The demand for eCommerce has been booming for the past decade. Given the current projection, we can expect the trend to continue. For business owners, solving logistics problems or finding the right partner may be difficult, especially for new joiners in the arena.
To address the eCommerce challenges of sourcing, storing and shipping goods to end-users, it is worthwhile to understand the different types of logistics companies and how to find the right one for your business.
Types of logistics companies
There are five kinds of logistics companies: from the first party to fifth parties. Here are their definitions:
- 1PL: first-party logistics - a firm or an individual that needs to transport goods from one point to another. This term applies both to the sender and receiver of the goods.
- 2PL: second party logistics - an enterprise that owns vehicles or workers that can transport products from one location to another. Examples include shipping, courier services and so forth.
- 3PL: third-party logistics - a company that provides outsourced logistics services to companies for part or all of their supply chain management functions for another company, such as shipping, storage, management and so forth.
- 4PL: fourth-party logistics - an independent company that doesn’t own hard assets, but specialises in high value-adding logistics management, such as assembling resources and managing technology. A 4PL company can serve multiple clients at one time. Its aim is to design a comprehensive supply chain solution for all of their clients while acting as a consultant with strategic insights and recommendations.
- 5PL: fifth-party logistics - a company that performs the basics of 3PL through a network of partners, has the technological and management consulting capability of a 4PL and takes part in negotiations with shipping companies or airlines for a better rate on behalf of its clients. Like 4PL, a 5PL usually serves multiple clients at one time and invests heavily in innovative logistics solutions and technology like blockchain or robotics.
Which one should you pick?
The choice of service level depends on a few factors. If your business needs no-frills and essential services, like storage and shipping, then a transactional service like 3PL would suffice. But the caveat is that 3PL services offer less control, giving elements take place outside your supervision. Also, 3PL is less strategic in nature, so you may be missing out on vital opportunities in developing capabilities.
4PL and 5PL move beyond the day-to-day movement of goods and focus more on negotiations, optimising supply chain solutions and technology. Also, you might have access to better rates in the long run as both services have partnerships with airlines and forwarders. Though less straight-forward than 3PL, 4PL and 5PL offer better results for the long term.
Where does Aersure stand?
At Aersure, we’re predominately 5PL with some 4PL characteristics, and we manage end to end services for the eCommerce startups with minimal cost; we plan, organise and implement solutions.
While taking care of 3PL services, we are also a concierge service for eCommerce merchants. We offer end-to-end solutions services that give our clients a completely electronic platform to oversee their supply chain, as well as competitive rates and reliable service-level agreements. Our range of partners ensure that our clients can grow their business with us, and we’re here to address all the logistics needs of your eCommerce business.
We also invest heavily in optimising our solutions, making our service as reliable as possible and providing recommendations that work. That makes us more than a vendor, but a partner you can grow your business with. Speak with us today and see how we can help.