Many ecommerce businesses outsource their logistics services. After all, finding a strong supply chain provider can help streamline operations, encourage efficiency, and drive growth. But what are the different levels of logistics services available? And how does a business know which level is right for them?
In this article, we explore four types of logistics providers and examine the main benefits of engaging with them for logistics services.
What is a 1PL?
First-party logistics (1PL) is a logistics service model in which a company handles its own logistics operations, storing goods in its own warehouses and using its own transportation fleet to move those goods from one place to another.
In the 1PL model, a company—anything from a manufacturer, to a supplier, or a retailer—relies on their in-house resources and expertise to manage their logistics operations. This logistics service model could be suitable for small companies with a single sales and distribution channel, such as a brand website or social media store, or large enterprises that have invested extensively in developing their own logistics capabilities.
What is a 2PL?
A second-party logistics (2PL) provider is a carrier that can transport a company’s products to any location across its supply chain. A 2PL owns and operates the ships, planes, vehicles, or other methods of transportation used to move the goods, and will sometimes be referred to as a shipping company or freight forwarder.
A 2PL can be used to send products from upstream manufacturing or storage facilities all the way to end customers’ doorsteps.
If you’re looking to outsource just your transportation operations, including international transportation, then the 2PL logistics services model is your best fit.
What is a 3PL?
A third-party logistics (3PL) provider offers a range of logistics solutions and services for companies of any size and across industries that are looking to outsource some or all of their logistics operations.
Amazon Supply Chain Services (ASCS) is Amazon’s supply chain, offering individual and end-to-end logistics support—from freight to warehousing to fulfillment to last-mile delivery— to businesses everywhere. More specifically, this support includes:
- Inventory management
- Order fulfillment across multiple sales channels
- Ground freight
- Air freight
- Warehousing
- And more
The pricing structure for 3PLs varies, as some 3PLs will engage at a contract level or some may offer pay-as-you-go pricing.
3PLs are a good fit for companies looking for an external party to handle their logistics operations—so that they can focus on their core competencies (such as product or business development).
Working with a strong 3PL like ASCS, which has a global footprint and access to state-of-the-art technology, can help optimize your logistics operations, improve your customer experience, and expand your business into new markets.
A 3PL with a strong physical footprint can also place your inventory close to end customers, wherever they are (ASCS, for example, has more than 200 fulfillment centers),
What is a 4PL?
A fourth-party logistics (4PL) provider offers end-to-end, integrated supply chain management solutions that go beyond what is typically offered by a 3PL. A 4PL is a strategic partner and single point of contact that can essentially run and optimize all or a part of your supply chain, manage multiple 3PL providers and other supply chain partners. A 4PL can act as a supply chain consultant, bringing expertise in several areas, including supply chain software and demand forecasting. 4PLs are a good fit for large companies with highly complex logistics operations and sprawling supply chains that stretch around the globe.
Choosing a logistics provider for your business
Depending on your company’s size, location, expansion and growth plans, and supply chain needs, there are a variety of logistics service models and support levels to evaluate. With everything ranging from the carrier services of a 2PL to the fully integrated supply chain management and optimization of a 4PL, the most important step is finding the provider that best suits your current and future needs.
