In summary, a 3PL is a third party logistics
provider. A 3PL company targets a particular function or a group of
functions in supply management, such as warehousing, transportation,
inventory management, etc.
According to the
Supply Chain Management Professionals, 3PL is defined as "a
firm that provides multiple logistics services for use by customers.
Preferably, these services are integrated, or bundled together, by the
provider. Among the services 3PLs provide are transportation,
warehousing, cross-docking, inventory management, packaging, and freight
A standard 3PL Provider servicing the apparel
industry would typically perform activities such as, pick and pack,
warehousing, and distribution. Essentially they would handle the
most basic functions of logistics.
A third-party logistics provider can be abbreviated
3PL or sometimes as TPL. These companies are firms that provide
service to their customers of outsourced (or "third party") logistics
services for part, or all of their supply chain management functions.
A third party is basically someone or a company who may be
indirectly involved but is not a principal party to an arrangement or
transaction. In other words, they do not work directly for your
company, but they provide your company with a specific services.
Fashion companies using a 3PL have advantages and
Advantages to using a third party provider:
As logistics is the core competence of third party
logistics providers. They possess better know how and a greater
expertise. If you are dealing with a large 3PL, their specialized
knowledge combined with their global network will provide advantages in
regarding to cost efficiencies and management efficiencies. In
addition, large scale service providers typically would have the proper
equipment and the IT systems that are appropriated. They may also
update and adapt to new requirement of their customers, so that they are
able to meet the instructions from suppliers and buyers.
If most or all operative functions of the clothing
companies logistics are outsourced to a 3PL provider it means there is
less or no need for the company to own its own warehouse or transport
facilities. This significantly helps lowering the amount of
capital required for the business. This is particularly beneficial if
a company has high variations (fluctuations) in warehouse capacity
utilization. If your business is not using all the space in a warehouse
because of a bad capacity utilization ratio it will most certainly
reduce the company’s profitability.
As already mentioned, third party logistics
providers typically specialize in integrated operations including
warehousing and transportation services that can be scaled and
customized to customers' needs based on market conditions. In regard
fashion industry, if a company is using a 3PL warehouse to store
their clothing shipments, they can reserve space in the warehouse based
upon their specific needs. If business is slow, the clothing
company can possibly negotiate a smaller amount of space (fewer pallet
positions). If that same clothing company owned their own
warehouse, they would be responsible for the space in the entire
Another key benefit is the fact that the
outsourcing of logistics department activities permits the apparel
company to focus more on their core business. It is much better to
focus on product design, merchandising, manufacturing garments, selling
to buyers, etc. The less time spent on dealing with warehousing issues
the more time a fashion designer can spend perfecting their product.
Dis-advantages to using a third party provider:
The one key concern would be that your business
could potentially have loss of control. If you would like to be
100% in control of every single aspect of your fashion business, using a
3PL would cost you a bit of control. You would most definitely
have a major say in what happens, but you would have to rely on
information being fed to you by another company.
One particular disadvantage is the loss of control
a client has by working with
third party logistics. Eminently in outbound logistics when the 3PL
provider completely assumes the communication and interacting with a
firm's customer or supplier.
Another potential concern may be the compatibility
of the IT systems. The client and service provider most likely
maintain to separate systems. However, often times the two systems
need to be able to communicate with one another. The systems can be
successful but this also has room for error and concern if not carefully
All in all, Apparel Search believes that utilizing
a 3PL is beneficial for many fashion companies. However, each
company is unique and should be evaluated accordingly.
Below is for reference:
First party logistics providers (1PL) are
single service providers in a specific geographic area that specialize
in certain goods or shipping methods.
Second party logistics providers (2PL) are
service providers which provide their specialized logistics services in
a larger (national) geographical area than the 1PL do.
Additional links of possible interest regarding
Have you ever asked yourself, “what
is a distribution center?". If yes, you can read about that as
well. Learn more
about warehousing issues for the apparel industry.