These are those entities who provide the logistics services to organisation. These logistical services may include:
These LSPs can be from within the organisation for example: a separate division taking care of logistics, warehousing or a department within a division or simply a logistics manager (usually in a small company. e.g. Sachin and Binny Bansal delivering books on their own during the early days of Flipkart) or can be outsourced to a third party such as DHL, Arshiya International etc.
According to the ownership and hence their relation with the client, LSPs may be classified into 5 Types:
1PL (First Party Logistics)
A 1PL is usually a seller (an importer, trader, retailer, manufacturer or a distributor) that owns a transportation fleet and distributes the product to the required destination. e.g. a milkman delivering milk at your place. Occasionally it can be the customer when he himself who takes the delivery form the seller and delivers it at his destination. e.g. You going to the milkman’s dairy and taking the milk. Apart from transportation it may also perform other logistical functions mentioned above
2PL (Second party logistics)
A 2PL is a carrier company that owns assets necessary for the transportation of goods and operates the fleet. Such a company is often contracted or hired by a 1PL since it results in elimination of unnecessary expenditure on the competencies required for transportation by 1PL. e.g. a Ship Carrier company, an Airline company.
3PL (Third Party Logistics)
A 3PL too concerns itself with the transportation of goods from a seller/supplier/consigner to the buyer/consignee but in addition to that it provides other services that are warranted in a supply chain as well. A 3PL is hired to oversee all or part of a supplier’s (1PL) logistics, including operations, storage and transportation. For example, a 3PL might run a warehouse where a vendor’s large items are stored, and hire a 2PL to deliver them to customers’ homes. 3PLs provide the management skills along with the physical assets, labor, and systems technology to provide professional logistics services, relieving companies of the responsibility of performing these services themselves.
Services of a 3PL may include some or all of the logistical Services and in addition to them they may also provide
Cost management and optimization
Contract management service
4PL (fourth party logistics)
Sometimes a firm contracts out (outsources) its logistical operations to two or more specialist firms (the third party logistics) and hires another specialist firm (the fourth party) to coordinate the activities of the third parties. So essentially a 4PL organisation assembles and integrates the resources, capabilities and technological abilities of its own organisation and other organisations to design, build and run comprehensive Supply Chain Solutions for its Clients.
5PL (fifth party logistics)
Much the same as 4PLs, and a new term circulating within the supply chain industry. They plan, organise and implement logistics solutions on behalf of the contracting company. They have widespread end-to-end tracking of containers which allow customers and the contractor to receive constant updated information on the container shipment process. Essentially, a 5PL manages networks of supply chains with an extensive e-business focus across all logistic operations, other than 3PLs and the parent company.
-Ankit Verma, Management Development Institute