Enterprise Explains: Party logistics. With globalization seemingly nowhere near itsend, and in the global environment of heightened demand for timely and efficient delivery of goods, logistics is climbing higher up companies’ priorities. Logistics operations have become increasingly more complex, with more parties becoming involved in businesses’ supply chains. While some companies manage their logistics in house, most are now turning to logistics management services to facilitate this process. Enter: The rise of the 2PL, 3PL, 4PL and — more recently — 5PL logistics players.

In a nutshell: Companies can hand over control of either some or all of their supply chain to party logistics (PL) players, or logistics management firms, to ensure their supply chain processes operate smoothly and with no hiccups. Whether it’s a second, third, fourth, or fifth party logistics player indicates the extent to which the business outsources its logistics services.

What do logistics management firms do? Ultimately, any logistics management firm helps ensure that goods go from one place to another smoothly. This could start from supply, shipping and distribution, and extend all the way to customer service and returns management. Conventionally, these services are carried out manually, but with recent advancements of technology, many logistics management service providers are using technologies like artificial intelligence (AI) and the internet of things (IoT) to help make these processes more efficient.

Some of the biggest logistics management companies across the MENA region include DHL, DP World, Agility, National Shipping Company of Saudi Arabia (Bahri), Aramex, and Nakilat.

If a company is doing first partylogistics, that means it handles its logistics in-house, which is most common amongst smaller companies with small production levels and who distribute their products locally. These companies essentially manage, store their goods, and deliver to the end user — with their own fleet — all by themselves. They do not outsource any segment of their supply chain.

What does a 2PL player do? A 2PL provider provides transportation of goods on behalf of your company. It can do so by providing trucks, ships, aircraft and other modes of transportation to move and deliver goods. Shipping companies, airlines, and trucking companies are prime examples of 2PL players.

Taking it up a notch: For complex logistical needs, businesses can turn to 3PLs, and outsource a large part of — or even the whole — logistics process to an external provider. The 3PL provider facilitates the business’ logistics operations by managing their supply chain from start to finish — arranging for transportation like a 2PL, but extending services to warehousing, storage, shipment, and reverse logistics, which is essentially the return process of an order. The 3PL provider manages the supply chain, but the business maintains overall control of it. DP Worldis an example of a 3PL provider, taking care of contracts, taking inventory, and offering warehouse and transportation services.

Have a smooth supply chain process secured — but need to make it more efficient? A 4PL player designs and implements supply chain management solutions to ensure logistics processes are running smoothly. 4PL providers will not carry out any physical transport, warehousing, storage activities, or any physical logistics processes. They will instead contract a 3PL provider to carry out these activities. They will solely oversee management, and optimize clients’ supply chains. Examples of 4PL providers include Maersk and Amazon.

The full package — and a bit more:Fifth party logistics players are the most recent entrants to the market. They manage the entire supply chain of a business, beginning with production, to ordering, transportation, and warehousing. It offers transport and physical logistics processes, in tandem with optimisation of the supply chain, doing the work of both a 3PL and 4PL firm. The biggest differentiator for this logistics player is that it can manage several supply chain networks in a business, rather than focus on just one.

Tech plays a big role for 5PL players: 5PL providers use technologies like blockchain, robotics, automation, Bluetooth beacons, and Radio Frequency Identification (RFID) devices, to help boost supply chain efficiency. 5PLs are a very new addition to the logistics space, but their ability to manage multiple supply chains makes them an attractive proposition for established or fast-growing online retailers, for whom an efficient supply network is essential.

Blurred lines: Some logistic providers offer different party logistics services simultaneously, such as Aramex, which offers both 3PL and 4PL services.

Tags: