By Chris on Aug 2, 2018 3:13:22 PM
As you must know, Third-party logistics, also known as 3PL or TPL, are outsourced logistical services connected with your company managing warehousing, monitoring, and distribution, among other services.
But, do you know what are First-Party Logistics or Second-Party Logistics, and their differences with a 3PL? If you don’t, our you would like to amplify your knowledge, keep reading!
What are 1PL and 2PL?
A First-Party Logistics provider is related to freight owners which can be the shipper (such as a manufacturing firm delivering to consumers) or the consignee (the entity who is financially responsible for the receipt of a shipment - such as a retailer picking up cargo from the supplier).
In other words, the term first-party logistics provider stands both for the cargo sender and for the cargo receiver.
Therefore, the person who moves their goods and services from their place to a new place is known as First-Party Logistics provider. Manufacturers, retailers, traders, importers and exporters are included in 1PL. Even individuals that move from one point to another and government departments can be found in this category.
Now, a Second-Party Logistics provider is an asset-based carrier, which owns the means of transportation. Consequently, they own trucks, ships, airlines and also provide their services for lease too.
An example of a 2PL would be a trucking company that is hired to haul cargo from an origin (a distribution center) to a destination (a port terminal).
What is the difference between a 3PL, 2PL or 1PL?
A Third-Party Logistics performs plenty of actions, but the main ones that differ them for the PL’s mentioned before are the following:
- Receiving inventory: The third-party logistic provider receives and stocks the inventory in-house, being responsible for keeping tab of it and labeling it.
- Storing inventory: The primary task on the list is to shelve the products and keep a close eye on what items come in and out so that they can ship the orders without any delays and customers are satisfied.
- Receiving the customer’s order: When processing an order, the product needs to be immediately delivered somewhere else. The company checks the order number and to which customer it belongs.
- Pick and pack: The individual components of an order are gathered from master cartons (pick) and then placed into a box or envelope addressed to a specific recipient (pack). In the pack process, there are one or more products equal or different, depending on the client’s instruction to the 3PL. Some 3PLs provide custom packaging options (We do!) allowing you to use your shipments as an opportunity to enhance your customer’s experience with your brand.
- Invoice or bill: As the name implies, it’s related to a sale transaction and indicates the products, quantities, and agreed prices for products or services the company had provided the customer.
- Shipping: According to the address given by the buyer, the 3PL finds the ideal delivery service company to ship your product, for example, FedEx, DHL, UPS or USPS.
- Order Fulfilled: The client has confirmed that the order has been successfully delivered and has been accepted.
To conclude, you must know that not every firm has the financial resources and time to redesign their entire supply chain.
Some companies prefer to outsource specific processes that are in need of being fixed, others prefer to have control over the core design and let various parties, such as 3PL's handle the elements within.
So, our advice (as we always say) is to take time before deciding which party contact.
If you’re still undecided in taking benefit from a 3PL, drop us line! We’ll help you deciding.