What Do You Mean by Logistics Service Providers
Logistic Service Providers, also known as 3PL (third party logistics), are responsible for managing the warehousing, distribution, and transportation of freight of shippers who have outsourced them this job. Their work is comparable to that of freight brokers, but they have access to better tools, technology, and knowledge, because of which their service quality is also better. LSP’s provide several benefits to their clients, including:
- Cost savings- Access to Transportation Management Software solutions
- Lesser back- Office related work
- Better Risk Management
- Improved customer satisfaction
- Higher return on investment and greater efficiency to cash cycle
What Are the Different Kinds of Logistics Services
The different types of Logistics services are as follows:
A first-party logistics (1PL) provider is a company/individual with their cargo and freight and can transport goods or products from one location to another. No middlemen are involved in the entire process. Here the goods are directly transported to the destination by the manufacturers themselves.
Second-Party Logistics (2PL) provider is the entity that transports their goods through ship, road, air, sea, or rail. Second-Party Logistics (2PL) providers include asset-based carriers that mainly transport goods using leased ships of their own and airlines they have a contract with. Airline firms, shipping firms, or transport companies are the best examples of Second-Party Logistics (2PL) providers.
Third-Party Logistics (3PL) providers provide outsourcing services to companies who want their goods shipped to a different location. They take care of warehousing, distribution, and transportation and provide customs brokerage and logistics software (tracking and analytics) for their clients.
Fourth-Party Logistics (4PL) provider manages the supply chain operations of their customer. They are involved in providing transport and warehousing operations, managing third-party suppliers, analyzing logistical data, and managing supply chain optimization for their clients. They have a more significant role in logistics management for their customer than 3PL.
Fifth-Party Logistics (5PL) providers help to manage the entire supply chain process. It enables better control of their supply chains regardless of the number of parties involved or complexity of operations. Fifth-party logistics providers also find out the most efficient supply chain networks by implementing efficient and cost-effective strategies.
Difference Between 2PL and 3PL
The main difference between 2PL and 3PL is that 2PL companies own the carriers which they lease out to the manufacturers. Service responsibility is owned by the manufacturer.
In 3PL model, the third party completely owns the process including carriers and service.
With 2PL, the scalability of business becomes a challenge due to the capital investment required (though it is lower than 1PL). Whereas, with 3PLs, scalability of business can be better achieved.