What is 5PL? What is the difference between 3PL, 4PL and 5PL. You might be unclear on what each level of logistics services entails.

The role of outsourced logistics in the supply chain hasn’t been fully explained. It is still unclear what level of services the 3 different PL’s offer.

Supply chain and the logistics industry are getting complicated. Increasing customer expectations, growth in e-commerce, and new business models lead to more pressure applied to the supply chain channels. Businesses have to do a lot to manage their logistics. There is hardly any room for error.

What is A 3PL?

A 3PL (third-party logistics provider ) offers outsourced logistics services, which includes anything that involves management of one or more aspects of procurement and fulfillment activities. In business, 3PL has a broad meaning that applies to any logistic service that involves storing, fulfilling or shipping items. Most 3PL’s are asset based while 4PL’s and 5PL’s are not. Many companies who provide multiple types of services call themselves 3PL Companies for examples, a Freight Forwarder who handles storage and some distribution can claim that they are a 3 PL. The same applies to Trucking companies who handle storage, they too can claim to be a 3PL. It has to be noted that not all 3PL’s are created equal. To be a true 3PL, you have to offer many services under the logistics Umbrella.

What is A 4PL ?

4PL ( fourth-party logistics ) is a more sophisticated form of supply chain management, focusing on the optimization of the whole logistics process.

While some 4PLs perform similar functions to 3PLs, they are usually non-asset based, meaning they don’t own any vehicles or storage facilities themselves.

A 4PL may coordinate the activities of 3PLs that handle specific parts of the supply chain. There is no set structure for a 4PL, and some larger 3PLs may even offer 4PL solutions to their clients.

What is a 5PL ?

5PL is a relatively new term in the logistics industry and reflects the development of full logistic integration through many outsourced providers.  encompass the whole supply chain from beginning

A 5PL provider looks beyond individual supply chains, focusing instead on wider supply networks.

A 5PL will plan, organize and implement a client’s logistics solutions, taking all elements of supply chain management out of their hands. Their focus on supply networks means they’ll oversee every single supply chain within an organization.

5Pls tend to be more valuable to e-commerce businesses with AI implementations. 5PL Firms Manage Multiple 3PL and 4PL Companies

Causes of inflation:

Freight cost, sometimes, make up a large portion of the total cost of a product specially when it comes to low value and high weight products.  For example, if you are importing ceramic tile, the freight cost alone could make up over 50% of the price of the product.

How can you save on Freight Cost?

There are several ways you can save on freight depending on the mode of transportation.

1- Ocean Freight: If you are shipping a container, make sure to maximize the load as long as you do not exceed the maximum weight allowed. Also, if you are shipping a container of heavy, low value products, try to add a high value product in the same container and off course negotiate the best rates with the Freight Forwarder

2- Air Freight: Make sure you do not ship half full boxes; you will be paying for air. Consolidate items into a little number of boxes as possible.

Do not Mix dangerous goods with non-Dangerous goods in the same shipment, you will be paying the rate applicable to DG goods which is the highest

3- Inland Transportation

A- If you are shipping a full truck, fill it up to the max weight, Choose the best Inland Transportation Company.

B- For LTL shipments, make sure you use the right NMFC Classification. The higher the classification, the more you pay. Once again, do not ship half full boxes.

4 – Courier Shipping; When shipping Via UPS, FedEx or USPS make sure to use the smallest size box as they charge based on what will net more revenue which is weight or volume. Refer to Dim weight calculation. Shipping a pillow that weighs 5 lbs. will cost you more than a computer that weighs 5 lbs. since the pillow shipping cost will be charged based on dim weight.

If you are an importer, make sure you use the correct harmonized Tariff Code , there is no need to pay  more in duties than you have to, remember to do your research and get the best shipping rates without compromising service

Resources:

International shipping rates

Ocean Freight rates

Request a freight Quote

When do you think about freight forwarding? I hardly believe you think of it when you pick up a toy or a toaster oven from your local store. There is a 90% chance that a freight forwarder was involved somewhere to bring the product to your fingertips.

A freight forward is an important part of the supply chain. Now let’s describe the role of the freight forwarder; It’s basically an organization that uses the services of a shipping company or air cargo company to move cargo from point A to point B. Anywhere in the world a freight forwarder does not own the vessel or aircraft although some shipping companies are freight forwarders.

