What is a Third Party Logistics Provider or 3PL and how do retailers use them?

June 14th, 2018

Do 3PL?s focused on the retail trade make it more difficult for small retailers to run e-negotiation events?

 

If you are having difficulty with your current? distribution model, compress your spend using eProcurement tools and then source a reputable 3PL.

According to Wikipedia a third-party logistics provider (abbreviated 3PL) is a firm that provides outsourced or “third party” logistics services to companies for part, or sometimes 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 customer?s needs based on market conditions and the demands and delivery service requirements for their products and materials.

As such, there are a number of types of 3PL?s within retail that may in fact service a single retailer as well as smaller buying groups of small retailers. All might fall under this umbrella including wholesalers such as SUPERVALU, collective buyers such as TOPCO or even a retailer collaborative that may in fact just coordinate aggregated purchases and in fact pick other 3PL?s to provide warehousing, picking and packing and distribution. Each of these providers may in fact provide some or all of the same services. The later or collaborative of multiple retailers might even be looked at as a non asset based 3PL.

In all categories of third party logistics providers however it is still the end user or retailer regardless of size that determines what products they buy and accept delivery of in their stores. As such, it should be no more difficult for smaller retailers to run e-negotiation events?? There will need to be discussions as to costs that are purely associated with the warehousing, slotting, picking and distribution of products by a 3PL once an e-negotiation event has been planned, but these items should be easy to break out for bid or add to the final pricing prior to award of business as a flat fee. This is a practice that all 3PL?s should be familiar with already. Retailers should anticipate that their existing 3PL depending on services offered would rather not have you conduct these types of events as it negatively impacts their volumes with manufacturers and other providers and as such their company?s margins.

Understanding your options and the flexibility that 3PL?s can provide may actually make it easier for all retailers to use e-negotiation tools to impact their bottom line.

We look forward to and appreciate your comments.

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