Layers to Logistics Services
There are four main interrelated layers of logistics services that involve increasing levels of service and supply chain integration:
First Party Logistics (1PL). Concerns beneficial cargo owners which can be the shipper (such as a manufacturing firm delivering to customers) or the consignee (such as a retailer picking up cargo from a supplier). They dictates the origin (supply) and the destination (demand) of the cargo with distribution being an entirely internal process assumed by the firm. With globalization and the related outsourcing and offshoring of manufacturing, distribution services that used to be assumed internally tend be contracted to external service providers.
Second Party Logistics (2PL). Concerns the carriers that are providing a transport service over a specific segment of a transport chain. It could involve a maritime shipping company, a rail operator or a trucking company that are hired to haul cargo from an origin (e.g. a distribution center) to a destination (e.g. a port terminal).
Third Party Logistics (3PL). Concerns freight forwarders that could have stakes in a specific transport segment and its physical assets, but who are offering comprehensive freight distribution services along transport chains. These services can involve warehousing, transloading, terminal operations and even forms of light manufacturing such as packaging and labeling. A 3PL thus tries to organize the tasks related to physical distribution, so that parts and finished goods can be carried from their origin to their destination.
Fourth Party Logistics (4PL). Concerns commonly independent and neutral actors such as specialized consulting firms that are organizing and managing complete supply chains strategies for their customers. They can be involved in outsourcing decisions, supplier selection and the routing of cargo to support supply chain management. This often involve agreements (subcontracting) with 3PLs and 2PLs.