Fulfilment companies are often labelled as 1PL, 2PL, 3PL, 4PL or 5PL but what does that mean? And how do these stamps differ? These stamps indicate the extent to which companies can take over your logistics operations: from keeping all logistics activities in-house to leaving the entire supply chain management to external parties, and all options in between.

The term 1PL refers to a situation where an organisation stores its goods itself and transports them to the end customer, without using external logistics service providers. Small manufacturing companies with local distribution are typical examples of 1PL operations. They are completely self-sufficient in their logistics processes and carry out all activities internally.

2PL refers to the first step of outsourcing logistics tasks, including transport and storage. Companies offering 2PL services act as logistics operators and are responsible for both transport and storage of goods.

In 3PL, a large part or even the entire logistics process of a company is outsourced to an external logistics operator. This operator acts as an intermediary between the client and its customers, organising transport and storage facilities. It covers a wide range of fulfilment services, such as inventory management, order processing and return logistics.

4PL includes supply chain management services such as consulting, planning and supply chain optimisation. Unlike 3PL organisations, 4PL entities do not perform physical transportation or fulfilment activities. However, they manage the client’s end-2-end supply chain and initiate supply chain design and optimisation.

5PL is a relatively new term that refers to an advanced level of logistics management. A 5PL operator combines the execution of transport and fulfilment activities of a 3PL provider with the supply chain optimisation of a 4PL provider. They manage not only the supply chain, but also a network of supply chains for the client, with a focus on using advanced (new) technologies.

In a world where efficiency and optimisation make the difference, 1PL to 5PL players play an important role. They shape logistics strategies and support business growth by, for example:

In an era of increasing globalisation and complexity, choosing the right level of outsourcing is essential for efficiently managing logistics processes. Whether it is to maximise operational efficiency, reduce costs or optimise the supply chain, finding the right balance between in-house management and outsourcing can be the key to success in a competitive market.