Logistic language can be confusing to deal with when faced with and may hinder your decision making. In case you are wondering what 1PL, 2PL, 3PL and 4PL are, take a seat and take a rest. This guide will unbundle them in order to make the decisions right with your logistics model.
What is 1PL (First-Party Logistics)?
The simplest model of logistics is 1PL. This is when the business manages its own transportation and delivery. For example, a furniture store that has its own vans and drivers to deliver orders is a 1PL operation. It is efficient with small companies that have small delivery areas and inefficient when the volume increases.
What is 2PL (Second-Party Logistics)?
In 2PL, you only contract transportation or warehousing of logistics. As an example, you may hire a truck from a transport firm or lease storage at a warehouse. The logistics chain is still under your control, but you will utilise outside resources to physically move or store.
This model suits best when you require additional capacities and at the same time intend to run things on your own.
What is 3PL (Third-Party Logistics)?
3PL companies provide logistics services all the way. They sort it all out down to warehousing, packaging, shipping, tracking, and returns. The e-commerce companies usually seek the services of 3PLs to make fulfilment simple and save the time to be used on the core business.
3PL benefits include:
- Lower expenses on overheads
- High season scalability
- Better delivery time slots
Nonetheless, you submit certain control of the day-to-day logistics.
What is 4PL (Fourth-Party Logistics)?
The 4PL providers are providers of a strategic partnership. They do not merely deal with logistics, they manage the whole supply chain. A 4PL may also manage several 3PLs, operate with data to streamline routes, and play the role of making all the logistic decisions.
The model is applicable in companies that have highly multi-layered supply chains and large corporations. You would obtain top management and performance, which comes at the price of increased expense and lack of control over day-to-day logistic activities.
Which one is the right one for you?
- Small business, local sellers: 1PL or 2PL
- Emerging e-commerce companies: 3PL
- Companies with international supply chains and success in large-scale businesses: 4PL
Each model entails several trade-offs in terms of degree of control, costs and convenience. Having known these differences, in the future, you will be capable of coming up with a more effective, intelligent approach towards logistics on your business.