It is quite astonishing to understand how humans have discovered or rather mastered the art of logistics & supply chain and yet for how many people, even for experts of the game, it comes across as a pleasant surprise to know that there are actually so many different layers at which this industry operates.
To start, let us get straight to the point:
- 1PL – Shipper
- 2PL – Traditional Transportation Provider
- 3PL – Integrated Logistics Service Provider
- 4PL – High Level Logistics/IT Consulting
- 5PL – Consulting for the High Level Logistics/IT Consultants
- 6PL – Artificial Intelligence Driven Supply Chain Management
- 7PL – A Turnkey Solution Provider (3PL + 4PL = 7PL)
- 8PL – Super Committee Created to Analyze Competitor’s Results
- 9PL – Crowd Sourced Managed Logistics Strategy
- 10PL – Supply Chain Becomes Self Aware and Runs Itself
1PL – Shipper: The manufacturer or the industrial actor/ trader who does not outsource transport and logistic activities to third parties. These functions are carried out by the company’s own departments.
2PL – Traditional Transportation Provider: The manufacturer/ trader hires a carrier as a subcontractor for the operational execution of a clearly defined transport or logistic task.
The organisation and follow-up remains the responsibility of the manufacturer/ trader. The relation is often only cost-driven and short-term, with the logistic actor doing what the client instructs, and being paid accordingly.
A second-party logistics provider is an asset-based carrier, which actually owns the means of transportation.
Examples:
a) Shipping lines: Shipping lines which own, lease or charter their ships;
b) Airlines: Airlines which own, lease or charter their aircraft
c) Truck/ Trailer Companies: Truck/ Trailer Companies which own or lease their trucks/ trailers/ specialised vehicles.
3PL – Integrated Logistics Service Provider
Third-party logistics providers typically specializes in integrated operation, warehousing and transportation services which can be scaled and customized to customers’ needs based on market conditions, such as the demands and delivery service requirements for their products and materials.
Third-party logistics providers include freight forwarders, courier companies, as well as other companies integrating & offering subcontracted logistics and transportation services. There are four categories of 3PL providers:[4]
- Standard 3PL Provider: this is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) – the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
- Service Developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.
- The Customer Adapter: this type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company’s logistics activities. The 3PL provider improves the logistics dramatically, but does not develop a new service. The customer base for this type of 3PL provider is typically quite small.
- The Customer Developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.
4PL – High Level Logistics/IT Consulting: Fourth-party logistics provider is an independent, singularly accountable, non-asset based integrator who will assemble the resources, capabilities and technology of its own organisation and other organisations, including 3PLs, to design, build and run comprehensive supply chain solutions for clients.
4PL is generally a consulting firm offering logistics advice, transportation and supply chain management services.
Their drive is to be different from the lower three levels that are ideally involved in an EDI operation – 3PL, 2 PL that are actual carriers, and 1PL that are shippers – or sometimes just to promote their business services in the logistics field. Providing non-asset-owning service seems to be an interesting business and that is what the 4PL do.
There are so many ways to manage the logistics process, and regardless of the forwarders, carriers or storage locations, 4PL really gives the customers a business edge. It can offer special terms during the process, or it might expedite something just to help the customers out.
5PL – Consulting for the High Level Logistics/IT Consultants: A fifth party logistics provider will aggregate the demands of the 3PL and others into bulk volume for negotiating more favorable rates with airlines and shipping companies. Non asset based, it will work seamlessly across all disciplines.
5PL is a basically a marriage between 4PL and detailed planning, organizing and implementing logistic solutions during the procurement. It manages everything: from interacting with suppliers, tracking inventory and shipments, and providing up-to-date status using appropriate technologies. This seems to be logical as well, as the companies with the greatest and latest technology has the ability to run the entire ship and find them-selves to handle shipment operations.
The central ethos of 5PL is its commitment to collaboration and to obtaining a higher degree of resource utilisation in order to achieve savings and open up opportunities to secure the best possible solution at minimum cost/carbon etc.
6PL -Sustainable Logistics Systems Management – Lead Sustainability Service Provider
6PL concept aims to help the logistics industry adopt a sustainable development strategy and 6PL companies act as the ‘Lead Sustainability Service Provider’ and also include Logistics Social Responsibility.
7PL – A Turnkey Solution Provider (3PL + 4PL = 7PL)
7PL is being used to describe a turnkey solution where instead of dealing with several people for various services like inbound, outbound and warehousing, The concept is ‘one contract, one bill’. 7PL is the combination of 3PL and 4PL into one (3PL + 4PL = 7PL).
One logistics service provider provides a client with both 3PL and 4PL services under one roof. 7PL is referred to as a turnkey solution where instead of dealing with several people for various logistics services like inbound, outbound and warehousing, clients deal with one person under the ‘one contract, one bill’ concept. It sometimes also creates an autonomous competitor to Test Alternative Supply Chain Strategies.
DIZA Logistics 