Third-party outsourcing

A third-party-logistics (3PL) firm is an external supplier that performs all or part of a company’s logistics functions. Depending on the firm, the terms “contract logistics” and “outsourcing” are sometimes used in place of third-party logistics. While some industry executives take care to distinguish among terms such as these, each of these terms refers to the use of external suppliers of logistics services.

Outsourcing to 3PLs, features prominently in the logistic equation with brand owners continuously seeking to reduce distribution costs, especially for expensive home delivery operations (popularly known as last-mile delivery) in remote locations.

Flipkart, India’s biggest e-commerce company shows a really ingenious third party logistics alliance. Flipkart has tied up with the local lunchbox delivery men (known as the “Dabbawalas of Mumbai”), famous for navigating their way through the cramped and confusing streets of Mumbai, to leverage their unique expertise in navigating the extreme conditions typical to Mumbai in the last stretch of its delivery to customers.

Likewise DHL Express, an arm of Deutsche Post, one of the world’s largest logistics companies, has already partnered with petrol station operators and major retailers to establish a range of drop points to provide customers more options for parcel pick-ups in Australia. eBay, an online retailer, has partnered with Woolworths, a major supermarket chain in Australia, to leverage the latter’s store network to act as “click and collect” sites for ebay purchases.

The Australian Business Review (2015) reported another example: The partnership between Amazon, a global online retailer, DHL and Audi, a motoring group in Munich, which allows consumers to receive packages to the trunk of their car, whether they are present or not. Some pundits are even speculating that crowdsourced delivery services (such as how Uber has provided taxi services in major cities around the world) will become a favourite way to get products into customers’ hands.

To get more insights into Flipkart and other forms of strategic value, 3PL alliances can deliver in the omni-channel world, we recommend that you go through the three articles in the interesting links.

Activity

“The latest worldwide report shows that shipper-3PL relationships continue to grow, as a new omni-channel retailing landscape opens up. With consumers looking for always-on, shopping opportunities, retailers are starting to invest in technology, supply chain resources and fulfillment strategies that will provide a seamless experience across all retail sales channels.

Due to an inconsistent global economy, shippers report an average of 36% of their total logistics expenditures are related to outsourcing, compared to 44% last year. However, 67% of shippers are increasing their use of outsourced logistics services this year (72% in 2013). Fifty three percent of shippers are reducing or consolidating the number of 3PLs they use.” (Capgemini, 2015)

Many omni-channel retailers utilise 3PLs for their deliveries. Do you think the sourcing of 3PLs is necessary for successful omni-channel retailing?

Share your thoughts in the Comments area.