1PL, 2PL, 3PL, 4PL and 5PL: Types of logistics operators, differences and advantages.

Contracting logistics operators is a very common business practice when looking for efficiency when transportation of goods. Given the complexity of logistics processes and the rise of the e-commerce, more and more companies are using these services and those that are arising to offer them.

The latter are what we commonly refer to as logistics operators. They are specialised in managing part or all the processes involved in the supply chain. They can be dedicated to warehousing, transport, inventory management, distribution… But the main thing is that they adapt to the specific needs of each client with different levels of integration.

Internationally, they are known by the term PL (party logistics or logistics providers), and the number that accompanies the term indicates the degree of outsourcing of logistics. In other words, the higher the number in front of the PL, the higher the level of outsourcing.

Types of logistics operators

As we have already mentioned, the number that accompanies the term PL indicates is the degree of the outsourcing of logistics. In accordance with this, we can classify logistics operators as follows:

1PL or First Party Logistics

These are private companies or particulars that store and transport the goods directly, including delivery and reception. It is usually applied in small production companies that deliver locally and are self-sufficient in terms of logistics.

1PL logistics providers are transport agencies that distribute goods, so they are in charge of the purchase and maintenance of the transport fleet, as well as the management of drivers.

2PL or Second Party Logistics

They are the first step of a manufacturing company in the outsourcing of logistics tasks. Companies offering these 2PL services are considered as logistics operators because, in addition to the transport, they also take care of the warehousing of the goods.

2PL logistics operators usually work on a national level, even if they offer only standard services. It is the contracting company that coordinates the transport fleets and prepares the orders in the warehouse. Good examples are shipping and trucking companies.

3PL or Third Party Logistics

They outsource most or all of the logistics operations. This 3PL operator acts as an intermediary between the production plant and the customer. And, in addition to providing transport and warehousing services at their facilities, they also use their own fleet of trucks. In this way, they organise transport, traceability of goods and warehouse operations (order picking, inventory control, reverse logistics and cross-docking).

3PL logistics providers optimise the supply chain management, relieving the company of this process. Although the contracting company is the owner of the stored goods and still has the overall control and manages orders and invoices, there is no difference between a 2PL operator and a manufacturer that manages its own logistics.

It is important to note that 3PL logistics operators offer customised services according to the needs of each customer, and the agreements they establish are usually long-term, allowing for a progressive optimisation of the supply chain.

4PL or Fourth Party Logistics

These are logistics providers that provide logistics consultancy services, planning, localisation, management, integration of new technologies, as well as acting as supervisors of the operation of the supply chain. These operators do not carry out the physical tasks of transport and warehousing.

We can say that 4PLs completely control the manufacturer’s supply chain, designing and optimising it to achieve greater efficiency. In addition, they are also in charge of contracting 3PL suppliers for the physical tasks, they act as interlocutors between suppliers and customers and they are usually long-term contracts.

5PL or Fifth Party Logistics

5PLs integrate the services of 3PLs and the supply chain optimisation of 4PLs. They are the most advanced logistics outsourcing, managing several global supply chains. Their services allow the companies that hire them to leave 100% of the logistics and supply chain in their hands.

5PLs are companies that must have a perfect relationship between the operations to be executed so that logistics is fully optimised. They control everything from manufacturing processes to reverse logistics. However, for the majority of intermediate tasks, they subcontract 4PL and 3PL operators.

The ideal logistics operator

We cannot speak of an ideal logistics operator, but rather companies and importers have to consider which level best suits them and what their needs are. Only by carefully examining all the options on the market will it be possible to find the one that best suits the specific nature of the business.

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