The emergence of 3PL, 4PL, and 5PL in logistics

The rise of e-commerce has made a significant contribution to the logistics. Logistics is an organization responsible for carrying out various delivery and shipment related operations known as a massive chain network. And without logistics, e-commerce could have never been possible to be implemented. They are interdepended able on each other for proper functioning.

The new emerging trends in logistics are 3PL, 4PL and 5PL. To understand these terms, it is a must to understand 1PL. The 1st Party Logistics is a firm or an individual, that has its own cargo, freight and can transport goods and merchandise. The functions are performed in-house by the company instead of outsourcing it to another party. It involves leasing or buying a fleet of motorbikes, vans and trucks for transportation. The responsibility and risk stay with the company providing its own logistics services. It can exercise far more control over the fulfillment process than with an external party. This generally means a seamless and higher quality of customer experience. However, logistics may become a big cost center and disturb the core focus of the company.

To counter this negative side, 2nd Party Logistics came into existence. It simply took charge of delivering the goods, allowing companies to focus on their products. 2PLs are typically paid per job and rates can be competitive. Whereas, 3PLs is using an external provider for logistics services that might have been provided within a company. This includes any logistics activities outsourced to another business: warehousing, transportation, cross-docking, inventory management, packaging, and freight forwarding.

4PLs is involved in employing an overseer for managing an entire supply chain of a company. These logistics are often called Lead Logistics provider and they are often treated as a consulting company. Now, 5PLs is a logistics partner that handles the logistics needs of multiple customers. The management of supply chains shifts to supply networks.