Your Package and It's Journey - Transportation and Logistics Explained

Recall that 3PLs are Transportation and Logistics Managers. They offer two broad types of services. Transportation, managing end-to-end shipping processes, and Contract Logistics, providing additional services for storing and processing goods, like fulfilling orders on a customer's behalf. In Transportation, 3PLs are tasked with orchestrating a series of different carriers across a number of transfer steps. This orchestration, the finding and bundling together the carriers and other handlers, is often called freight forwarding. This is like when a travel agent procures everything for a trip, the plane ticket, airport pickup, and hotel room. The word freight forwarder is sometimes used interchangeably with 3PL. However, forwarding actually refers in particular to just one piece of the puzzle. To ensure high quality and speedy delivery, many 3PLs will also directly carry or handle goods at critical stages, in addition to playing the role of freight forwarder. Transport customers are called shippers, and can either be the seller of the goods or the buyer of the goods, depending on the circumstance. For example, many large-scale importers will hire 3PLs directly, preferring control over the total cost of shipping. In other cases, like in e-commerce, the seller, not the customer, will engage the 3PL for shipping. To meet the wide spectrum of shipper needs, 3PLs must be equipped to manage any number of transport journeys, covering all three of the major modes of transport, air, ocean, and land. The dynamics vary significantly across these modes, as does the role of the 3PL. Since air and ocean transportation require specialized vessels, ports, and loading and unloading procedures, 3PLs tend to play a less direct role here, focusing primarily on end-to-end orchestration. In land transportation, conversely, the 3PL often plays a larger role. For example, carrying and consolidating goods via their own trucks and warehouses. For this reason, land transportation is often a separate business line from ocean and air transportation. In addition, 3PLs must manage carriers and transfers across each of the three critical stages of the transport journey, the so-called first, middle, and last miles. The first mile is typically defined as the stage from the pickup point or origin to the first consolidation point, usually a terminal or warehouse, where goods are repacked efficiently for longer transport. The middle mile is typically the stretch from the first consolidation point to the last, where goods are deconsolidated. During the middle mile, the longest distance is covered, and goods may pass through a number of consolidation points. Eventually, goods will reach a final consolidation point, where they are deconsolidated. From this point to the destination is the last mile. The first and last miles are often the costliest, given the inefficiency of moving individual non-consolidated goods to and from individual addresses. This is exactly why consolidation points are so key to efficient transport. Imagine, for example, the public transportation system of a major city. In a way, the logistics of human movement. When individual commuters leave their homes in the morning, they are non-consolidated, and moving them individually through the city to their destinations would be nearly impossible. Instead, buses will pick them up in groups at set times and places. The bus stop is like the consolidation point. Larger, subsequent consolidation points, like metro stations and terminals, further consolidate commuters, preparing them to move even more efficiently over longer distances on larger vessels. Just as buses are different from metros and trains, the carriers involved in each of these segments often vary as well. For example, there are dedicated first mile trucking companies operating vans, and dedicated middle mile trucking companies operating 16-wheelers, called line or long haulers. Most major 3PLs are equipped to orchestrate players across each of these stages and transport modes. There are, however, specialist logistics companies who operate with a narrower focus. For example, express courier parcel companies, ECPs, focus on speedy deliveries of smaller goods, like those in e-commerce orders. ECPs own significantly more trucks and manage significantly smaller orders than other 3PLs. Some 3PLs own and operate ECP business lines, as is the case with DHL Express. Even companies that you may not consider logistics companies, such as food delivery players like DoorDash and Instacart, are in fact offering what is called on-demand logistics. The focus on this primer, however, will be on the major 3PLs, which offer broad services serving as a one-stop shop.