The term 1PL (First-Party Logistics) relates to beneficial cargo owners, which can be a shipper or a retailer who receives cargo from a supplier. The term 2PL refers to carriers that are providing a transport service over a specific segment of the transport chain, such as a rail operator, maritime shipping company or trucking company hired to haul cargo from a distribution center to a destination.
The term “3PL” was first used in the early 1970s to identify intermodal marketing companies in transportation contracts. Up to that point, contracts for transportation had featured only two parties – shippers and carriers. The intermodal marketing companies appeared and began to accept shipments from shippers and tendered them to rail carriers, thus, as a third party to the contract, they were dubbed “3PLs.”
The Council of Supply Chain Management Professionals defines a 3PL as a company that offers logistics services for hire that include transportation, warehousing, inventory management, cross-docking, packaging and freight forwarding. Typically these services are integrated or bundled. In 2008 legislation passed declaring that the legal definition of a 3PL is, “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”
A 4PL differs from a 3PL in that the 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners. 4PL organizations act as a single interface between the client and multiple logistics service providers. All aspects of the client’s supply chain are managed by the 4PL organization. It is also possible for a major 3PL to form a 4PL organization within its existing structure.
A 4PL is neutral and will manage the logistics process, regardless of what carriers, forwarders or warehouses are used. The 4PL can and will even manage 3PLs that the customer is already currently using.
5PLs have now emerged in the marketplace as companies who define themselves by broadening the scope to add e-business to the mix, such as electronic procurement. A key function of the 5PL is to plan, implement and organize logistics solutions on behalf of the contracting party, along with adding managing other externals functions such as material handling.