The existence of 3PL (third-party logistics) is nothing new, but where does 4PL (fourth-party logistics) come into the picture, and are there any other ‘PL’s you should know about?
Here’s a rundown of each type of logistic provider and where each falls into the spectrum of supply chain management, distribution, warehousing, transportation, and more.
A first-party logistic provider is any company that transports cargo, freight, goods or merchandise, and can refer to both the cargo sender (like a manufacturer delivering to customers) or the cargo receiver (like the retailer picking up cargo from a supplier).
Simply put, the entire logistics and distribution process is managed internally by the business. This method of logistics is relatively uncommon, as most businesses today outsource their logistics operations to external providers.
Australian red meat supplier Samex is a 1PL as it exports goods to wholesalers, distributors and supermarket chains worldwide using its own logistics operations.
Pros of 1PL
Cons of 1PL
The 1PL approach is typically used by large companies that have the volume and infrastructure to manage their entire supply chain internally.
A second-party logistics provider handles the transportation component of the supply chain and is responsible for getting a company’s goods from A to B. 2PLs lease or charter their own transportation – such as ships, trucks, or planes – to companies, and they can also be contracted to transport freight. A logistics provider that only transports goods over a certain part of the supply chain could also be classified as a 2PL.
Any freight forwarding company such as World Cargo Transport Inc. headquartered in Woodbridge, New Jersey, is a provider of logistics services to and from almost anywhere in the world.
Pros of 2PL
Cons of 2PL
2PLs are suited to companies that want a segment of their supply chain managed externally (such as transportation from a warehouse to a dock) but would prefer to manage other parts of the supply chain internally.
A third-party logistics provider provides outsourced logistics services to companies. These services can make up part or sometimes all of their supply chain management functions, including:
UPS are a well-known example of a third-party logistics provider. They offer all the services listed above and more, and operate on a global scale.
Fulfillment by Amazon is also a type of third-party logistics provider. However, it comes with restrictions in terms of allowable products and packaging requirements, and services are more limited than some other 3PLs.
Pros of 3PL
Cons of 3PL
3PLs are suited to small-to-medium-sized businesses that want to take advantage of the operational power of an external logistics company but still want some control over their supply chain.
A fourth-party logistics provider essentially takes third-party logistics a step further by managing resources, technology, infrastructure, and even manage external 3PLs to design, build and provide supply chain solutions for businesses.
4PL services typically encompass 3PL services as well as:
Deloitte provides 4PL services that go above and beyond traditional 3PL by offering strategic business insights and consultative services in addition to logistics execution.
Pros of 4PL
Cons of 4PL
4PLs are a relatively new concept, but typically they’re sought out by medium to large sized businesses that are seeking a complete logistics solution from both an operational and a strategic perspective.
The difference between 3PLs, 4PLs and other ‘PL’s is highly debated, even among experts in the supply chain industry. The simplest way to think about it is that each successive type of logistics provider offers greater involvement in the supply chain than the last.
As for which one will work best for you, that depends on your business model, infrastructure, budget, and how much control you want over your supply chain.
Many eCommerce businesses choose 3PLs because they provide a good combination of support, flexibility, and cost-effectiveness. What’s more, TradeGecko integrates with 3PL providers directly (such as Amazon FBA), via our integrations with shipping apps and 3PL Central provided by Cart Rover, or through our 3PL exporter add on, which allows you to streamline your order fulfillment process across both systems.
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