When assessing logistics providers, it can be difficult to understand what is meant when terms other than 3PL logistics providers are used. Read on to find out the differences between 1PL to 5PL and everything in between.
The differences between 1-5PL service providers
When deciding on the right supply chain strategy for your company, choosing the most effective logistics service is important. Here are the most prominent logistic strategies used in the market today.
1PL: First Party Logistics
- First party logistics accounts for the two parties benefiting from the transaction, but mainly the vendor/supplier.
- A First party logistics provider is specifically the consignor of goods, the transaction party that has organised transport to the receivers chosen destination.
2PL: Second Party Logistics
- Second party logistics involve specifically the carriers of goods for the transaction, which can be rail, road, sea and/or air.
- A second party logistic provider specialise in the transport area of the supply chain, getting goods from one point to another. They can be an asset-based carrier and own the means of transportation, for example shipping lines which charter or lease their own ships, or airlines that are contracted to use their passenger flights to transport air freight from origin A to destination B.
3PL: Third Party Logistics
- Third Party Logistics still primarily concerns goods transportation from a supplier/consigner to a buyer/consignee, but includes additional services involved in the supply chain. These services can include warehousing, terminal operations, customs brokerage, supply chain management, IT analysis and track and trace.
- A 3PL logistics provider supplies all or some of these services and manages the obligations of each party from goods departure to destination. For example, BCR is a 3PL service provider specialising in freight forwarding and customs brokerage, but also provides e-fulfilment services, warehousing and other supply chain management services for your business. See what BCR did in the Barbeques Galore case study here.
4PL: Fourth Party Logistics
- Fourth party logistics is essentially employing an overseer for a company’s entire or certain parts of the supply chain, while also managing 3PL’s that are already in place. They must have an integrated electronic interface system that address the requirements of all logistic sections and allow measurement of established KPIs.
- Fourth party logistics providers act as the head administrator for all or some aspects in the supply chain of a company. They manage any other contracted 3PLs and provide neutral management, feedback to the company about the state of their supply chain, recommendations and solutions to increase efficiency. In saying this, a larger 3PL can also become a company’s overarching 4PL or display the same characteristics as a 4PL player today.
- For example, BCR has performed 4PL functions such as consolidating a plethora of suppliers and carriers to provide a single-invoice solution that streamlines the supply chain process. See the services provided and concluding results in the case study for SCA Hygiene Australasia here.
5PL: Fifth Party Logistics
- Much the same as 4PLs, and a new term circulating within the supply chain industry. They plan, organise and implement logistics solutions on behalf of the contracting company. They have widespread end-to-end tracking of containers which allow customers and the contractor to receive constant updated information on the container shipment process. Essentially, a 5PL manages networks of supply chains with an extensive e-business focus across all logistic operations, other than 3PLs and the parent company.
Finding the right logistics strategy for your business
This list can go on and on, with even apparent 8PL service providers emerging from the woodwork. But these are the major types of logistic strategies businesses are using within the current market. Determining the right type of logistics provider will depend on your business structure and strategy, and even then it is a difficult choice. Although BCR specialises in 3PL logistics provision, we can also assist with our expertise in other areas and have crossed the barriers of other logistic service categories (see how we provided 4PL services to SCA here).
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