Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involve the integration of information, transportation, inventory, warehousing, material-handling, and packaging. Logistics is a channel of the supply chain which adds the value of time and place utility.
Definitions of logistics outsourcing (3PL)
Logistics outsourcing, or third-party logistics (3PL), involves the utilization of external organizations to execute logistics activities that have traditionally been performed within an organization itself.[1] According to this definition, third party logistics includes any form of outsourcing of logistics activities previously performed in-house. If, for example, a company with its own transport facilities decides to employ external warehouse specialist, this would be an example of third party logistics.
Another definition[2] has it as “long and short-term contracts of alliances between manufacturing and service firms and third-party logistics providers.” This definition has been largely used on the needs that firm characteristics influence the decision to contract multiple third-party logistics services, and therefore, firms have to obtain cost savings and to concentrate on their core competencies. The agreement also becomes more formalized with mutual commitments from both parties. In such partnerships the partners attempt to keep their autonomy, while at the same time collaboration is vital to develop more efficient results. Sometimes, the agreement specifies that the external service provider fully or partly takes responsibility over personnel, equipment and plant of the client firmh
Similar to the above definition, Hertz and Alfredsson[3] simply stated that logistics outsourcing involves “an external provider who manages, controls, and delivers logistics activities on behalf of a shipper”. The purpose is that both parties develop a mutually beneficial and continuous strategic relationship and all or a part of the logistics activities are performed in a satisfactory way for the partners, with the guarantee of the quality of performance and benefits involved.
Nevertheless, to understand the concept of logistics outsourcing, there are five levels of logistics outsourcing, as follows[4]: 1) In-house logistics or in sourcing logistics, or reverse outsourcing: means that the firm operates its logistics activities in-house. 2) Logistics service provider (LSP), or asset-based logistics (2PL): means the management of traditional logistics functions, such as transport and warehouse. 3) Third-party logistics (3PL/TPL), or forwarding logistics, or contract logistics: This can be also a close relationship between a firm and a logistics provider not only to operate the logistics tasks but also the sharing of information, risks and benefits under long-term contract. 4) Fourth-party logistics (4PL/FPL), or supply chain logistics, or lead logistics provider (LLP): 4PL has been viewed as a single contact that manages and integrates all kinds of resources and directs 3PL function along the supply chain with the sense of strategic advantages, and long-term relationship. 5) Fifth-party logistics (5PL): means serving the electronic business (e-business) market. Those 3PL and 4PL providers manage all the parties in the supply chain on electronic commerce (e-commerce). They key to success in this area is the information technology and information systems.
