations in over 30 countries and employs over 100,000 people. The company’s revenue for 2018 was $17.28 billion.
Ceva Holdings LLC
CEVA Logistics is a global provider of supply chain logistics solutions to a growing list of customers worldwide. The company also offers freight management, contract logistics, and asset management. The Switzerland based company had revenues of $7 billion in 2018.
Expeditors International of Washington
Expeditors International is a U.S.-based logistics company that specializes in freight handling. Expeditors International employs over 17,000 people worldwide and had revenue of $8.1 billion in 2018.
Kenco Logistic provides integrated logistics services to customers across the U.S. and North America. This third party logistics provider offers transportation, warehousing and distribution services to thousands of customers.
Is Amazon a 3PL Company?
Amazon Inc is the world’s leading e-commerce company and currently handles its shipping and delivery services via the aptly named Amazon Logistics. The arm uses a host of other third-party providers to serve its customers around the world.
What Amazon is doing at its 161 fulfillment facilities makes it look like the e-commerce giant is a third-party logistics provider.
- thousands of Amazon-branded trailers
- second-largest warehouse capacity- only behind DHL
- 20 domestic cargo planes
- rapid expansion of fulfillment centers across U.S. and Europe
U.S.-based 3PL analyst Armstrong & Associates (A&A) has noted that Amazon has rapidly expanded its warehouse space. According to A&A, Amazon’s capacity is almost the same size as the top logistics company DHL Supply Chain. If you factor in third-party revenues, Amazon could become the world’s largest 3PL company.
Is DHL a 3PL Company?
DHL is the world’s top third-party Logistics (3PL) provider per revenue in 2019. According to A&A, DHL Supply Chain is ahead of 3PL giants Kuhne + Nagel, DB Schenker, Nippon Express and C.H. Robinson.
The logistics unit of Deutsche Post DHL offers 3PL solutions in 220 countries, the most by any third-party logistics provider. Customers can outsource services in warehouse management, transportation, and packaging among many other top-notch solutions.
DHL recently became the first 3PL provider to integrate the services of truckload matching firm Convoy.
Is FedEx a 3PL company?
FedEx is a leading logistics company, consistently ranked among the top providers in the industry. When it comes to third-party logistics (3PL), FedEx provides all types of businesses with 3PL services in supply chain management, transportation, warehousing, and order fulfillment.
FedEx acquired third-party provider GENCO in 2014 and moved to increase its presence as a 3PL services company since early 2015.
What is 3PL and 4PL in Logistics?
In Logistics, both third party logistics (3PL) and fourth-party logistics (4PL) refer to services and solutions companies offer to businesses looking to handle logistics challenges.
A discussion on 3PLs often leads to one frequently asked question: what is 3PL in the supply chain? The answer to this is in line with what third party logistics companies offer to customers along the supply chain.
To answer that, let’s look at what a 3PL company is in logistics.
A 3PL is a company that focuses on the more discrete solutions that outsourcing businesses need. The services of a third-party provider usually relate to specific logistics needs within the supply chain. A 3 PL company is, therefore, a link in another company’s supply chain and will handle key functions like distribution and fulfillment orders.
A 4PL, on the other hand, handles the logistics part that deals with the design and execution of processes within the supply chain. Fourth party logistics companies also provide oversight over your company’s supply chain operations.
More often, you’ll find a 4PL working with multiple providers. It could be a 3PL provider offering transportation or warehouse services. Ideally, you use 4PLs if you want to have one company overseeing all your supply chain processes.
How Much Does Cost to Use 3PL Companies?
What costs you incur for the services a 3PL company offers your business will vary from provider to provider. It also depends on whether you have discounts or special rates. However, having said that, general costs do fall into five categories.
The estimates available on FREE quotes pages may not be conclusive or accurate, and that means that the best option is to get real-time quotes.
Here are the fees you would have to keep in mind:
- An initial set up fee
- Cost related to the 3PL receiving your product
- Storage costs paid monthly (per pallet, square foot, cubic foot)
- Fulfillment fees
- Shipping costs
All these charges could vary greatly from company to company and from region to region. What you need is to ensure you are sure what 3PL costs apply where and when every time you strike an agreement. Ensure you understand what costs apply to order fulfillment and what the cost per order is.
Why Businesses Use 3PL Companies?
Many companies choose 3PL as it allows these businesses the time and space to scale their production, focus on growth and put resources where they are needed.
Using a good 3PL provider can allow a business to create and improve on how they transition between seasons. It also offers that opportunity to benefit from expert logistics providers and ride their connections to build supply chain visibility.
The various connections logistics firms have also played a role in getting the best from carriers, freight brokerages, and warehousing giants. Most often, the reason to have a 3PL handle certain aspects of your logistics is to get access to certain advantages mentioned (above- and) below.
What are the advantages of 3PL Companies?
There are many advantages businesses get when they integrate or utilize 3PL solutions. Along with easing processes within the supply chain, 3PLs will offer the following advantages:
Companies benefit from expert service providers and best practices within the space. When you outsource your logistics needs, you get access to reliable supply chain services. You are then free to focus on your company’s core business.
- Network and optimization of resources
When a company outsources its logistics needs, it gets access to a network of providers. Leverage this resource and you could end improving business operations, inducing efficiency and improving cost-effectiveness.
- Saves money and time
A company that uses outsourced services can save on capital and time that would have gone into catering to those needs. For instance, there is no need to acquire staff, train, get equipment and so on.
- Improve company supply chain
3PL providers have some of the best facilities, resources, professionals, and technology. They are thus likely to help a company improve its supply chain management.
What are the basic types of 3PL firms?
Types of 3PL firms refer to the various categories of third party logistics, with the categorization dependent on the type of service or solution on offer. Because they provide solutions to logistics needs, the basic types of 3PLs will generally be:
- Transportation based 3PLs- examples are FedEx, UPS
- Forwarder based 3PLs- examples include Kuehne & Nagle and C. H. Robinson
- Warehouse/Distribution based 3PLs- for example, DSC Logistics
- Financial based 3PLs – Chicago Consulting and GE Information Services are examples
- Information based 3PLs- Nistevo and uShip
Third-party logistics (3PL) companies provide invaluable solutions and services key in the logistics and supply chain industry. Their importance is highlighted more by the fact that over 86% of Fortune 500 companies use 3PL services.
Choosing the right 3PL provider can be the difference between optimizing and destroying businesses’ logistics. It can also improve or influence a company’s customer services and affect aspects like repeat purchases.