Third-Party Logistics (3PL)

Third-party logistics (3PL) is when a business or company decides to outsource parts of their distribution, warehousing, and fulfilment to third parties. While 3PL is the most commonly used third-party logistics term, you may come across other third-party logistics acronyms including 1PL, 2PL, 4PL and 5PL, in the questions below we explain what each of these terms mean.

A first party logistics (1PL) provider is a company or individual that needs to have cargo, freight, goods or products transported from one point to another. Examples of 1PLs would be the cargo sender and the cargo receiver. If you’re already sending goods to your customers, then you could consider yourself to be a 1PL.

A second party logistics provider (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 haulage companies that operate vehicles. Note the shipping line, airline or haulage company may own, lease or charter their ships, aircraft or vehicles rather than own them outright.

A 3PL provides outsourced or third-party logistics services to companies for all or part of their supply chains such as fulfilment, storage and distribution or additional services such as customs brokerage, logistics software such as analytics and track and trace.

For example, Good Logistics offers 3PL services, we specialise in warehousing, storage services and sustainable, international freight handling solutions but we also provide fulfilment services such as real-time stock data, total inventory control, returns management, same day dispatch and delivery to the point of sale.

A 4PL (sometimes referred to as a Lead Logistics Provider) is an independent company who will manage a customer’s supply chain by orchestrating the resources and technology of its own organisation along with the services of other companies such as 3PLs to create the best solution. 4PLs are similar to 3PLs, yet they take on a more strategic role in helping a customer meet its organisational goals and have accountability for the entire supply chain. Their role usually includes analysing vast amounts of data, managing transport and warehouse operations, managing third party suppliers and generally operating any other section of the supply chain to optimise efficiency.

Crucially a 4PL needs to be impartial, while they may be able to offer the services its clients need, they need to compare those services and costs to that of their competitors and work in the best interests of their customer at all times.

At Good Logistics, for example, we often perform 4PL services to streamline supply chain processes, such as consolidating multiple suppliers and carriers to provide a single-invoice solution.

5PL is a relatively new term in the logistics industry and reflects the development of full logistic integration through many outsourced providers. Critical to success in achieving this is the effective integration of IT and computer systems to ensure real-time visibility and control of the entire supply chain no matter how many different suppliers are involved.

Please contact us, we will be happy to advise on the best third-party logistics 3PL options for your business. We have dedicated teams of experienced professionals all over the UK.