What is 5PL?
5PL (fifth-party logistics) is a more recent development than 3PL and 4PL, with the concept open to various interpretations. Generally, however, a 5PL provider looks beyond individual supply chains, focusing instead on wider supply networks.
How does a 5PL work?
A 5PL will plan, organise, and implement a client’s logistics solutions, taking all elements of supply chain management out of their hands. Their focus on the whole supply chain network means they will oversee every single supply chain within an organization.
With most 5PLs specialising in big data and leveraging technology to drive efficiency, they tend to be more valuable to e-commerce businesses than companies with a bricks-and-mortar presence. Other technologies that 5PLs may look to harness include robotics, blockchain, artificial intelligence (AI) and Bluetooth beacons.
Advantages of using a 5PL
- Multiple supply chain management
In general, e-commerce enterprises benefit the most from 5PL suppliers. This is due to their ability to effectively handle different supply chains for an organization and negotiate the best rates.
- Digital supply chain optimised
5PL suppliers have also prepared themselves to take advantage of any new technologies. This can help you get a competitive edge by preparing you to take advantage of any supply chain changes and give you a competitive advantage.
If you wish to take a hands-off approach to manging your supply chain or supply network then a 5PL partner is the best option for you as they look after every step in the process and have easier access to a large database of 3PLs, 2PLs, carriers, warehouses, and trucking companies.
3PL, 4PL, 5PL – which is the best solution for your company?
The decision of whether to use a 3PL, 4PL or 5PL will ultimately depend on the needs of your business, and whether you have the capacity to manage your logistics in-house.
If your business wants to maintain some control over your supply chain, a 3PL provider might be the best option for you. In comparison, if you have a complex or far-reaching supply chain, a 4PL or even a 5PL provider may be ideal.
For example, hiring a 5PL firm over a 4PL firm would not benefit traditional enterprises with no e-business experience. The need to save costs wherever possible is critical for 5PL businesses as they aim to deliver services at minimum cost. They consolidate the 3PL requirements of customers and negotiate bulk rates in return. A large portion of this necessitates that your company be entirely digital from start to finish.
With the emergence of new technologies that have the potential to transform supply chains, it could make strategic and commercial sense to partner with a 5PL, especially if your company sells primarily through digital channels.