Outgrown the spare bedroom? Think logistics.
Scaling up is one thing, but how do you ensure you can continue delivering, quite literally, to your customers? Every ecommerce company needs a thorough logistics plan to make sure those products get into the eager hands of your customers.
There’s a number of different ways to go about that, however. You could go with 1PL, 2PL, 3PL or 4PL depending on your current infrastructure and budget.
We’ve put together a guide to the different types of logistics to help you figure out what method might be best for you.
What is 1PL?
First-party logistics (1PL) is when a company picks, packs and delivers all of its own stock with no outsourcing. To be able to do this on a national or international scale, you’ll need a huge infrastructure of transportation so you can deliver your own goods.
An example of a 1PL would be Australian meat exporter Samex, who deliver products to supermarkets across the globe using their own warehousing and shipping system.
What is 2PL?
Second-party logistics (2PL) is when a company outsources their delivery process to a courier service. This means that the company does all of its picking and packing in-house, but needs the extra help to get their products to a store or customer.
In UK ecommerce, a lot of companies use Royal Mail or DPD to deliver orders directly to customers. ASOS are an example of a company who do this; while their warehousing is handled entirely by themselves, Royal Mail takes care of delivery and returns.
What is 3PL?
Third-party logistics (3PL) means outsourcing not just delivery, but also the picking and packing process. For companies without the capacity for a large warehouse space, this is especially useful. Funds can be spent in other areas of the business without having to worry about the upkeep and maintenance costs which come with operating a warehouse.
The most famous, and successful, example of a 3PL company would be Amazon. Although it manufactures and delivers its own products, over half of paid units listed on its website were made by other companies in the second quarter of 2021. As Amazon is a digital marketplace, a lot of businesses will send products to Amazon warehouses for them to store, fulfil and ship when an order is placed.
What is 4PL, and how is it different from 3PL?
A fourth-party logistics (4PL) company - also known as a lead logistics provider (LLP) - takes care of many of the same processes as a 3PL does. It manages the storage, fulfilment and shipping of a client’s goods so that the seller doesn’t have to deal with warehousing.
However, a 4PL has a much broader and significant role in the supply chain and becomes a trusted partner and advisor. They direct every moving part of a customer’s supply chain, such as transportation and warehousing, and serve as a single point of contact.
A 4PL often develops from a 3PL relationship. Overall, the difference is between the amount of control each provider has; a 4PL manages any fulfilment partners you work with and negotiates contracts, whereas a 3PL works directly for you.
Which logistics service is right for you?
Deciding what the best logistics provider would be for your company is a subjective process. Every business is different with various levels of infrastructure and funding which will affect your decision.
However, there are some points to take into consideration. If you’re a very small, local business capable of handling your own supply chain, you might be fine sticking with 1PL; equally, you could go 2PL and include delivery costs into your orders. 1PL isn’t just for small businesses, though; specialist providers like Samex are often able to pick, pack and deliver their own stock as they might be shipping in bulk to specific locations, so there’s less diversity in destination.
2PL and 3PL are great for B2C ecommerce companies who receive lots of orders, with 3PL suited more towards those without the funds or know-how to operate a warehouse. Companies such as ShipBob or SEKO handle 3PL, and tend to work on a subscription fee.
Finally, a 4PL provider might be handy if you want to focus entirely on the other areas of your business, and trust your 4PL partner enough to completely take over your supply chain operation.
If you’re thinking about outsourcing your logistics, or are looking for a warehouse management system (WMS) so you can handle your own fulfilment, Patchworks is a reliable and experienced integration partner. Connections matter to us, so we’ll connect your data between systems for a smooth operation.