By Anthony Liu
As supply chain becomes more and more complex due to globalization and advancing technology, more integrated and advanced logistics have emerged. You may have heard of 3PL (Third-Party Logistics), but what are 1PL, 2PL, 4PL, 5PL, and 6PL? This blog will illustrate the different types of logistics, which may help you choose the most suitable one for your company.
1PL
1PL (First Party Logistics) refers to the Logistics activities organized by sellers, manufacturers or suppliers themselves. The main operations of these organizations are the production or supply of commodities. It is the process in which a material or commodity provider undertakes delivery to the end user as to realize the spatial change of the object.
2PL
While 1PL gives companies with simple logistical needs the full control over the entire logistics process, it can take the time and focus off of a company critical goals such sales and product development, as the process is operated in-house. This is when 2PL comes into play. A 2PL, as known as the second party logistics, is referred to the transportation actives carried out by the carriers. They are the middleman that own assets such as trucks, ships, aircrafts, or warehouses.
The providers of this level of logistics focus mainly on areas of transportation and the storage of goods. This is usually the first step when it comes outsourcing logistics or supply chain services. It gives companies more autonomy as to logistical management, while leaving the room for companies to achieve a higher economy of scale.
3PL
A third-Party logistics provider, also known as 3PL or TPL provider, is an intermediary between the carriers and companies. They act as the logistics department of a company, which can assist companies with more complex logistical needs such as inventory management, transportation management, packaging, custom clearance, etc. While they are generally asset-based, they can also be non-asset based.
3PLs often can offer competitive rates and secure container space to companies by establishing long-term relationships with carriers.
4PL
Fourth Party logistics providers specialize in providing logistics planning, consulting, coordination and supply chain management for companies. In comparison with 3PL, 4Pl providers are non-asset based. They are able to offer a tailored and full range of logistics solutions, anywhere from design, build, execute, to monitor and analyze, through integrated resources, information technology and capabilities of its own organization and other 3PLs organizations. Because of its versatile and comprehensive supply chain management capability, 4PL providers are also called lead logistics providers and consultants.
5PL
On top of 4PLs, the fifth party logistics utilizes big data and advanced technology to better support and build a more detailed and comprehensive supply chain system for companies. A 5PL provider will run the entire supply chain for a company and is striving for constant optimization with its data utilization and information integration.
They act as a 3PL-aggregator that combines the demands of various 3PLs to secure the most competitive rate. Due to its dependent on data and technologies, 5PL is more suited for E-commerce and E-business.
6PL
The sixth party logistics is a new logistics concept. In theory, 6PL integrates sustainability into the supply chain system, and is able to meet high standard with partly automated supply chain solution monitored and driven by artificial intelligence (AI). Although this type of logistics is still in its infancy, there is no doubt that the application of AI in logistics would make supply chain management more efficient, thus saving more time and cost for company.
Conclusion
With each incremental layer, a more comprehensive supply chain integration and management is involved. The decision of which one to choose ultimately comes down to what the needs of your business are. Many of logistics providers offer services that overlap each other. In fact, around 75% of all 3PL providers also offer some 4PL services.
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ASCI specializes in helping businesses like yours to address supply chain management challenges, including transportation coordination and order tracking. We offer consulting services to help your team with safety, responsiveness, and integrity. Visit our website to learn more and to arrange for a free consultation.
