What does third party logistics mean?
The term third party logistics – often abbreviated to 3PL – refers to a specific logistics model: 3PL providers take over third party transportation and warehousing. For this purpose, they maintain their own fleet of vehicles and warehouses. If needs be, services also include inventory management, warehousing, labeling, packaging, customs clearance and IT services such as delivery status determination and product tracking. In other words, using 3PL service providers, manufacturing companies can completely outsource all logistics processes and concentrate fully on their core competencies.
What is the difference between 1PL, 2PL, 3PL and 4PL?
3PL is different from other supply chain models such as 1PL, 2PL and 4PL. This classification of logistics service providers and their respective services has evolved historically:
- 1PL: First Party Logistics Service Provider. Manufacturing companies handle most of the logistics themselves. This includes transportation, handling and warehousing services. At the end of the 1970s, 1PL was largely replaced by 2PL.
- 2PL: Second Party Logistics Provider. Just the actual shipments are handed over to a contracted logistics partner. However, the manufacturing companies continue to control and manage the logistics processes. 2PL emerged in the 1980s, especially with regard to lean management. Examples of 2PL are freight forwarders and courier services.
- 3PL: Third Party Logistics Provider. 3PL emerged in the 1990s. Service providers expanded their service portfolio beyond 2PL and acted as system service providers: They organize the flow of goods and information, take over all logistics processes and offer customized value-added services on top of this – e.g. in terms of financial and information services, labeling, packaging and customs.
- 4PL: Fourth Party Logistics Service Provider. Starting in the mid-1990s, 4PL entered the scene. It enables manufacturing companies to outsource optimization, integration and management of the entire logistics chain. The 4PL service provider links all participants in the value chain to each other, controls all processes and keeps an eye on the most efficient use of all resources. The service provider will maintain neither an own fleet of vehicles nor warehouses, but will commission 3PL providers for third-party transportation.