Evaluation Of Third-Party Logistics (3PL) In Supply Chain

Third-Party Logistics (3PL) In Supply Chain

Companies have embraced one-stop global logistics services more frequently in recent years. These third-party logistics (3PL) providers may enhance customer service and save expenses by allowing businesses to focus on their core strengths. According to https://redstagfulfillment.com/3pl-definition-process-resources/, the traditional business model of handling many or all operations in-house isn’t always the most productive. We employ an assessment criterion framework designed around IT to analyze a 3PL supplier with the support of proven ideas in the literature.

3PL Evaluation Criteria

Five streams of literature relate to logistics provider models: 

  1. Industrial buying behavior, 
  2. Strategic decision making in organizations, 
  3. Transportation purchasing, 
  4. Strategic decision-making in organizations, 
  5. Logistics relationships and
  6. Strategic decision making in organizations, 

Companies can use strategic alliances to decrease friction, reciprocate on things relating to common goals, improve efficiency and stability, and build market credibility. When it comes to picking logistics suppliers, logistics managers look at things like perceived performance, perceived capabilities, and responsiveness.

Inter-Organizational Systems (IOS) primarily facilitate the outsourcing of supply chain operations by integrating IT with logistics providers and their clients.

A Framework of 3PL Functions

3PL services can range from a simple collection of logistics services to a fully integrated set. Significant outsourcing functions were highlighted in two surveys:

  • Warehousing
  • Transportation
  • Freight consolidation and distribution
  • Inventory management
  • Product marking, labeling, and packaging
  • Traffic management and fleet operations
  • Cross-docking
  • Freight payments and auditing
  • Product returns
  • Packaging
  • Order management
  • Carrier selection
  • Logistics information systems
  • Rate negotiation

Warehouse, transportation, customer service, and inventory and logistics management are the four areas in which these supply chain operations.

Real-time data flow is required for the implementation of 3PL. The information flow that influences the 3PL provider functions may be used to create a framework of 3PL provider functions and assessment criteria.

Core 3PL Evaluation

Preliminary screening based on qualitative characteristics like reputation is part of the 3PL evaluation process. A shortlist of 3PL suppliers is generated based on qualitative and feasibility criteria. The short-listed 3PL suppliers get an assessment criterion.

Professional organizations can offer you a list of 3PL suppliers. About 430 logistics companies are listed on Google and Yahoo, along with about 75% of them situated in the United States. This preliminary screening removes 3PL suppliers that do not supply all of the services while compiling the shortlist. Most businesses look at six to eight possible suppliers and narrow down their choices to two or three finalists.

A set of criteria must be developed to evaluate a potential supplier within a supply chain framework. Quality, pricing, capacity, delivery capabilities, and financial stability are some of the most commonly used evaluation criteria. Cultural compatibility, customer references, financial soundness, operational and pricing flexibility, and IT competence are also important. To assess a third-party logistics supplier, consider the following factors:

  • IT
  • Cost
  • Quality
  • Services
  • Intangibles
  • Performance metrics

Final 3PL Selection

The potential shortlist finalists are often issued an assessment criteria sheet as part of a formal request for proposal (RFP). This proposal kicks off the negotiating process between the customer and the 3PL supplier, including pricing and talent, culture, and commitment match.

The approach for evaluating outsourced logistics services described in this article might assist IT managers in the supply chain. The main operations of 3PL providers, such as inventory management, logistics, transportation, warehousing, and customer services, are examined using an IT-focused conceptual framework. The continuous presence of 3PL providers with superior IT will lower logistics costs and improve efficiency and growth by integrating all areas of the supply chain.

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