{"id":11908,"date":"2021-04-01T09:09:44","date_gmt":"2021-04-01T16:09:44","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/?p=11908"},"modified":"2021-04-01T09:09:44","modified_gmt":"2021-04-01T16:09:44","slug":"difference-between-1pl-2pl-3pl-4pl-5pl","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/blog\/3pl\/difference-between-1pl-2pl-3pl-4pl-5pl\/","title":{"rendered":"What is the difference between 1PL, 2PL, 3PL, 4PL, and 5PL?"},"content":{"rendered":"

Most people have heard the term third-party logistics (3PL), but there are actually many other types of companies that can offer various logistics solutions. 3PL is when a company outsources elements of their supply chain, including distribution, warehousing, and fulfilment to third parties. 3PLs provide integrated fulfilment, warehousing and transportation services which can grow along with your business and scale depending on the customer\u2019s requirements. While the use of 3PL providers has been prevalent in businesses for years among larger companies, the use of 3PLs is on the increase for small to medium-sized businesses as the growth in ecommerce continues to skyrocket. In organizations of this size, operating their own fulfilment, warehousing and distribution services is usually far more costly than using a 3PL that can provide on-demand services that scale with market demands.<\/span><\/p>\n

So that covers 3PL, but while this is the most widely used third-party logistics term, you may also come across other terms such as 1PL, 2PL, 4PL and 5PL. Read on to find the definition of each and their main differences.<\/span><\/p>\n

 <\/p>\n

1PL<\/span><\/p>\n

A 1PL first party logistics provider is a company or individual that needs to have cargo, freight, goods or products transported from one point to another. First party logistics involves just two parties. There is the manufacturer or distributor that ships the goods (you), and then there is the retailer or customer that receives the goods (your customer).<\/span><\/p>\n

 <\/p>\n

2PL<\/span><\/p>\n

A 2PL is an asset-based carrier that is responsible for the method of transportation. Examples of 2PLs include shipping lines which operate the ships, airlines that operate the planes and hauling companies that operate vehicles. A 2PL is often referred to as a forwarder because their business mainly consists of a means of transportation. For instance, it could be an airline company that also offers freight services to get things from you to your customer.<\/span><\/p>\n

 <\/p>\n

3PL<\/span><\/p>\n

Third party logistics is outsourcing the supply chain operations and logistics to get a company\u2019s products to their customer. The logistics solutions that 3PLs offer include receiving, storing, packing, and <\/span>shipping services<\/span><\/a>. Some 3PL companies also provide other logistics services, referred to as value added services. These include <\/span>inventory management<\/span><\/a>, kitting and assembly, postponement packaging, and others.<\/span><\/p>\n

Because 3PL service providers have been managing logistics for years or decades, they have the expertise and leverage to make the process simpler, quicker, and more cost effective for the seller. The market for 3PLs providers has grown exponentially with the exponential growth of ecommerce. <\/span>Most Fortune 500 (86%) companies<\/span><\/a> and 96% of the Fortune 100 use services like these. 3PLs have also bloomed thanks to tracking technology, such as radio frequency identification (RFID) and global positioning system (GPS), both of which offer extended supply chain visibility. Meanwhile, internet of things (IoT) technology has improved tracking metrics for trucking and other carriers.<\/span><\/p>\n

 <\/p>\n

4PL<\/span><\/p>\n

A 4PL provider is an integrator that manages all aspects of the supply chain. Going beyond physical logistics, a 4PL may include elements of IT, procurement, and finance.\u00a0<\/span><\/p>\n

It may seem that the differences between a 3PL and 4PL are slight, but a company seeking the right fit of services and support for their growing business, the distinction can be huge. For example, both will rely on the latest in IT to help optimize your supply chain communication and accuracy. However, a 3PL is more likely to have <\/span>proprietary tech systems<\/span><\/a> for tracking units across the supply chain and bundle that service into the overall cost of their support, while a 4PL may provide a higher-level analysis of data to help inform your business decisions for long-term growth.\u00a0<\/span><\/p>\n

4PL will include all the benefits of 3PL providers but also include:<\/span><\/p>\n