Copyright 2008, Traffic World, Inc.
Supply chain experts have been trying to define "3PL" since the birth of third-party logistics. A new law takes a stab at it, but not everyone agrees with the result.
Buried in Section 235 of the Consumer Product Safety Improvement Act of 2008 is this four-line definition: "The term ''third-party logistics provider'' means a person who solely receives, holds or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product."
The product-safety measure, signed into law by President Bush in August, significantly expands the authority and enforcement powers of the Consumer Product Safety Commission. The legislation was passed in response to well-publicized cases involving the safety of imported goods such as toys from China, and includes new requirements and penalties for manufacturers, distributors and retailers.
The law''s definition of a 3PL is important for the logistics industry from an ownership and liability-limit perspective, according to Pat O''Connor, Washington representative of the International Warehouse Logistics Association, which has claimed much of the credit for inserting the 3PL definition into the bill.
The new law "reaffirms the role of the 3PL as an intermediary in the supply chain, similar to the carrier or forwarder," O''Connor said. "It sets a critical precedent as Congress turns to similar legislation for food, pharmaceuticals and cargo security."
With that, let the parsing begin.
The Council of Supply Chain Management Professionals has a more detailed definition of 3PL: "A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or ''bundled'' together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging and freight forwarding."
Rick Blasgen, president and chief executive of CSCMP, said the new law''s definition won''t necessarily change logistics and supply-chain professionals'' perspectives on what a 3PL is.
"I do not see this as a major issue, given the context in which they are using the term," he said. "This seems to me to simply be a way for the bill to hold a 3PL entity in some context legally as it relates to the overall bill.
"Obviously, our definition is more detailed, defines 3PL as a firm as op-posed to a person, and I have no comment on the legal implications of what their definition might produce," Blasgen said.
Others question the potential legal impact of the new definition.
"I would hope that the definitions put forth by the logistics industry would continue to take precedence," said Cliff Lynch, executive vice president of CTSI, a Memphis-based supply-chain management firm. "If there should be a definition, it probably shouldn''t be this one. It really muddies the water, and raises more questions than it answers about ownership, services and who is a person or business."
A 3PL "can''t be identified as a person; it''s a business," Lynch said. He added that he''s not sure what the term "who solely" means in the product-safety bill''s definition.
"The terms 3PL and 4PL may not be something we ought to be dealing with anymore anyway," Lynch said. "They have become a misnomer; they should be called logistics service providers," he said.
The definition "puts the 3PL in a position apart from manufacturers and distributors, and one which is not to be considered during product recalls and legal actions," said Kate Vitasek, managing partner of Supply Chain Visions, based in Bellevue, Wash.
"In our highly litigious society, anything that exempts a party from legal action has to be considered ''landmark legislation'' from their perspective," Vitasek said. "However, other supply-chain partners may not welcome this so warmly, as it does not allow them to ''spread the pain'' associated with these actions to the 3PL."
She also noted that it is not uncommon for a 3PL to own and control inventory under a performance-based logistics contract.
"Today, the term 3PL is so broad that most outsourcing relationships fall under 3PL. With this definition, some companies may not want to associate themselves with the term 3PL. Others might love it."