The differences between 1-5PL service providers
When deciding on the right supply chain strategy for your company, choosing the most effective logistics service is important. Here are the most prominent logistic strategies used in the market today.
1PL: First Party Logistics
First Party Logistics accounts for the two parties benefiting from the transaction – the manufacturer or supplier shipping the goods, and the receiver.
A First Party Logistics provider is specifically the consigner of goods, the transaction party that has organised transport to the receivers chosen destination. Australian red meat supplier Samex is a 1PL as it exports goods to wholesalers, distributors and supermarket chains worldwide.
2PL: Second Party Logistics
Second Party Logistics involves specifically the carriers of goods for the transaction, which can be rail, road, sea and/or air.
Second Party Logistics providers specialise in the transport area of the supply chain, getting goods from one point to another. They can be an asset-based carrier and own the means of transportation, for example shipping lines which charter or lease their own ships, or airlines that are contracted to use their passenger flights to transport air freight from origin A to destination B.
3PL: Third Party Logistics
Third Party Logistics still primarily concerns goods transportation from a supplier/consigner to a buyer/consignee, but includes additional services involved in the supply chain. These services can include warehousing, terminal operations, customs brokerage, supply chain management, Logistics IT software products and analysis services and track and trace.
A Third Party Logistics provider supplies all these services and manages the obligations of each party from goods departure to destination. For example, BCR is a 3PL service provider with locations throughout Australia including Sydney, Brisbane and Melbourne, specialising in domestic and offshore warehousing, international freight forwarding and customs brokerage, but also provides e-fulfilment, specialised export services and other supply chain management services for your business.
4PL: Fourth Party Logistics
Fourth Party Logistics is essentially employing an overseer for a company’s entire supply chain. A 4PL can also manage 3PLs. Sometimes this provider is called the Lead Logistics Provider and many supply chain consulting companies are considered 4PLs. In many cases, a 4PL may have an integrated electronic interface system that address the requirements of all logistic sections and allow measurement of established KPIs.
Fourth Party Logistics providers act as the head administrator for all aspects in the supply chain of a company. They manage any other contracted 3PLs and provide neutral management, feedback to the company about the state of their supply chain, recommendations and solutions to increase efficiency. In saying this, a larger 3PL can also become a company’s overarching 4PL or display the same characteristics as a 4PL player.
For example: BCR has performed 4PL functions such as consolidating a plethora of suppliers and carriers to provide a single-invoice solution that streamlines the supply chain process.
5PL: Fifth Party Logistics
Much the same as 4PL, 5PL is a new term circulating within the supply chain industry. A 5PL will plan, organise and implement logistics solutions on behalf of the contracting company with a focus on utilising the most appropriate technologies. Essentially, a 5PL manages networks of supply chains with an extensive e-business focus across all logistic operations, other than 3PLs and the parent company.
Finding the right logistics strategy for your business
These different types of outsourced providers can be confusing. Determining the right type of logistics provider will often depend on your business structure and strategy where you ideally select a professional provider that has extensive experience and a credible customer portfolio.
Although BCR specialises in 3PL logistics provision, we also have expertise in other areas and do cross the barriers of other logistic service categories from time to time. For more than 100 years BCR has been assisting, small, medium and large businesses with third party logistics services including international freight forwarding, warehouse solutions and Customs-related services.
For more than a century, BCR has continued to help small, medium and large businesses achieve an optimum logistics solution with warehousing and transportation, including air freight and sea freight services to and from the major ports including Brisbane, Sydney, Melbourne, Adelaide and Fremantle (Perth).