A freight forward is involved in multi-modal transportation, for example: a shipment of microwaves from the factory in China to London will involve inland transport from a factory to the airport or shipping port and once the cargo arrives in London, it will be transported by truck (Inland Transportation) to the final destination.
Freight forwarders are subject to regulations that vary by country. This makes freight forwarding a tricky business.

Years ago, freight forwarders offered limited services, they only focused on shipping, with time they started offering services such as custom clearance, warehousing, consolidation and other services. Some of these services were outsourced. This has given rise to third-party logistics companies (3PL companies).

Freight forwarders that have not adopted innovation in the past few years are experiencing a slowdown business.
The industry has changed a lot over the past 20 years. A forwarder has become a one stop shop for all our logistics needs. This came with opportunities and challenges.
As a Freight forwarder adds on services, they need to add new talent. People who have experience in packaging, order fulfillment and customer service.

Many freight forwarders try to shed their skin and put on the Logistics Provider skin with little services because basically they focus on freight forwarding, their core competency.

In this challenging market so many freight forwarders are fading because they have not adopted change and innovation. We will continue to witness the change and evolution in this industry.
The next time you pick up your blender or coffee maker, remember how much work was involved.

Third party logistics providers (3PL) are a becoming an important part of today’s supply chain. These companies offer services that can allow businesses to outsource part or all of their supply chain management activities. Many 3PL companies offer a wide range of services including; inbound freight, freight consolidation, warehousing, distribution, order fulfillment and outbound freight.
many freight forwarding companies have evolved into third party logistics companies in order to be able to attract more businesses by introducing value added services which they outsource themselves to other providers.

The growth of 3PL companies has been driven by the need for businesses to become leaner, more efficient reducing assets and allowing focus on core business processes.

Selecting A Third Party Logistics Provider

Deciding to a use a third party logistics company is a decision that depends on a many of factors that differ from business to business and from location to location. The decision to outsource certain business functions will depend on the company’s plans; future objectives, product lines, expansion, acquisitions, etc.

Once a decision has been made to outsource certain processes then a company will begin a search for the right 3PL that fits all their requirements at the best possible price. There are three types of Third Party Logistics Providers or companies that operate today.

• Asset Based
• Management Based
• Integrated Providers

Asset based third party logistics companies use their own trucks, warehouses and personnel to operate their business. Management based companies provide the technological and managerial functions to operate the logistics functions of their clients, but do so using the assets of other companies and do not necessarily own any assets. The third category, Integrated Providers, can either be asset based or management based companies that supplement their services with whatever services are needed by their clients.

When selecting a 3PL, the request for information (RFI) or quotation (RFQ) should be as detailed as possible. The company that is selected should be able to fulfill all the logistics requirements and that can only be assured if every requirement is communicated to potential companies. The RFI should include a detailed description of the areas to be outsourced. This will usually include:

• The scope of the contract, including locations, facilities, departments.
• Information on volumes involved; number of deliveries, warehouse sizes, number of items, etc.
• The logistics tasks are to be performed, e.g. warehousing, transportation, etc.
• The level of performance required.

After the bids have been received by a company from the prospective third party logistics providers, an evaluation would take place where a multi-discipline team will review each bid based on a pre-defined set of criteria. These will include some of the following.

• Does the 3PL provide the services required?
• Does the 3PL have the technology required to perform the tasks required?
• Does the company have the required warehouse space, dock capacity, warehouse personnel, etc.?
• Is the 3PL financially sound?
• Are the 3PL’s geographical locations suitable to cover the network?
• Does the 3PL have the flexibility to respond to changes?
• Are the 3PL’s environmental policies compatible?
• Are the costs of the services detailed enough for comparison to other bids?
• Are the customer references acceptable?
• Is the 3PL a good cultural fit?

Freight forwarding is a service industry that involves moving goods around the world on behalf of importers and exporters. International Freight forwarders specialize in moving cargo. They also arrange customs clearance of goods, maintain all documentation, oversee cargo packing and will at times deal with the movement of dangerous goods.

When you first contact a freight forwarding company, they should provide a quote for international shipping, including carrier charges, duties, insurance, and their forwarding fee. A freight forwarder should explain timelines, transfers, and transportation options. Versed in import, export, and customs laws, freight forwarders can advise you on the specific regulations regarding your shipment.

