September 5, 2022

What is 5PL & how is it used to solve supply chain pain points?

The supply chain has no shortage of acronyms; ELD, ACE, POD, 3PL, eBOL, ECCN, among others. And more recently a new term has joined the list, creating buzz and debate over something referred to as “5PL.”

If you haven’t heard of 5PL yet, you’re not alone. A recent LinkedIn poll surveyed over 500 industry professionals and 48 percent had either never heard of the term or were unsure.

Before dissecting the details of 5PL within the supply chain, let’s revisit the preceding four “PLs”.

1PL – manufacturers handling their own shipping in-house with no other parties involved
2PL – a contracted shipping company – often a carrier or owner-operator
3PL – a contracted broker who coordinates shipments between manufacturers and carriers
4PL – a term used to describe certain 3PLs offering additional services that expand beyond standard logistics processes – such as IT, Project Management, etc. (Deliverr).

Finally, 5PL – which broadly speaking is referred to as an optimizer or “e-solution” encompassing supply chain processes from beginning to end. Where a company ultimately lands within the logistics pyramid (1PL-5PL) revolves around how many parties fit within the supply chain process and what they can do.

Some ambiguity still exists around this new 5PL term. One type of definition focuses more on encompassing the entire supply chain into one digital ecosystem for the managing of shipments, loads, payments, etc. Another definition focuses more on describing 5PLs as solution providers offering load management software on behalf of multiple parties in the industry.

Ultimately, a fully functional 5PL company should encompass both – hosting a digital network environment of software solutions – all within an immersive ecosystem that joins all parties together on one intelligent platform. The goal being to create a fully connected supply chain.

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