A 5PL (fifth-party logistics provider) is a new term that’s circulating in the logistics industry. A 5PL is a non-asset based company that manages your entire network and supply chain, from handling suppliers to negotiating the most competitive rates for shipping and bringing your product to the storefront. Through a 5PL, one can achieve a high level of collaboration and integration across a supply chain and network. Benefits include cost savings through efficient resource utilization and seamless operations under the same management.
To better understand, let’s take a look at the functions of a 1PL onwards.
A 1PL is a company or entity which handles its own manufacturing and transport to the retail outlet. They do not hire any third party to cover transportation.
When this company or entity decides to hire a carrier or operator for some logistics task (such as warehouse management or a van for transportation to the retail outlet), they hire a 2PL. All responsibility and management still lies with the 1PL at this point. The 2PL follows orders and tasks and nothing more.
A 3PL is a service provider that can take over and organize and run the activities of transport and logistics tasks. They will assume responsibility, negotiate best rates with fleets, and be in communication with the original company or entity up to the destination point. This is an important relationship that is usually long-term to ensure value, trust and thorough understanding of the original company or entity. 3PLs often make suggestions and hone the supply chain for optimum performance.
A 4PL is one step above a 3PL. Not only do they hire third parties for transport and logistics tasks, but they may also outsource the management of the original company or entity. A 4PL will check and monitor the entire supply chain. They will suggest on improving service and share the risks and benefits with the original company or entity.
A 5PL is about managing a supply network, which is different from a supply chain. A supply network may involve various distribution methods, collaborating between organizations and developing an e-business. 5PLs also focus on delivering at minimum costs (by consolidating the requests of various customers and negotiating bulk rates, as well as by leveraging technology such as control towers).
As a 5PL, our consultants at ILC cover the following: procurement services, market entry and registration, air, land and ocean freight, customs brokerage, consolidation services, value-added services, contract manufacturing and more. We can help build your supply network from the ground up or reinvent and find ways for continuous improvement. We believe supply networks must be agile and responsive, with a focus on your core business that doesn’t get neglected while bringing costs down.
Our offices are in close proximity to the largest regional airport, Tocumen International Airport, and to the Panama Canal. Our team can handle any supply chain or network query you send their way. Please contact firstname.lastname@example.org to get in touch.