As you know, we covered explaining the various logistics layers in our popular “3PL vs 4PL: What are these PLs, Anyway? Layers of Logistics Explained, offering an academic definition from the Council of Supply Chain Management Professionals’ glossary of a 3PL as “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.” However, this definition in of itself didn’t start with the 2008 legal definition as set forth by the President, signed into law with HR 4040 on August 14th, 2008. In fact, there is an interesting history and origin of 3PL and third party logistics as covered below in this first part of the two part series.
History & Origins of 3PL
At the passing of HR 4040, the keeper of the CSCMP glossary, Kate Visek asked why it is important that we in the industry define all of the terms in logistics. She says “Well – they are to the CSCMP and its members because the Glossary is the single most popular item on their website – with close to 200,000 downloads a year. It’s also listed on the FORBES website and has been adopted by the US Post Office as well as many other organizations.”
I would argue further it’s important to define, and legally define some, to mitigate risk and fraud in the industry. Fraud is such as an issue, that coming this October 1st, the FMSCA and DOT are requiring further regulation to fight fraud by increasing the freight broker surety bond to $75,000 with the enforcement of Map-21.
So, before 3PL was legally defined by HR 4040 in 2008, where did the term come from and how did it get to the definition we see today?
While it isn’t immediately clear exactly who coined the term 3PL, its beginnings can be traced to the 70′s and 80′s as companies outsourced more and more logistics services to 3rd parties. Over time these 3rd party logistics service providers (3PLs) expanded their services to cover specific geographies, commodities, modes of transport and integrated their existing warehousing and transportation services, becoming what we now know today as a “3PL”.
Then, in 1996, the term “3PL” was registered by Accenture as a trademark and defined as “A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.”
The term is no longer registered. The official CSCMP Definition up until HR 4040 was: “A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or “bundled” together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding.”
Various Definitions of Third Party Logistics
There are countless sources defining third party logistics and here are just a few we have come across throughout our research, but would welcome your definition in the comments below:
- Third-party supply of logistics-related operations between traders by an independent organization. – Eyefortransport
- Third Party Logistics is the activity of outsourcing activities related to Logistics and Distribution. The 3PL industry includes Logistics Solution Providers (LSPs) and the shippers whose business processes they support. – Logistics Focus
- A third party logistics provider is an outsourced provider that manages all or a significant part of an organization’s logistics requirements and performs transportation, locating and sometimes product consolidation activities. – Bridgefield Group
- Third Party Logistics (3PL) is the function by which the owner of goods (The Client Company) outsources various elements of the supply chain to one 3PL company that can perform the management function of the client’s inbound freight, customs, warehousing, order fulfillment, distribution, and outbound freight to the clients customers. – Maxwell
- Third-party logistics describes businesses that provide one or many of a variety of logistics-related services. Types of services would include public warehousing, contract warehousing, transportation management solutions, distribution management, freight consolidation. – Accuracy Book
- A standard definition of just what a third-party logistics provider is can vary from contract to contract. Is everyone who thinks they are engaged in a “third-party contract” really involved in a “third-party contract?” If a distributor, for example, has the UPS truck pull up to their door a few times a day or week, is UPS their 3PL? And are third-party agreements a threat—a possible replacement, in some cases—for distributors?- Industrial Distribution
- A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides a one-stop shop service to its customers of outsourced (or “third party”) logistics services for part or all of their supply chain management functions. – Wikipedia
As with anything, it’s important we understand where we came from, what the current definitions are, and what we have to achieve in the coming years as an industry.