Breaking down the layers of Party Logistics
How the different PLs impact supply chains
In 1PL, the dairy producer has full control over his entire logistics process and transports his goods directly from his farm to end-users. 1PL is cost-effective as the solutions sit in-house with the customer. However, this also means Jake needs to cater to an entire logistics department and have the expertise and equipment in-house to handle end-to-end logistics.
In 2PL, Jake hires a separate carrier to move his products from one location to another. This level provides the customer with economies of scale by leveraging a network to utilise assets across various customers. This stage could involve a courier company, rail, shipping service or trucking over a specific segment in the supply chain.
Here Jake outsources some of his logistics to a contracted service provider. A 3PL service provider also offers procurement at scale for many different parts of the supply chain, and not just transportation. The 3PL provides additional services that help to coordinate services like booking, documentation, warehousing and packaging. For Jake, a 3PL could package his dairy products and store them until delivery, along with the associated transportation.
In 4PL, Jake’s entire supply chain is made simple. He enters into a long-term contract with a service provider to effectively takeover his logistics process. There is no need for a full in-house logistics department, his own trucks or the need to build logistics capabilities, freeing up more time for customers to focus on their business. The 4PL company provides end-to-end supply chain management with a fully equipped and experienced logistics service team. The 4PL also coordinates the roles and functions of various 2PL or 3PL companies on behalf of the customer.