Over the past few weeks we have been talking about all of the benefits of using a 3PL for storage and distribution within a supply chain. But we never have really talked about what a 3PL is, or what they do. As we start to talk about how to go about choosing the best provider for your company, it is important to talk about the different kinds of Third Party Logistics providers and what they do. Paul Welna, COO and Greg Parupsky, VP, Client Solutions team up to help discuss different types of 3PLs and what types of service each of them provide. The two have a combined 62 years of experience within the logistics industry and have worked with companies from start-ups to Fortune 500 distributors and retailers.
“3PL means different things to different people, even within the industry. When you use the term 3PL you can be talking about storage providers, shippers, manufacturers and all of the different parties within the supply chain and logistics process,” says Greg Parupsky, “That’s why when a potential client is looking for a 3PL we always do our due diligence to find out what type of provider they are looking for,” he continued. When a potential client calls Murphy for a quote on services it is always a good idea to make sure that we would be a good fit for what services they need. “We have a special set of skills here at Murphy, and do a lot of things that many clients need, like warehousing, transportation, fulfillment, rail access and a lot more,” says Paul Welna.
Welna described one of the main differentiators between 3PL providers as them being asset based or non-asset based. Asset based 3PLs own their equipment, whether that is warehouse space, trucks for transportation or tools to complete jobs for clients. Non asset based 3PLs tend to broker business out to other companies. They have the connections around the world to know which asset based 3PLs can do the best jobs for their clients, and they become the middle man between the client and the warehouse or transportation provider.
Some of the most common types of 3PLs include:
- These 3PLs tend to do a lot of different tasks for their clients. They generally complete operations from pallet moves to pick and pack fulfillment in the warehouse and all types of transportation from full truckload to single item shipments on the road. Clients usually like the flexibility that comes with using a general warehouse. Murphy Warehouse would be considered a general warehouse because of the many options that we provide to our customers, but as Welna said, we do a lot more than the typical, general warehouse.
- Buzzwords such as e-commerce, food-grade, and contract warehousing tend to describe niche warehouses. These providers generally do one thing all day. They could be a warehouse that specializes in e-commerce single item shipments, or a contract warehouse that only has one client in a building. Clients prefer this type of 3PL for specialized work that is done in high volumes.
- These warehouses also tend to have special certifications that are needed to handle the specific types of products that they handle. For example to have food in a warehouse, that warehouse must be certified by outside sources to make sure that it will be safe for the public to eat. Not all warehouses have these certifications and they can be extremely valuable for companies that need them for their operation. Murphy holds ASI, GMP, ISO 9001, ISO 14001, FDA/USDA, Department of pharmacy, and HACCP certification. We also have SQF pending in March 2015.
Niche Services can also include:
- Refrigerated/Freezer warehouse space
- Haz-Mat certified warehouse space
- Foreign trade zone
- Rail access
- And more specialized logistic services
- These companies act as the middle man from manufacturers to retailers. They do not tend to own their equipment, and broker the business to other logistics companies. Freight forwarders can complete the transportation process from start to finish. They can get product imported from other countries through their connections with providers and find solutions to transport that product where it needs to go. Freight forwarders can be considered 4PLs by some people because they are an outside vendor, who brokers to other logistics companies.
The main thing to look at when choosing the type of 3PL that you want to use is that they provide value to you and your company. If it makes more sense to have one company that does a variety of things within your supply chain, a general warehouse makes the most sense. If you have a specific line item or operation a niche warehouse could probably handle it with precision. Or finally, if you have product moving throughout the world and want one vendor to organize that transportation through their contacts a freight forwarder may be the best fit.
Thank you for reading! Be sure to check back next week as we talk about the next steps for choosing the right 3PL provider for your logistics operation.