1. Supply Chain and Logistics terminology can seemingly not keep up with the rapid evolution of the industry. For years we have become accustomed to organisations adopting 3-or-4PL business models, but of late abbreviations such as 5, 6 and even 7PL beginning to become part of the logistics lexicon, but what exactly to do these terms mean?
TYPES OF MODELS - 1PL, 2PL
1. A first-party logistics provider refers very simply to any organisation that needs to move product from point A to point B. In this type of model, both the sender and receiver of goods is called a 1PL, and the action of moving products is carried out by their own internal departments with no service provider used for transportation.
2. Second-party logistics refers to a business model in which an organisation appoints a subcontractor to perform defined logistical activities, for example, a single transport route, or warehouse management. All other traditional supply chain activities such as planning or follow-ups remain the responsibility of the shipper, and this model is often ad-hoc and highly cost sensitive. A second party logistics provider will own the means of transportation – such as shipping or airfreight logistics.
TYPES OF MODELS - 3PL
1. A Third Party Logistics Provider is the first logistics model in which the outsourcing of a part of the supply chain occurs. 3PLs offer integrated supply chain solutions such as:
- Transportation
- Warehousing
- Cross-docking
- Inventory management
- Packaging
- Freight forwarding
2. An organisation will outsource a part of the supply chain, which can incorporate multiple logistical activities.
3. The provider will become the point of contact for the organisation and manage the activities required to successful service the outsourced requirement. The 3PL provider may own, or subcontract the logistical activities required by the organisation but is responsible for the entire management of such. These relationships are often more long-term; however, the client will retain expertise necessary to monitor and correct the logistics activities handed to the outsourced partner.
TYPES OF MODELS - 4PL
1. Fourth Party Logistics refers to a model where a non-asset based supply chain integrator takes full responsibility for the management of end-to-end supply chain on behalf of a client. The model requires the 4PL to plan, resource and build comprehensive solutions on behalf of the contracting client. 4PL encompasses all of the services of 3PL, as well as:
- Logistics strategy and analytics
- Freight sourcing strategies
- Network analysis, design and management
- Consultancy and business planning (including change management)
- Project management
- Inventory planning and management
- Inbound, outbound and reverse logistics
2. This model will often see the 4PL provider contracting various 3PL providers on behalf of the client to deliver the required logistical solutions. This type of model requires intense participation by the 4PL provider in the clients business, and the model is based on collaboration and grounded more in long-term value creation than short-term cost focus.
TYPES OF MODELS - 5PL, 6PL
1. A newer term in Supply Chain, a Fifth Party Logistics Provider has arisen from the switch of thinking from supply chains to supply networks. 5PL providers will manage and aggregate the needs of 3PL providers to extract maximum value from airlines and shippers thanks to bulk volume. A 5PL model has an intense focus on e-commerce and the utilisation of appropriate technologies to build the most efficient supply network possible.
2. Sixth Party Logistics moves into the realm Artificial Intelligence and is referred to as an AI Driven Supply Chain. While not much is known about the functioning of such Supply Chains yet, the definition implies the use of AI in the aggregation and analysis of large amounts of data to action, improve and manage supply chain activities throughout the entire process. For example, AI would learn ordering patterns and instruct upstream activities to be triggered proactively, or flag orders as unusual if products are ordered to close together or in illogical patterns.
TYPES OF MODELS - 7PL
1. The term 7PL refers merely to a 4PL provider that owns 3PL activities instead of only managing the providers, as with a more traditional 4PL model. Such models counter concerns that a 4PL is simply a middleman by combining supply chain expertise with asset ownership to undertake bespoke solutions, inclusive of all activities under one ownership umbrella.
2. As the supply chain industry continues to evolve, we are likely to see more and more “PL” terms emerging with 8PL, 9PL and even 10PL already being mentioned in some circles.
TRANSPARENCY AND TRACEABILITY FOR LOGISTICS OPTIMIZATION (TATLO)
1. Transparency and Traceability for Logistics Optimization, or TATLO, is a set of concepts and proposals for streamlining the global supply chain through data digitization and standardization. It can streamline cumbersome logistics and customs processes and address the flow of information among companies and between companies and governments.
2. By creating a “single window” for customs operations and providing information exchange for companies, TATLO allows trade to flow more smoothly and efficiently, ensuring goods move more swiftly, less expensively, and more reliably.
3. The approach works by focusing on key areas, such as:
- Making tracking and tracing data readily available
- Securing information
- Replacing paper documents with digital files
- Utilizing electronic logistics exchanges and government sites
- Promoting industry standards for interoperability
- Addressing all modes of transportation
https://blog.barloworld-logistics.com/you-know-your-3pl-from-your-4pl-but-what-about-5pl-6pl-and-7pl
https://www.bcg.com/industries/transportation-travel-tourism/framework-logistics-optimization
