Knowing what type of logistics service you are getting is important in the supply chain business. It can make a difference on whether you’ll be saving up amounts of costs or spending it unnecessarily on the wrong service provider. That’s why it’s important what your business needs in terms of the right supply chain strategy.
If you are a supply chain specialist, you’ve probably heard of the Five Layers of Logistics: 1PL, 2PL, 3PL, 4PL, 5PL. But if you are a recent business owner, you’ve probably never heard of these terminologies. That’s why in this article, we will be explaining to you these terms and what will be the best type for your business needs.
What is Logistics?
Before we delve into the article’s main topic, let’s have a refresher course first on what is logistics. Logistics means the overall process of managing how resources are acquired, stored, and transported to their final destination. An example would be food products. You need to know where they will be stored, how will you acquire them, and how will they be delivered to the client.
What are the Five-Layers of Logistics?
In executing strategies within your supply chain business, you will have to choose a type of provider to deliver and arrange your products. These types of providers can strike a difference in making your customers happy through efficient delivery or not. Here are their definitions and differences:
1PL – First Party Logistics
The 1st PL is First Party Logistics. It deals with cargo owners which can also be the shipper itself or pick up the cargo itself from the supplier. They dictate both the supply and demand of the cargo while the firm handles the distribution of it. An example that can be used here is a farm and eggs as a product. A local farm that transports eggs to a grocery store is an example of 1PL.
2PL – Second Party Logistics
The 2PL deals with the same supplier, but this time, has a transport provider for its products and goods. This layer could involve a trucking company, maritime shipping company, or railroad operator to deliver the cargo to the destination. An example would be the farm hires a trucking company to deliver the eggs to the grocery store.
3PL – Third Party Logistics
The 3PL is where it gets more advanced. It still deals with the same enterprise but at this stage, only supervises the delivery. The logistics and supply chain management are outsourced to another company that will perform the entire delivery process. They may also subtract most or some of the processes to add value to your products. In our example, a 3PL service may take charge of moving the eggs from the farm to the grocery store. They can add other details such as packaging to add value to the delivery process.
4PL – Fourth Party Logistics
In The 4PL Layer, a company outsources management of all logistic activities as well as the processes and execution of the delivery. The 4PL offers more insight and overall management of the logistics operations of the company. In our farm example, the farm will transfer the entire operations to a company that will handle end-to-end deliveries of the eggs to the grocery store.
5PL – Fifth Party Logistics
The 5PL service supplies the provider with innovative solutions and may develop an optimal supply chain for your production outlet. They seek to gain value and efficiency from your production chain end-to-end through the use of automation, technology, blockchain strategies, and many more. In this case, the 5PL will oversee the end-to-end management and supply chain of your business.
Choosing the right logistic strategy
In a supply chain business, it’s important to have your products available 24/7 for customers to browse and purchase. It reflects enormously on customer service and the quality of your products, that’s why it’s important to have the perfect logistics service provider.
Here at Dash Cargo, we can easily do the job for you. Why Dash Cargo? We eliminate your need to invest in warehouse space, technology, transportation, and employees to carry out logistics processes, allowing for more focus on your core competencies. When you avail 3PL, they can scale space, labor, and transportation according to current inventory. We only give you the VIP Treatment you deserve; offering only the best solutions, services, and innovations to eliminate bottlenecks and headaches on your supply chain business, adding value to your products and your shareholders.
