If your company ships freight, it can identify shipping arrangements through the following logistics solutions: second party logistics (2PL), third party logistics (3PL), fourth party logistics (4PL), and logistics software, which provides shippers with their own logistics function. Below, we examine how it compares to contracting with a 2PL, 3PL, or 4PL logistics provider. closed van rental
2PL providers are carrier companies that contract directly with shippers. For shippers, the advantage of 2PL is the elimination of brokerage fees charged by 3PL providers. The disadvantage is shipping options are limited to that particular carrier’s options. In certain instances, this could result in significantly overpaying for shipping.
For example, if a carrier offers Less than Truckload (LTL) shipping, but doesn’t integrate ground shipping with other mediums (i.e. air, rail, and sea), its customers will not save money through integrated shipping options. Due to the innumerable shipping options it presents, logistics software eliminates this issue.
Also known as freight brokers, 3PL providers operate in two capacities: freight brokers that also have their own fleet (asset-based 3PL), and pure freight brokers that act as middlemen in the shipping process, connecting shippers with various types of carriers (i.e. ground, rail, air and sea), often in an integrated fashion.
3PL companies range from standard 3PL providers, which offer basic services but not comprehensive solutions, to customer developers, which manage a company’s shipping process and propose new solutions. In the first case, the advantage is cost, and the disadvantage is limited service opportunities. In the second case, the advantage is expanded service opportunities, and the disadvantage is cost.
Unless you need singular shipping services, or can afford to pay an entity as you would a team of in house experts, 3PL is rarely the best option.
4PL providers serve in an advisory capacity. Their services are consultative, not equipment or brokerage based. If your company has its own shipping fleet and logistics department, hiring a 4PL to fine tune its shipping process could pay dividends. But for companies that don’t have a shipping fleet or logistic department, the cost of 4PL services versus what they could offer is a poor value proposition.
Logistics software is different from other logistical options in terms of pricing and implementation. Instead of being priced as a traditional business-to-business (B2B) logistical solution, it is priced as an internal software or SaaS (Software as a Service) solution. Shippers implement it as either an internal solution (complete with the appropriate hardware), or as an SaaS solution. It is tailored to their shipping process in either case.
For small to midsize shippers that need flexible, affordable shipping, logistics software can provide both. Offering the same range of shipping options as 3PL, but without the brokerage fees, and the same logistical function as an in house department, but without the payroll expense, it is a one size fits all solution for shippers that need inexpensive logistics that delivers top results.