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International Warehouse Logistics Association

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Third-Party Logistics

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What is logistics?

A recent study defined logistics as: That part of the supply chain process that plans, implements and controls the efficient flow and storage of goods, services and related information from the point of origin to the point of consumption, in order to met the customers’ requirements. Today's modern, efficient warehouses/distribution centers are the heart of logistics, and provide control, efficiency and velocity for goods moving through the system.

A bit broad, but the elements that make up the modern logistics industry continue to evolve as the breadth of value added services warehouse logistics providers offer does. This expansion has been accelerated by three vital trends in the new economy:

  • The general trend toward outsourcing;
  • The previously unprecedented growth of e-commerce; and
  • The importance of the partnership aspect of the manufacturer/marketer-logistics provider relationship.

Third-party warehouses logistics providers store and handle other people's goods. The term third-pary means ownership over those goods is never taken at any point. However, 3PLs are responsible for proper storage, handling and many times transportation of those goods from the point of manufacturing to their final destination. 

A recent study found that 95 percent of the U.S.’s chief executives believe they should have some form of logistics strategy, and nearly 50 percent of the nation’s CEOs are currently incorporating supply chain planning into their overall business strategies.


One thing is certain: no matter how logistics is defined, the function accounts for 8.5 percent of the total U.S. Gross Domestic Product ($1.3 trillion in 2011). It is growing dramatically in terms not just of services provided and outsourced but in terms of volume. The 3PL provider contributes largely to the logistical equation in the U.S. including:

  • Reduced need for personnel
  • Reduced transportation and distribution cost
  • Improved customer service
  • Improved cycle time
  • Free-up capital in manufacturers’ and marketers’ non-core areas

E-commerce fulfillment is a special subset of 3PL warehousing, offering a unique challenges. Because of the retail nature of most ecommerce companies, they are subject to high seasonality requiring the warehouse-based 3PL to manage peak-season order volumes that are often two- to three-times greater than off-peak volumes. The increasing amount of ecommerce sales means more shipments being delivered directly to the consumer. This fact also demonstrates that commercial freight does not just move on interstate highways but extends all the way to the residential doorstep.

 

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