An enterprise that sends goods or products from one location to another is a 1PL. For example, a local warehouse that transports package directly to a business location for sale is a 1PL.
An enterprise that owns assets such as vehicles or planes to transport products from one location to another is a 2PL. That same local farm might hire a 2PL to transport their packages from the warehouse to the business location.
In a 3PL model, an enterprise maintains management oversight, but outsources operations of transportation and logistics to a provider who may subcontract out some or all of the execution. Additional services may be performed such as crating, boxing and packaging to add value to the supply chain. In our farm-to-grocery store example, a 3PL may be responsible for packing the eggs in cartons in addition to moving the eggs from the farm to the grocery store.
In a 4PL model, an enterprise outsources management of logistics activities as well as the execution across the supply chain. The 4PL provider typically offers more strategic insight and management over the enterprise’s supply chain. A manufacturer will use a 4PL to essentially outsource its entire logistics operations. In this case, the 4PL may manage the communication with the farmer to produce more eggs as the grocery store’s inventory decreases.
A 5PL provider supplies innovative logistics solutions and develops an optimum supply chain network. 5PL providers seek to gain efficiencies and increased value from the beginning of the supply chain to the end through the use of technology like blockchain, robotics, automation, Bluetooth beacons and Radio Frequency Identification (RFID) devices.
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