Glossary 3PL (Third Party Logistics)

There are two broad viewpoints on the definition of 3PL (Third Party Logistics). First, the logistics work directly operated by the company is now outsourced to a specialized external logistics company. Second, it is a form of strategy to increase the overall efficiency of the logistics system through strategic alliances with specialized logistics companies. The definition could also be classified depending on the agent of the company’s logistics activities as below. First, if a company has its own logistics organization and performs the logistics work by itself, it is known as first-party logistics (1PL). Second, if a company separates its logistics organization and makes it an independent subsidiary, it is known as second-party logistics (2PL). Third, if a company outsources its logistics work to a specialized external logistics company, it is called third-party logistics (3PL). The use of the term 3PL was in full swing during the end of the 1980s. The word started to rapidly gain attention in the industry after the term third-party provider was first used in a logistics survey done on shippers of the Council of Logistics Management (CLM) in 1988. According to the definition of CLM, third-party refers to an agent or intermediary in logistics channels that has a temporary or long-term relationship with other subjects in the logistics channels. In addition, the process of carrying out a certain service under mutual agreement between a shipper and a single or multiple third parties at a certain cost for a certain period of time is defined as third-party logistics or contract logistics (CLM, 1989).