Most people involved in logistics or supply chain related fields would have heard of the term 3rd Party Logistics or 3PL.
I ‘m not sure however if many would be that familiar with the terms 1st Party Logistics, 2nd Party Logistics or 4th Party Logistics let alone even pondered the meanings of 1PL, 2PL or 4PL .
Given this blog is all about managing 3rd Party Logistics service providers it would be remiss of me if I did not provide an explanation of how the term 3PL is interpreted throughout this site.
At the same time I’ll do my best to help you make some sense of the terms 1PL, 2PL and 4PL.
If you ask the google machine “What is a 1PL?” or “What is a 2PL?” it will direct you to many different sites and there are a myriad of explanations – most of which don’t quite make sense to me from a logistics perspective.
I just don’t get some of the logic that is being presented.
The diagram below is a summary of my take on what it all means and it does differ somewhat to some of the other explanations currently found out there in cyberspace.
To be honest I think the terms 1PL and 2PL have been developed as an after thought once the term 3PL had been coined.
To further complicate things the concept of 4th Party Logistics (4PL) was thrown into the mix by Andersen Consulting (Now Accenture), although it did come after the word 3PL was a universally accepted as part of the language of logistics and supply chain managers.
Anyway, before we get to “What is a 3PL?” here’s some further explanation of 1PL and 2PL.
To provide some context my definitions are based on the premise of how far removed the entity performing the logistics processes is from the original source of the finished product.
Therefore on the 3plmanager.com blog the following definitions apply:
1st Party Logistics (1PL)
1st Party Logistics (1PL) is where the organisation is the manufacturer and distributor of a product and performs all (or some) of its logistics processes in house.
This would include the manufacturer operating a warehouse and making deliveries of completed orders to it customers using its own fleet of vehicles.
2nd Party Logistics (2PL)
2nd Party Logistics (2PL) is where the organisation is a distributor of a manufactured product and performs all (or some) of its logistics processes in house.
This would include the distributor operating a warehouse and making deliveries of completed orders to it customers using its own fleet of vehicles.
3rd Party Logistics (3PL)
3rd Party Logistics is where the manufacturer (1PL) or the distributor (2PL) of a product engages another organisation to perform some or all of its logistics processes.
This would include the other organisation providing services to perform one or more of the following processes:
- International courier services
- International freight forwarding services
- Customs clearance services
- Warehousing services
- Transportation services
So back to the question “What is 3rd Party Logistics (3PL)?”
Third Party Logistics (3PL) is defined as “A logistics process performed by an organisation that is NOT the manufacturer or distributor of the product”
And hence a Third Party Logistics (3PL) service provider is defined as “An organisation that provides the services of performing logistics processes on behalf of a manufacturer or distributor of products”
Further clarification of this point was made in 2008 when legislation was passed in the USA to define a 3PL as “a person [or organisation] 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”
And finally the notion of a 4PL.
4th Party Logistics (4PL)
As mentioned above the concept of a 4th Party Logistics (4PL) service provider was first defined (and trademarked) by Accenture in 1996 and defined a 4PL as “A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution”
Also known as a “lead logistics provider” or LLP a 4PL will typically use a technology solution to integrate the services of multiple 3PLs to manage a manufacturers or distributors supply chain from end to end.
It is not uncommon for a 3PL organisation to develop a 4PL solution that will manage both its own services and the services of other 3PLs.
What do you think – do my definitions make sense ?
Feel free to provide some feedback or let me your thoughts on this post by making a comment below
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