5PL Fifth-Party Logistics Operation
What is a fifth-party logistics service provider, a 5PL? There are many levels of logistics services, but 5PLs would usually handle all logistics for a shipper. This should include inbound freight, such as raw materials. It would include what shippers usually contract to a logistics service provider, shipments to customers.
Fifth-Party Logistics service provider (5PL) helps its client company (shipper) plan, engineer, and implement a complete logistics solution. The 5PL might manage several networks of supply chains. There could be specialization, for example with e-commerce and parcel shipping for online retailers.
A 5PL should think in terms of entire supply networks. Given an increase in market-focused supply networks, these could enable the purchase and delivery of everything from raw materials to finished products. The supply chain network would aggregate buyers, sellers, and transportation options to give a buyer the ability to both do procurement and also arrange delivery, negotiating costs simultaneously.
The 5PL could take responsibility for vendor selection and implementation of software and sourcing of carrier capacity. This would require the 5PL to do a strategic supply chain design. The supply chain plan would require sourcing capacity using carrier bids for shipping lanes. The 5PL would be responsible to find low or lower-cost methods and suppliers. It might require the contracting of warehouse or distribution space for cross-docking or last-mile stocking for quick delivery.
Think of the wide array of products that a manufacturer, food processor, or process industry company might need. Suddenly, you can imagine the differences in deliveries and shipments and the equipment required.