What is 3PL

3PL is a common term thrown around by people in the business of logistics. It may be common jargon for people that have a foundation in this logistics business. However, most people outside this realm likely hear this term and are puzzled. What does it mean exactly? Yes, 3PL stands for Third Party Logistics, but that means the exact same thing to people not in the supply chain industry. So, this article will explain what it means and how it differs from other terms that are commonly used.

3PL

Third Party Logistics, as said before, is a commonly used term in the supply chain. The true meaning behind the term is that the logistics team of a company is reaching out to another independent logistics company in order to get their products to where they need to go. Once the product goes out the door, it is the 3PL firm/brokerage’s responsibility until it gets to the receiver. So, the internal logistics department of company A (the company shipping… let’s say bread) contacts Company B (a 3PL company) to get their bread from Louisiana to California. Company B takes responsibility for that shipment of bread from the time it’s loaded on whatever vehicle to the point it’s offloaded to the receiver. This could mean a variety of services to accomplish this:

  • Warehousing
  • FTL and LTL freight shipping
  • Shipping and receiving
  • Reverse Logistics
  • Picking and packaging, Kitting, and customization, and more

Usually, it will simply involve Company B contacting a person or company that transports freight to move Company A’s product. 3PL is a fast-rising type of brokerage and a great option for all parties involved.

2PL

A 2PL entity, or second party logistics, is one less step in the supply chain. So 2PL would be commonly known as a carrier. This could be a freight forwarder, a shipping line, etc. This would be the company that a 3PL would contact to actually move the product that they need to move. These entities are a vital part of the supply chain, as they usually do the actual moving of the freight. 2PLs have less responsibility than 3PLs but still have a hand in it when they pick up the product and transport it. Getting paid quickly is also vitally important to keep the 2PLs moving, freight factoring is a simple and easy way to keep the carriers moving.

4PL

4PL, or Fourth Party Logistics, Fourth Party Logistics is not too far off from 3PL. However, for 4PL, the difference is that they would manage ALL the logistics for a company. So, where a 3PL would communicate with a certain company’s internal logistics team, a 4PL acts as the interior and exterior logistics for all supply chain needs. When a company wants to outsource for all their supply chain management needs, they would want to get in contact with a 4PL company. Usually, a 4PL will not own assets and will outsource shipping to a 3PL.

5PL

Fifth party logistics isn’t dissimilar to 4PL, with a few major differences. They have complete control over the supply chains and the supply networks. That means they will work with a larger group of carriers and businesses to get the job done efficiently. In addition, most 5PLs have an emphasis on utilizing technology and data to get the job done to the best of their ability.

Guest Blogger Rexing Companies: Rexing Companies Is a one-stop-shop for logistics, supply chain management, and warehousing. Our family of companies work together to offer a more personalized service than our competitors and take pride in building strong business relationships.