1PL, 2PL, 3PL—How Many Parties Do You Need for Logistics Excellence?

If you’re an ecommerce business owner, logistics is probably the first thing on your mind when you wake up and the last thing you think about before heading to bed. Today’s supply chain is more complex than ever before, and even seasoned fulfillment experts can have trouble keeping the different logistics solutions straight. Companies have an incredible array of options for getting products to customers, so it pays to do your research before you decide how many parties you want to involve between you and your customers.

1PL (First-Party Logistics)

When the selling scenario only includes the manufacturer and their market, that’s 1PL. Consider, for example, a retail jewelry store that produces goods from scratch in its own workshop and then sells them directly to customers.

2PL (Second-Party Logistics)

If a manufacturer plans to sell their wares in other stores, they’ll need more support, such as what might happen if the 1PL jewelry store became so successful it decided to bring its products to nearby cities. Instead of outfitting a fleet of delivery trucks, however, most companies will work with a 2PL to ship and transport products, even if the “second party” is just the local post office.

3PL (Third-Party Logistics)

In today’s digital world, many business owners choose to expand their brick-and-mortar operations with an online storefront or international retail sales, and third-party logistics providers meet these needs. Unlike a 2PL transportation company, however, 3PLs typically maintain and manage relationships with multiple 2PL carriers, allowing them to negotiate better rates and coordinated deliveries. 3PL services can also make ecommerce businesses more successful by streamlining functions like packing orders and managing inventory, among other services.

4PL (Fourth-Party Logistics)

In the 4PL model, a separate provider manages a client organization’s entire supply chain. In simple terms, a 3PL handles day-to-day logistics tasks, while a 4PL is concerned with the bigger picture of coordinating suppliers, communicating with merchants, and optimizing the supply chain from beginning to end. Companies who use a 4PL often do so because they want to take a completely hands-off approach to supply chain management.

5PL (Fifth-Party Logistics)

This is a newer logistics model that encompasses a variety of definitions, but in general, 5PLs act as conglomerations of 3PLs to serve as end-to-end supply networks as opposed to overseeing individual supply chains like 4PLs. An all-encompassing approach, 5PLs specialize in streamlining global operations and managing large databases of suppliers.

Takeaway

Which option is best for you? No specific logistics model is ideal for every company, but a 3PL provider is a good place to start for most businesses looking to reduce fulfillment costs—and Rocket Shippers is a 3PL ready to step up and introduce your company to the benefits of ecommerce fulfillment today. Learn more about the latest in logistics on our Insights page, or reach out to us directly to get your free quote.