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.
Lead logistics providers have the advantage that they have specialized industry expertise combined with low overhead costs, but lower negotiating power and fewer resources than a third-party provider has based on a normally big company size, a good customer base and established network systems.
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.
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.
[11] Non-asset based providers perform functions such as consultation on packaging and transportation, freight quoting, financial settlement, auditing, tracking, customer service and issue resolution.
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.
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.
"[14] On-demand transportation is a relatively new term coined by 3PL providers to describe their brokerage, ad-hoc, and "flyer" service offerings.
On-demand transportation has become a mandatory capability for today's successful 3PL providers in offering client specific solutions to supply chain needs.
The cost quoted to customers for on-demand services are based on specific circumstances and availability and can differ greatly from normal "published" rates.
This includes extending common transportation networks, their warehouse infrastructure and the ability to provide more complex service packages by combining resources.
[16] 3PL Providers typically have a large network of carriers (air, ground, and ocean) which are located all throughout the state, country, or region of the globe.
Technology helps increase visibility for the client by way of continuous status updates via Dispatch Management Software and Electronic Data Interchange (EDI) which does involve a cost, but it can help avoid penalties for delays and subsequent financial losses such as from not unloading freight in time.
Numerous studies have shown that selling products online, rather than in a brick and retail environment, adds extra costs when it comes to handling returns (i.e., reverse logistics).
[citation needed] Artificially induced demand events such as Black Friday in the United States or Singles' Day in China come with an influx of returned products, which can slow down warehouse operations and in turn delay the issuing of refunds or other methods for mitigating dissatisfied customers.
Unlike in-house logistics, 3PL provider often unable to address the concerns of the clients to reach the goal of cost optimization[18] with the trade of convenience, capacity, and scale.
Therefore, in order to resolve this issue, a proper transition needs to be executed to ensure the operation scaling can be maintained optimally while also minimizing the cost.