Layers to Logistics Services
There are four main interrelated layers of logistics services:
  • First Party Logistics (1PL). Concerns beneficial cargo owners which can be the shipper (such as a manufacturing firm delivering to customers) or the consignee (such as a retailer picking up cargo from a supplier). They dictate the origin (supply) and the destination (demand) of the cargo with distribution being an entirely internal process assumed by the firm. With globalization and the related outsourcing and offshoring of manufacturing, distribution services that used to be assumed internally tend be contracted to external service providers.
  • Second Party Logistics (2PL). Concerns the carriers that are providing a transport service over a specific segment of a transport chain. It could involve a maritime shipping company, a rail operator or a trucking company that are hired to haul cargo from an origin (e.g. a distribution center) to a destination (e.g. a port terminal).
  • Third Party Logistics (3PL). Concerns freight forwarders that could have stakes in a specific transport segment and its physical assets, but who are offering comprehensive freight distribution services along transport chains. These services can involve warehousing, transloading, terminal operations and even forms of light manufacturing such as packaging and labeling. A 3PL thus tries to organize the tasks related to physical distribution, so that parts and finished goods can be carried from their origin to their destination.
  • Fourth Party Logistics (4PL). Concerns commonly independent and neutral actors such as specialized consulting firms that are organizing and managing complete supply chains strategies for their customers. They can be involved in outsourcing decisions, supplier selection and the routing of cargo to support supply chain management. This often involve agreements (subcontracting) with 3PLs and 2PLs. Many 3PL firms also offer 4PL services.
Each layer involves increasing levels of service and supply chain integration. With service integration, a number of more comprehensive logistics services are provided. At the same time, supply chain integration involves a growing number of steps managed by the logistics service provider. For instance, a 3PL could be booking transport and warehousing services creating a supply chain between a manufacturer and the distribution center of a purchaser. Several firms, many global in scope, offer a variety of logistical services spanning 2PL, 3PL and 4PL layers. About 75% of all 3PL firms are also offering 4PL services.