Logistics Models Explained
Logistics is the process of planning and implementing the shipment and storage of goods in the most efficient and cost-effective way. It is a fundamental part of Supply Chain Management. With International trade figures constantly increasing, it is a service always high in demand. Logistics has evolved into 3PL, 4PL and 5PL models.
But what does each logistics model involve?
3PL – THIRD PARTY LOGISTICS MODEL
The 3PL company acts on behalf of another organisation in need to move their goods. The 3PL company then works with other shipping companies as liaison, to manage distribution services for their client.
A 3PL service can include transportation, warehousing, packing, freight-forwarding, cross-docking, and managing inventory functions. Additionally, it may include other services such as customs clearance or weighing, depending on the business model of the company.
Its objective is to optimise delivery distributions, expedite shipments to fulfill deliveries time wise and support greater visibility.
4PL – FOURTH PARTY LOGISTICS MODEL
Essentially 4PL takes 3PL a step further by additionally managing outsourced logistics on top of directing the movement of goods.
A 4PL service can include transportation, warehousing, packing, freight-forwarding, cross-docking, and managing inventory functions, as well as managing the logistics strategy for the client.
It is the single point of contact between all parties and can provide clients with more strategic solutions and insights.
5PL – FIFTH PARTY LOGISTICS MODEL
5PL is a relatively new logistics model within the supply chain industry, very similar to 4PL. A fifth party logistics provider works closely with their client to develop and implement the most suitable logistics solutions for their whole supply chain, whilst enjoying the efficiency benefits arising from the use of the most appropriate and advanced technologies.
5PL is mainly used by e-commerce or bulk retailers.