Some businesses deal with logistics on their own, other use providers. More and more entities are now rendering such services, and their organization may vary.
Let’s understand what exactly does 1PL, 2PL… 5PL models suggest?
1PL — First-Party Logistics
A venture or small enterprise that sends goods or products from 1 location to another is referred to as 1PL. For example, a farm that transports eggs directly to shopping markets or grocery stores is a 1PL.
2PL — Second-Party Logistics
An organization or enterprise that maintains assets like vehicles or airplanes to transport products from one place to another is a 2PL. The same local farm might hire a 2PL to transport their vegetables, cereals, or eggs from the farm to the supermarket.
3PL — Third-Party Logistics
● Within a 3PL model, an enterprise asserts management supervision but outsources operations of transport and logistics into a supplier who might subcontract out some or all of the implementation.
● To add value to the supply chain, additional services may be done, such as packaging, boxing, and crating.
● Taking the farm-to-grocery store example, a 3PL provider could be responsible for packaging the vegetables, cereals, or eggs in cartons and then transferring the relevant items from the farm to the grocery store or supermarket.
4PL — Fourth-Party Logistics
● In the 4PL model, a venture outsources the management of logistics activities as well as the implementation throughout the supply chain.
● The 4PL provider provides management and more strategic insight over the enterprise’s supply chain.
● A producer will utilize a 4PL to outsource its logistics operations. In this case, the 4PL may manage the communication with the farmer to produce more vegetables, cereals, or eggs.
5PL — Fifth-Party Logistics
5PL is a rather new model (its roots come from the present decade we operate in). It controls all of the operations in a supply chain with the usage of information technology and combines the proven methods of 3PL and 4PL.
● A 5PL operator is a logistics service provider that plans organizes and implements logistics solutions on behalf of other commercial entities.
● The 5th logistics service supplier can fortify demand. Additionally, it negotiates rates with other service providers, like trucks, airlines, etc.
● The businesses which outsource their logistics’ management functionalities to third parties make a great illustration of such a remedy.
● The 5PL theory recently gained hype with the popularization of e-commerce.
● Along with the integration and management of a supply chain, the 5PL organizations provide some other beneficial services, such as call facilities or online payments.
Leveraging our four-decade expertise across industries, Ark India provides customized end to end supply chain solutions in PAN India.
