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Author's profile photo John Meadows

Third Party Logistics – How to Use #1

I have put these blogs together mainly for the ByD partners, so they can understand how exactly Third Party Logistics works and how they can best demonstrate it. Of course customers will find this useful too if they are ready to expand the scope of their ByD solution.


Third Party Logistics – what is it?

Third party logistics in ByDesign allows ByD customers to sub-contract the storage and handling of their on-hand inventory to a third party, but at the same time retaining the visibility of ATP and planning of this stock. It is often confused with Third Party Order Fulfillment (or DropShip).

In the scenario Third Party Logistics (3PL) the on-hand inventory is owned by the ByDesign customer. They are just not handling the logistics and storage.In DropShip scenario the ByD customer never owns the stock, it passed directly from supplier to end customer.

3PL – Setup


To enable this process, this scoping questions need to be answered


In Organisational Management Work Center;

An Organisational Unit needs to be included in the company org structure. This org unit definition is:

Business Residence:

You must include the Full Address of this warehouse too.

In Supplier Base work center;

Add your Warehouse Supplier and add the attribute “Warehouse Provider”

In Supply Chain Design Work center;

this Site needs to have the following Location attributes.

Since this is an externally managed location, ByD does not manage its layout, material flow or storage profiles.

  • You have defined that the site is an externally-managed location and have assigned the warehouse provider to it.


in Supply Chain Master Data work center,

Using Transport Lanes, you can determine under which circumstances inventory is picked from a 3PL warehouse.

In this case I have decided that delivery to either Gloucestershire or Worcestershire is automatically sourced from our externally managed warehouse. So first I create the transport zone

and then assign a warehouse/zone combination

For this blog in my standard SAP reference system I have created a new product called

“Worcester Boiler EV112”

Purchasing is ACTIVE

Logistics Planning Area P1124 is ACTIVE

Planning for Logistics Area P1124 is ACTIVE

  • Demand Driven Planning
  • External Procurement
  • Safety Stock = 5

Sales is ACTIVE

Valuation is ACTIVE

If everything is in order, you can run planning and in your Supply Planning work center you should see this exception

This indicates that all the master data is in alignment and that the system can see a need for safety stock in the external warehouse.

To help with the smooth automation of the procurement process, also set up a purchasing contract for the new boiler. This will automatically propose the supplier when we process purchase proposals and requests.

This is done through the Sourcing and Contracting Work Center.


Further automation is located in the Third-Party Logistics work center, where you can make the following rules apply.

ByDesign also supports direct connection of 3PL warehouse management systems, so optionally you need to create a communication scenario. Details are here on that process.

In my next blog we will process tasks manually.


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      Author's profile photo vasam lakshmi
      vasam lakshmi

      Thanks for sharing the beautiful information about the third-party logistics ,This blog helped me in understanding the third party logistics .

      Fulfillment HUB USA is the best Third-party logistics service provider and the fastest growing e-commerce around the globe.