What are the 2pl, 3pl and 4pl in logistics?

  • Jul 26, 2021
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The rise of e-commerce has made a significant contribution to the global economy and so has this logistics. Without logistics, an e-commerce concept could never have been implemented. In this post we explain the different types of logistics available. Not only the logistics 2PL 3PL 4PL, but there is also the 1PL and 5PL.

Known as a massive chain network, logistics is a detailed organization responsible for carrying out various operations related to delivery and shipping. Whenever you buy a product from an online store, this logistics is the one that takes care of its shipment and makes sure that you have the right product in your hand.

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The abbreviation "PL" means in English "Party Logistics" in Spanish is called "Logistics Providers" and is a supply chain model for logistics specialists. There are different ways that companies manage logistics. Some have their own fleet of vehicles and drive the transports themselves. Others hand over the entire organization and management of transports to a service provider. What these different models entail is explained in the next part:

2PL 3PL 4 PL logistics

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In this article you will find:

1PL - First Party Logistics Model

With the First Party Logistics Model 1PL (first provider of the logistics model), the company producing the goods takes over the transport and logistics services.

The company performs all the necessary activities and it has expensive equipment such as trucks, trailers, warehouses, etc. 1PL logistics in part refers to a company or individual, who has their own cargo, freight, and can transport goods and merchandise from one point to another. It is the specific consignee of the different goods and products and organizes the transport of the products to their respective destinations.

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It is mainly made up of two parties that benefit from the transaction. The manufacturer or supplier and the person who buys it. There are no other intermediaries involved in the whole process.

2PL - Second Part Logistics Model

The second-party logistics model (2PL) refers to the subcontracting of transport to a contractually linked logistics partner. The dispatcher of the goods subcontracts the transport and storage services to a logistics service provider, but still retains control and administrative management of the Logistics.

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The logistics service provider generally owns and operates its own facilities.

3PL - Third Party Logistics Model

The Third Party Logistics Model (3PL) it is a common pattern in commercial shipping. This model can also include a variety of other services such as delivery, labeling, product packaging, and customs clearance.

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As defined by the Council of Supply Chain Management Professionals, a third-party logistics provider performs transport, storage, packaging, dispatch, cross-docking and administration of Inventory.

4PL - Fourth Part Logistics Model

With the fourth provider of the logistics model (4PL), the carrier subcontracts the operational management of the transportation and warehouse service, as well as the administration of logistics.

The 4PL service provider takes over the entire supply chain operation. It links producers, suppliers, retailers, IT service providers, financiers and logistics providers.

Key feature: The service provider does not operate a facilities-based business model, nor does it have a warehouse or fleet of vehicles that can be used to carry out the transports.

Instead, the logistics service provider organizes, manages and supervises the transports. This model is more integrated than the most popular previous and third-party models.

5PL - Fifth Part Logistics Model

A fifth part logistics (5PL) model can be used when converting from supply chains to supply networks.

The logistics provider of the fifth part can consolidate 3PL and 4PL requirements and capabilities. A 5PL negotiates favorable rates and services with service providers such as carriers and airlines. It also offers its clients strategic and innovative solutions and concepts.

The tasks of 5PL service providers include providing a framework for planning and implementing multiple parts of the supply chain. This includes the supply of materials, services, information and also the capital flows necessary for the planning, delivery and monitoring of the transport.

The advantages and disadvantages of 1PL and 2PL

Advantage:

  • Non-disclosure of sensitive data to third parties
  • The company accumulates internal technical knowledge by carrying out its own shipments
  • The sender has control over all the steps during transport.
  • The company has simple communication through internal procedures

Disadvantages:

  • Investments in own assets, for example in a fleet of vehicles, carry risks and influence the liquidity of the company.
  • Transport is not usually the core competence of the company, so expert knowledge may be less developed.

The advantages and disadvantages of 3PL, 4PL, 5PL

Advantage:

  • The company no longer needs to invest in transportation resources, because these are no longer necessary by handing them over to external logistics providers.
  • There is a low capital commitment due to omission of assets.
  • The sender benefits from the logistical knowledge of the service provider:
  • All actors are focused on their tasks, so quality and efficiency increase and service is improved.

Disadvantages:

  • There is the possibility of losing technical know-how and therefore the probability that you will no longer be able to take over services internally on short notice if the logistics partner fails.
  • Dependence on the logistics partner increases accordingly.
  • Share confidential company information with external partners
  • Companies have less control over their transports. This can lead to errors or damage in deliveries that the company does not notice, resulting in reduced service and dissatisfaction of the end customer.

With the above information, we hope that you have the most complete vision of the logistics service models. And get the most accurate answer to the question: what is 2PL 3PL 4PL logistics.

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