Everybody has heard – read about the various Layers of Logistics. Most people in this field will be referring to 3PL (Third Party Logistics) or 4PL (Fourth Party Logistics). But there is also 1PL as well as 2PL. What about the 5PL?
Confusing… isn’t it? Is there any distinct cut line to differentiate all those PLs?
With this short article will try to provide a simple, yet clear insight regarding the meaning of the various PLs available.
First Party Logistics – 1PL
Refer to anybody holding goods such as manufacturer, distributor, trader, wholesaler or retailer in the business environment. Goods could be own manufactured (manufacturer or producer) or obtained through distributorship, (holding stock) for an intended transfer from point A to point B.
Anyone who intends moving goods from one place to another or from one country to another is considered first party logistics operator.
Second Party Logistics – 2PL
Refer to an asset-based carrier for which purpose they actually own the means of transportation and provide the transport service. It could involve a shipping line, an airline or rail operator or a truck company in which case they own, lease or charter ships, planes, trains or trucks to transport the cargo from a point of origin to a pre-arranged destination.
Third Party Logistics – 3PL
Refer to a person or a company who actually receive, store or transport various goods produced by other manufacturers to various destinations based on specific & detailed documented instructions.
Worth to mention that 3PL providers do not claim or hold title to various goods or products delivered to any final recipients.
3PL providers could be identified as freight forwards or courier companies.
Fourth Party Logistics – 4PL
Refer to an independent, non-asset based supply chain integrator who will pull together resources, capabilities and technology of its own organisation and complement these with the ones from other organisations, including 3PLs in order to design, build and run comprehensive supply chain solutions for its various clients.
The main role of a 4PL is to provide a broad range of services with holistic management of the supply chain.
Fifth Party Logistics – 5PL
Alternatively referred to as e-business. 5PLs will combine the demands of the 3PLs and other providers into bulk volume for the benefits of negotiating more attractive freight rates with rails, airlines or various shipping companies. It is usually a non-asset based company, or a “brick and click” company, as compared to a “brick and mortar” company of a usual 3PL provider. The main emphasis of a 5PL provider is based on its commitment to using existing resources to be able to achieve savings and to provide optimum solutions to clients.
The various benefits of the 3PL providers have been well observed in the business environment for some time.
How valuable and beneficial the benefits of the 4PL or even 5PL providers will be in our operating environment remains to be observed as we are all look forward to it.