What is the Difference between 1PL, 2PL, 3PL and 4PL Logistics?

When it comes to outsourcing logistics, there are a number of different things to consider. You might start off just wanting to understand the difference between 3PL and 4PL logistics, but you can easily end up delving into the specifics of the different types of logistics providers. 

What Does it Mean to Outsource Logistics?

The many different types of outsourced logistics options can seem overwhelming and complicated – but it is actually fairly simple to understand the concept. Outsourcing logistics refers to the act of strategically choosing experts who don’t work for your business to handle the supply chain of your business. There are several different types of logistics service providers, and they all have there own pros and cons.

The Different Types of Outsourced Logistics Solutions: 1PL, 2PL, 3PL, 4PL Logistics

When choosing which outsourced logistics solution is right for your business – it’s important to consider each of the different types of logistics companies that are out there. It can be a lot to research and evaluate, and it can leave you with a lot of questions. You might find yourself asking things like, what is the difference between 3PL and 4PL? How do I compare 2PL vs. 3PL?

We’re in the business of helping you save time, so we’ve outlined the key things you need to know about the different types of logistics companies below. 

1PL or First Party Logistics	First party logistics involves just two parties. There is the manufacturer or distributor that ships the goods (you), and then there is the retailer or customer that receives the goods (your customer).
2PL or Second Party Logistics	A 2PL is often referred to as a forwarder because their business mainly consists of a means of transportation. For instance, it could be an airline company that also offers freight services to get things from you to your customer.
3PL or Third Party Logistics	3PLs work as a go-between or a mediator.  A good 3PL can provide as few, or as many, outsourced logistics services as you need. A 3PL will receive products directly from your supplier, store the product, and pick, pack and deliver orders to your customers.
4PL or Fourth Party Logistics	Fourth Party Logistics advise and project manage your entire supply chain strategy and help you build a solution – they often engage other third parties such as a 3PL to manage the logistics component.

 

The Pro’s and Con’s of Each Type of Outsourced Logistics

Just like any method in business, there are always pros and cons to each method of handling logistics. Instead of getting caught up in the debates around 3PL vs. 4PL or 1PL vs. 2PL, it’s a good idea to take a step back first and look at what your business needs demand.  

A 1PL system is definitely a simple system, and it doesn’t require a lot of integration or networking. Your business has full control over the process. However, it can hamper the ability to grow, and it is not always the most effective system once the business reaches a certain level of maturity or growth. 

The 2PL system can also be a more simple system, but it doesn’t offer as many logistics solutions as the more complex 3PL or 4PL logistics models. 

When a company matures to the point that they require a 3PL, it does mean you need to let go of some degree of control in order to outsource the day to day logistics of your business. However, what your business loses in control, you’ll make up for with flexibility, reach and consistently.

Read more about finding a 3PL that can grow with you. 

If you choose to go with a 4PL, this means giving up control of your supply chain almost entirely. The 4PL supplies most of the management and design functions. While these functions are highly personalized to match the business needs, they still keep most of the process out of the business’ hands.

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