Model example 2: third-party logistics company

3PL is a third party logistics company. 3PL's clients are ABC and XYZ.

3PL stores inventory for ABC and XYZ in its warehouses and fulfills orders for ABC and XYZ. The businesses of ABC and XYZ are very similar and they can have the same item identifiers representing two different physical items.

3PL's revenue comes from the service fee for processing its clients' sales orders and purchase orders. 3PL sends the order processing details to its financial organization to collect the service fees from the clients.

The inventory in 3PL's warehouses is owned by the clients. 3PL has one warehouse in California and one in Massachusetts. 3PL stores products owned by both the clients (ABC and XYZ) in the same warehouse.

The organization structure of ABC and XYZ is the same as what is described in the previous example with the following differences:

  • They have operations only in North America.
  • They do not own a distribution center (sourcing location). Their inventory is kept in 3PL's locations.
  • The two sales organizations of ABC, Electronics and Entertainment, do not want to have visibility on each other's inventory. However, this is not the case with XYZ.

Each client generates purchase orders to replenish its stock in 3PL's warehouses. The client sends the purchase order to its vendor. It also sends a copy of the same purchase order to 3PL so that 3PL can receive the product.

Orders are managed by 3PL but the clients (ABC and XYZ) need visibility of their orders. The clients also need to have certain order modification permissions but not all. Warehouse operators also need visibility to orders and the ability to receive returns.