Today, we’re all familiar with third-party logistics and fulfilment; even consumers know about the “Amazon Fulfilment Model”. However, many do not realise that while eCommerce is relatively new, 3PL Logistics itself is not and has existed for well over a century.
But before we dive into the history of 3PL logistics, let’s first explore what actually is 3PL?
What is 3PL?
A Third-party logistics (3PL) provider supplies companies with outsourced logistics services, including procurements, fulfilment, warehousing, distribution and value-add services.
Today, the role of 3PL providers can vary from client to client; however, at a top level, the most popular 3PL services are:
- Goods In: Receiving and checking goods from manufacturers
- Warehouse Storage: storing goods in warehouses
- Order Fulfilment: picking and packing orders for both D2C and B2B orders
Transportation Consolidation: arranging the transportation of orders to customers
What is the difference between 3PL and 4PL?
Logistics services can fall into a range of categories but commonly are referred to as 1PL, 2PL, 3PL or 4PL. First and second-party logistics providers (1PL & 2PLs) are typically companies that provide shipping services to transport goods, such as couriers.
While a 3PL is a logistics service provider that provides a range of outsourced logistics services such as warehousing, storage or packing. These can be in the form of a single-client site in which only one single client is housed in a warehouse or multi-client sites where a range of brands are serviced in one location – often also known as fulfilment centres.
Similarly, a 4PL provider outsources the logistics process. However, the key difference between 4PL and a 3PL is that a fourth party logistics provider will also integrate with a broader ecosystem of suppliers within the supply chain, such as integrating with purchasing or outsourcing warehousing.
A Brief History of Third-Party Logistics
While many associate 3PL with eCommerce, the process dates back over a century. The first mail-order company can be traced back to as early as 1861, when Welsh entrepreneur Pryce Pryce-Jones began to sell Welsh flannel through distributed catalogues. Utilising the national postal stamp and the newly extended railway network, Pryce-Jone’s was able to promise next-day delivery over a century before Amazon.
Following this, in the early 1900s, the UK witnessed the growth of several British mail-order brands:
- 1900 – Great Universal Stores (GUS) – FTSE 100 retailer and manufacturer before it was eventually brought by Sainsbury’s in 2016
- 1905 – Freemans & Co – later brought by the Acardia Group in 1988
- 1912 – Grattan – later brought by Next plc in 1985
- 1923 – Littlewoods – closed in 2005, but The Very Group has retained the online brand name
Despite the adoption of 3PL practices by the military during WW1, it was not until the early 1980s that businesses began to utilise organised logistics. Following the increased reliability of transportation across the UK and the growth of freight movement, brands were now able to distribute their products directly to consumers from suppliers and warehouses. By the late 1980’s the rise of the TV shopping channels such as The Shopping Channel and QVC, mail-order sales were skyrocketing.
During this time, and before introducing the internet, 3PL logistics and order fulfilment looked very different, relying on handwritten catalogue orders sent via the postal service or call centres. While 3PL providers and the companies themselves primarily relied on manual processes and paper trails.
The mass introduction of the internet changed the industry forever; as consumers began to place orders via websites and apps, 3PL providers were required to evolve their process and technology. They introduced sophisticated warehouse management systems and processes that worked in real-time, allowing customers to expect more – faster, better and cheaper fulfilment.
As the internet began to connect people across the globe, supply chains became global and ultimately more complex; however, with the right technology, exponential growth was achievable, and 3PL Logistics Providers grew.
The Role of 3PL Providers today
Today, the eCommerce industry is one of the fastest-growing industries globally, and with that comes new demands and requirements for 3PL logistic providers. However, as experts in their space, 3PL providers are adept at handling the complexities of a global supply chain and responding to new enhancements and changes.
Here at Synergy, we started in the world of mail orders, supporting clients such as Freemans and Grattan. While the way that orders are placed and the technology that underpins our process has evolved, our commitment to providing exceptional service to our clients has not. So when we say we know 3PL logistics, we REALLY know it.