Once you hire a freight forwarder, they will arrange for space with carriers, verify insurance coverage, complete documentation, and help with packaging.

1)      What are my incoterms with the supplier or the buyer? At what point does my responsibility and liability of the cargo begin or end?

2)      What mode of service do I need? Do I need port to port, port to door, door to port, or door to door services?

3)      What is the origin address of the cargo, what is the final destination?

4)      What is the size/weight/dimensions/value of my cargo? What is the value?

5)      Is the shipment considered oversized or out of gauge?

6)      Depending on the mode of transport: what size ocean container, what volume of air cargo, or size domestic cargo will I be shipping?

7)      How is my cargo packaged? Do I need additional packing/loading services?

8)      Is my cargo considered hazardous? If so, do I have the MSDS, which is required by my freight forwarder?

9)      Is there any sort of import or export license required for the import or export of my cargo depending on the commodity and ultimate destination of the cargo? If so, do I know how to apply for that license?

10)  Will I need any special services such as: documentary services such as document attestation or legalization services, drop and pull of a container (container left overnight at supplier), customs clearance and duties paid, CBP/FDA/USDA exam processing, in-bond entry, commodity classification (HTS codes), fish & wildlife license, prior notice, annual bond for imports, consolidation of cargo, deconsolidation or any other type of additional service?

The world’s largest container ports

Ports are hubs that welcome marine vessels so they can dispatch or discharge cargo. In terms of value, seaborne trade carried by container ships is the most important category of waterborne freight, and container handling is one of the key sources of revenue produced by the operation and management of a port. Intermodal containers usually have a capacity of one or two twenty-foot equivalent units, a standard unit of measure which is often being abbreviated to TEU. On a global scale, the busiest ports are located in Asia, the largest ones being Shanghai, Singapore and Hong Kong. The Port of Los Angeles and the adjoining Port of Long Beach together form the largest port in the United States. The cities of Rotterdam, Hamburg and Antwerp are home to the largest ports in Europe.

International Freight Forwarders

There are a lot of confusion when it comes to the various companies offering logistics services. from International freight forwarders to  3PL, 4PL and 7PL companies in addition to the many other types of companies.

Below is a simple definition of a freight forwarder

A Firm specializing in arranging storage and shipping of merchandise on behalf of its shippers. It usually provides a full range of services including: tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space, negotiating freight charges, freight consolidation, cargo insurance, and filing of insurance claims. Freight forwarders usually ship under their own bills of lading or air waybills (called house bill of lading or house air waybill) and their agents or associates at the destination (overseas freight forwarders) provide document delivery, deconsolidation, and freight collection services. Also called forwarder.

Many traditional freight forwarding companies are offering other services such as: warehousing, distribution, pick and pack services and transportation management.

This has given rise to what we call 3PL companies.

While the idea of moving cargo from A to B sounds simple, like importing, there are complex regulations that govern the movement of freight worldwide. Every country has its own regulations, and different products have different requirements, and keeping track of them all can be daunting for small business owners.

That’s where working with the right freight forwarding company is essential. a freight forwarder should be able to offer you personalized service and  focus on compliance, you can rest easy knowing that your cargo is in good hands and that you won’t be faced with any surprise charges or delays.

International shipping is by now means easy. Shipping a container involves many activities that most people are not aware of. With more and more regulations affecting imports, international freight companies have to stay on top of all the changes in the market place.

Resources:

7pl Logistics

 

What is the difference between 3PL and 4PL?

The CSCMP defines 3PL as follows:

Outsourcing all or much of a company’s logistics operations to a specialized company. The term “3PL” was first used in the early 1970s to identify intermodal marketing companies (IMCs) in transportation contracts. Up to that point, contracts for transportation had featured only two parties, the shipper and the carrier. When IMCs entered the picture—as intermediaries that accepted shipments from the shippers and tendered them to the rail carriers—they became the third party to the contract, the 3PL. Definition has broadened to the point where these days, every company that offers some kind of logistics service for hire calls itself a 3PL. Preferably, these services are integrated, or “bundled,” together by the provider. Services they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. In 2008 legislation passed declaring that the legal definition of a 3PL is “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”

The CSCMP defines 4PL as follows:
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