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.

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.

Get the Best Prices on Black Friday

1. Don’t buy full price

This year, there is a shorter peak holiday season, with only 26 days between Thanksgiving and Christmas compared to 32 days in years past.

That means retailers are are clamoring for your business. They need us to shop with them — every single day counts, and that’s good news for shoppers because it means stores are willing to offer discounts and promotions.

There are lots of ways to save and you should, quite frankly, never pay full price around the holiday season. This can come in a variety of forms, from free shipping codes, promo codes, coupon codes to cashback offers.

2. Do your research

The best way to remedy that is to do your homework and look through Black Friday and Cyber Monday ads in advance and compare the advertised prices and promotions.

For example, if you have a list of items you’d like to buy, you can do some research online. You can even go shopping and scout out what you’re hoping to buy and just track the price every couple of weeks.

Some stores will even price match during Black Friday season, so it’s worth looking into the policies if you’re debating between several stores. There are lots of places that are offering incentives and promotions to get shoppers to shop with them. So find that place and then make your purchase.

There’s even a Black Friday calculator, where you can plug in the type of promotion, the original price and the discount. From there, the calculator will tell you if the deal is worth considering.

3. Strategically abandon your cart

When you’re shopping online and not finding any discounts, it may help to close out of your browser without buying anything and wait a few hours. In other words, abandon your cart.

In an hour, two hours, or sometimes 24 hours, you may get an email from the store with a subject line like: “We noticed you left a few things in your cart. Here’s a 10% off coupon on us to help you check out.” Skirboll calls this a “sneaky” trick to save money, but it works well with retailers where you frequently shop. Keep in mind that you need to be logged in for this to work.

When it comes to using the “abandon your cart” approach during Black Friday and Cyber Monday sales, make sure that you keep track of when a promotion period ends. If you haven’t received any additional coupons via email and the sale is about to end, you may want to check out other stores or simply move forward with the sale price you already have.

4. Download apps and browser extensions

If you’re looking to automate your Black Friday and Cyber Monday experience a bit this year, consider downloading some apps for your smartphone and browser extensions that plug into your internet browser and alert you to cheaper prices and deals.

5. Shop after the sale days end

Only about a third of Americans plan to shop on Black Friday, according to PwC’s report. In fact, over half say they will wait until the week after Black Friday to complete their holiday shopping.

You may be able to find better deals on certain items after Black Friday and Cyber Monday end. For example, Skirboll recommends shoppers avoid buying any fitness equipment or linens until January, since that’s the time when those products tend to have bigger sales.

3 Acquisition Strategies to Get Customer and Grow Your eCommerce Business

In a saturated online marketplace, it can be a challenge to continually attract new customers. And while it is crucial to focus the majority of your efforts on customer retention, customer acquisition is still important for a healthy business. Here are 3 strategies to help grow your eCommerce customer acquisition. 

Build Engagement 

Seventy-nine percent of customers want to see that a brand cares before making a purchase. Connect with your consumers by knowing your company values and sharing them frequently. Be open with customers about the corporate social responsibility initiatives your business takes part in, and look for ways that your values align with those of potential customers. Using social media is a great way to build engagement with potential customers. Follow your prospects on social, and share your customers’ content on your own pages. Share engaging content on holidays, promotional days, and throughout the week to stay at the forefront of prospects’ feeds and top of mind.

Choose Your Channels Wisely 

Not all channels are created equally, especially when it comes to eCommerce customer acquisition. Depending on your product, some channels may be more suitable to help you grow. For example, clothing and makeup brands often find success selling on social media platforms like Pinterest, Facebook, and Instagram, while brands that sell shoes or car accessories may be better suited for marketplaces like Amazon. Once you’ve done the research to determine where customers are already seeking out your products, get to work optimizing the channels that are likely to convert. Utilize their native advertising platforms, and optimize your product pages with keywords and thorough product descriptions.

Educate Consumers 

Let potential customers know why your product is the best choice. Most customers do their own research on a product online before making a purchase. Make their job easier by providing ample product information online— provide multiple images of different angles on your product detail pages, incorporate Q&A on your site to let customers answer each other’s questions, include a clear link to your return policy and a FAQ page, and consider implementing a chatbot on your site to answer customer questions. Another great way to provide social proof is to incorporate ratings and reviews on your site. 92% of customers read reviews when shopping online, and reviews can enhance SEO, improve conversions, and drive value to your bottom line.