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10
Nov
2021

The Evolution of 3PL

by Michael Kotendzhi | Logistics
Storage and transport containers, showing off the evolution of 3PL

Third-party logistics are relatively ‘young’. And yet, the short existence of 3PL does not stop it from showing off its obvious importance! How many companies and businesses worldwide could continue operating as smoothly as they do now without third-party logistics to rely on? The answer is, undoubtedly, not many! It is for this reason that we should take note of the evolution of 3PL. What made it possible? How did it start? And will third-party logistics remain as crucial as they are now?

What is 3PL?

Simply put, 3PL, or third-party logistics, are a way for a company to outsource some or all of its distribution or supply needs. The third-party logistics providers aim to offer logistics services that are indispensable to other companies. After all, even if they do not legally own a product and are simply handling it on behalf of the other company, they can, due to their specialization, often do the job better than the company itself. And third-party logistics services are helpful for companies at every stage of their development! Young companies are probably still struggling with setting up a proper supply and delivery chain. Sometimes even a decent warehouse system. While more established companies might be trying to cut down on costs, find more reliable ways to distribute or obtain goods, or simply require more warehouse space and are unwilling to go looking themselves.

The historical development of 3PL

The evolution of 3PL can be roughly divided into three periods. The following periods are its inception, its growth, and the boost technological advancement offered to third-party logistics.

The inception

Roughly dated to the 1980s, this was the very birth of third-party logistics. The number of trucking carries massively grew, thanks in part to the Motor Carrier Act of 1980. Even the companies which had previously focused only on ensuring their customers have effective and organized warehouse storage facilities entered the market. This, combined with the surge in production and the need for better storage and distribution, led to the rise of the first third-party logistics companies. Or, at the very least, the first versions of the same. The fragmented market would become the best means for such companies to grow and develop into what we know today, even though it took a considerable amount of time for that to happen.

Growing popularity

Dated to the 1990s, this was the moment when the development of 3PL finally allowed it to step onto the global stage. The emerging economies, particularly countries like China, incentivized businesses to start delegating some of their production processes. This, in turn, made the popularity of third-party logistics grow. Things such as sturdier supply chains, faster delivery times, and even the benefits of reverse logistics all became much more relevant.

Tech advancement

The technological advancement of the 2000s led to the evolution of 3PL at a rapid pace. The growing popularity and development of the internet alone cause massive improvements in third-party logistics. The efficiency and perks of logistics software allowed the benefits of investing in warehouse space and its efficient handling to spawn numerous perks. The better coordination of suppliers and distributors allowed for faster and cheaper services. The place of third-party logistics in the world of business was cemented and made irreplaceable.

The evolution of 3PL in the future

With the recent developments in mind, we can reasonably assume that third-party logistics will only continue to grow in importance. The invention of drones is a significant opportunity for the industry. Not to mention the continued development of various types of software. They are constantly making warehouse management more efficient, delivery routes better optimized, and even bettering fleet management technology. The pandemic has dealt third-party logistics a severe blow, yes. But even with that in mind, little can truly stop the ever-continuing rise of 3PL.

Conclusion

The evolution of 3PL and its history all point to the same thing - it is doubtful that anything will replace third-party logistics in the near future. The usefulness and sheer convenience of 3PL make it impossible to rock their importance in the world of business. And with third-party logistics continuing to improve, this importance is only likely to grow further in the future!

For over 30 years, 18 Wheels Logistics has strived to be the most customer-centric trucking, warehousing, and logistics company around. Based in Burnaby, British Columbia, Canada, 18 Wheels relies on experience and integrity to make customers happy and remain on the cutting edge of shipping and logistics management.

If you have any questions about this article or you would like to talk to us about your shipping needs, please call us at (604) 439-8938.


Michael Kotendzhi is President of Operations & Transportation and a partner at 18 Wheels.

Mr Kotendzhi oversees North American operations. Michael has over 15 years of experience. As well as a background in logistics from XPO Logistics, North America's largest contract warehousing provider.  Michael Kotendzhi has a degree in Logistics. 

Michael's experience includes supply chain management, reverse logistics, & domestic transportation.