Most people are familiar with the phrase third-party logistics (3PL). However, there are many different sorts of businesses that may provide logistics services. One of them is called “2PL,” which stands for second-party logistics. When a logistics firm expands parts of its supply chain such as distribution, warehousing, and order fulfillment, it becomes a 3PL company. A 2PL, on the other hand, is the actual shipping company including commercial shipping, airline companies, forwarders, etc. It is important to know the differences between 3PL and 2PL to figure out what is best for your organization.
3PL and 2PL logistics each have their benefits. However, 3PLs offer integrated order fulfillment, storage, and shipping services that can grow with your business and scale up or down, based on what the customer needs. Large companies have been using the services of 3PL providers for years, but small and medium-sized businesses are starting to use them more now as e-commerce fulfillment continues to grow at an incredible rate. When an online retailer or an e-commerce platform reaches a substantial size, it’s usually much more expensive to run its own order fulfillment, warehousing, and distribution operations to cater to the growing consumer demand. It is, therefore, more economical to hire a 3PL service provider that can offer on-demand facilities and complete logistics solutions that scale with market needs.
The Role of Logistics in Our Economy
Logistics is a complex case that is often described as a “huge chain network.” It comprises a wide range of tasks and activities related to shipping and delivery. Personnel involved in logistics help make sure you receive the correct product and quantities when you buy something from a dealer, an exporter, and more recently, an online store. The explosion of e-commerce and logistics has both made a huge difference in the international economy. Without logistics, it would have been impossible to put the idea of e-commerce into action.
2PL Companies
When the shipping process is outsourced to a logistics service provider outside of the company, this arrangement is often undertaken through a 2PL service provider. When a company is hired to carry out these tasks, it is referred to as a 2PL operator, second-party logistics service provider, or a carrier (only the tasks that pertain to transportation). Among the biggest 3PL vs. 2PL differences is that the 2PL doesn’t do anything else in the logistics chain of your business. A 2PL might, for example, use a truck to move clothing items from a garments factory to a fashion retailer downtown that sells these outfits directly to the customers. That’s about it.
Two-party logistics companies, or 2PLs, are big companies like FedEx and Maersk that move goods all over international boundaries by air, railways, roadways, or water. They help lower your overall operational costs when compared to shipping the item yourself. They are straightforward to work with and hire, and it’s simple to keep a record of your goods.
Based on the 2PL company you choose to work with, you can decide how your products will be shipped. But keep in mind that these are primarily outside companies that don’t give you a lot of control over how they run things. If your business is growing exponentially, it can be difficult to scale when working with a 2PL provider, especially if you don’t even know enough about their shipping methods, technologies, or even emerging opportunities to make the most of them. The association with such a 2PL partner is, at best, task-oriented and not a long-term solution.
Enter the 3PL Companies
A 3rd-party logistics is a distribution network that is mostly about moving and delivering various items, but it also includes a number of additional services. As far as differences between 3PL and 2PL go, 3PL services may include providing warehouse space, connector operations, customs clearance, the overall management of the supply chain, and numerous other solutions. It would also include logistics technology services and reporting tools, which help keep track of where different products would be in the distribution process at a given point in time. All of the above services are provided by these third-party logistics providers, which also deal with any problems that come up during storage, order processing, transit, and delivery. They are experts in both domestic and international transportation, and they also stay on top of your other supplier relationships to make them easier to deal with.
Most 3PL providers enable quick delivery times as well as fewer mistakes, and your customers will be happier as a result. It’s easier to grow your business with a 3PL company than with other logistics partners because you can truly scale your operation, concentrate more on your core business, and leave the logistics to the 3PL provider.
Do keep in mind when thinking about 3PL vs. 2PL differences that the 3PL’s initial costs are higher than those of other shipping partners. The 3PL model has come to dominate and expand its influence in the world of logistics for a while now, mostly because businesses that work with third-party logistics companies always tend to save money in the long run.
The reason is that supply chain management undertaken by a 3PL not only helps cut down on the number of product returns, but also reduces inventory costs, processing errors, and delivery times significantly. Another thing to keep in mind is that your company will be held responsible for problems with customer service since 3PLs are incorporated into your business operations closely.
The Bottom Line
Large companies have been using 3PL providers and their services for years, but the utilization of 3PLs is on the rise now that Alibaba, Amazon, and eBay make it easier for small and medium-sized businesses to get one’s products quickly and more efficiently to market. Knowing 3PL vs. 2PL differences helps you decide on your logistics system because when a business continues to grow, it’s generally much more expensive to run its own fulfillment, storage of goods, and distribution channels than to hire a 3PL specialist who can provide on-demand assistance that can grow or shrink with market needs.
Logos Logistics has been providing world-class logistical services in the Midwest for more than a decade. We ensure reliable warehousing and distribution, competitive shipping rates, real-time data visibility, and most importantly, enough space for your business to run its operations without worrying about the details.
Contact us today and make smarter, faster, and better supply chain decisions!
