3PL is a common term thrown around by people the business of logistics. Personally, I hear it multiple times a week. It may be common jargon for people that have a foundation in this business, however, most people outside this realm likely hear this term and are puzzled. What does it mean exactly? Yes, 3PL stands for Third Party Logistics, but that means the exact same nothing to people not in the supply chain industry. So, this article will give you a look into what exactly it means and why it differs from the other commonly used ones.
3PL
Third Party Logistics, as said before, is a commonly used term in supply chain. The true meaning behind the term is that the logistics team of a company is reaching out to another independent logistics company in order to get their products to where they need to go. Once the product goes out the door, it is the 3PL firm/brokerage’s responsibility until it gets to the receiver. So, the internal logistics department of company A (the company shipping…. let’s say bread) contacts Company B (a 3PL company) to get their bread from Louisiana to California. Company B takes responsibility for that shipment of bread from the time it’s loaded on whatever vehicle to the point it’s offloaded to the receiver. This could mean a variety of services to accomplish this:
- Warehousing
- FTL and LTL freight shipping
- Shipping and receiving
- Reverse Logistics
- Picking and packaging, Kitting, and customization, and more
Usually, it will simply involve Company B contacting a person/company that transports freight to move Company A’s product. 3PL is a fast-rising type of brokerage, and the best in our opinion. (not that we’re biased)
2PL
A 2PL entity, or second party logistics, is one less step of the supply chain. So 2PL would be commonly known as a carrier. This could be a freight forwarder, shipping line, etc. This would be the company that a 3PL would contact to actually move the product that they need to move. These entities are a vital part of the supply chain, as they usually do the actual moving of the freight. 2PLs have less responsibility than a 3PL but still have a hand in it when they pick up the product and transport it.
4PL
4PL or Fourth Party Logistics. Fourth Party Logistics is not too far off from 3PL. However, for 4PL, the difference is that they would manage ALL the Logistics for a company. So, where a 3PL would communicate a certain company’s internal logistics team, 4PL acts as the interior and exterior logistics for all supply chain needs. When a company wants to outsource for all their supply chain management needs, they would want to get in contact with a 4PL company. Usually, a 4Pl will not own assets and will outsource shipping to a 3PL.’
5PL
Fifth party Logistics isn’t dissimilar to 4PL, with a few major differences. They have complete control over the supply chains, but also the supply networks. That means they will work with a larger group of carriers and businesses to get the job done efficiently. In addition, most 5PLs but an emphasis on utilizing technology and data to get the job done to the best ability.
(Red Stag Fulfillment, https://redstagfulfillment.com/3pl-definition-process-resources/)
(DCL, https://dclcorp.com/blog/3pl/difference-between-2pl-and-3pl/)
(Approved Forwarders, https://www.approvedforwarders.com/whats-the-difference-between-3pl-a-4pl-and-a-5pl/)