What is 5PL? Exploring Options in Logistics Supply Chains
Fifth-party logistics (5PL) has emerged to help e-commerce businesses manage increasing supply chain pressures. But what exactly does it cover, and is it the right fit for your business? Read on as we examine the various supply chain management options available to help your e-commerce business meet demand – and ensure your customer promises are kept.
With global e-commerce booming, conditions have never been riper for you to find and sell to customers around the world. But with the demand comes challenges – customers expect their orders faster and cheaper than ever before, and that includes those cross-border. The pressure is on for brands to deliver, pandemic or not, meaning an effective supply chain strategy is crucial.
For e-commerce businesses to keep up, an efficient inventory management, order fulfillment and seamless delivery operation is crucial. Indeed, as a small (or indeed medium) business owner, you may already outsource some of these aspects of logistics management.
The global market for e-commerce logistics is projected to reach US$861.4 billion by 2027, growing at a CAGR of 20.5% over the period 2020-2027(1).
In recent times, the fifth-party logistics (5PL) model has emerged to help e-commerce businesses take an approach to supply chain management that effectively deals with the increasing pressure they are finding themselves under. A 5PL partner like DHL will handle all the logistical needs of a client, firstly by identifying their exact requirements, then by planning, executing and managing their entire supply chain network. For e-commerce businesses new to international shipping, the 5PL solution will handle cross-border complexities such as customs rules and regulations, leaving them with more time to focus on the business of selling.
However, before you jump to 5PL, there’s 1PL, 2PL, 3PL and 4PL to consider, too. You’ll probably find that as your business grows, it will be a natural progression to progress through the PL “ranks”. Let’s take a closer look…
The benefits of 5PL providers:
- They source all the services a company needs, and negotiate the best contracts
- They leverage technologies to drive highly efficient networks, including Order Management Systems, Warehouse Management Systems, robotics and AI, guaranteeing the most accurate optimization of every step of the supply chain
- Efficient supply chains means faster and more accurate deliveries
- Clients have more time to focus on their core business
As the e-commerce sector’s needs and demands evolve, so too must the capabilities of the 5PL model. DHL has invested in a dedicated Innovation Center to integrate the most innovative technologies within its logistics services, helping customers stay ahead.
Logistics is being transformed through the power of data-driven insights. Thanks to the vast degree of digital transformation and the Internet of Things, unprecedented amounts of data can be captured from various supply chain sources. Capitalizing on its value offers massive potential to increase operational efficiency, improve customer experience, reduce risk, and create new business models.
Deciding on the right approach to logistics management for your business is dependent on its growth trajectory – as your requirements become more complex, the need to outsource more jobs will increase. There are advantages and drawbacks to working with each level of logistics model; relinquishing some control of your business may be worth it for the cost savings to your business, whilst investing in a more advanced model can help your business grow and scale quicker. Remember, it ultimately comes down to your customers, and delivering them the best service possible.
This article was originally published on Discover DHL and was republished with permission.
1 - Business Wire, October 2021