What is 2PL (Second Party Logistics)? The definition
Second-party logistics, commonly referred to as 2PL, is a type of logistics service where a company hires an external provider to handle specific logistics tasks. These tasks are usually related to transportation or storage. The business that owns the goods (the first party) hires the logistics provider (the second party) to help move or store their products. Unlike more integrated logistics models, such as 3PL (Third Party Logistics) or 4PL (Fourth Party Logistics), which manage more complex supply chain activities, 2PL focuses on offering a single, specialized service, such as transportation or warehousing.
In simpler terms, a 2PL provider typically owns trucks, ships, airplanes, or warehouses and is responsible for handling a specific segment of the logistics process. They do not manage the entire supply chain; instead, they concentrate on one particular job, such as moving goods from a warehouse to a retailer or providing storage solutions.
Why is 2PL important in logistics?
Even though the world of logistics has become more complex, 2PL services remain essential for many businesses. There are several reasons why 2PL is an important part of supply chains worldwide, and it continues to be a go-to option for companies that need straightforward logistics services.
Specialized services
2PL providers are highly specialized in the tasks they perform. Whether it’s transporting goods by truck, ship, or plane, or providing warehousing solutions, 2PL companies are experts in their respective fields. This expertise ensures that goods are transported or stored with maximum efficiency and care. For example, a trucking company might focus solely on delivering goods across the country, while a warehousing provider will specialize in securely storing products until they are needed for distribution.
Take trucking companies like Schneider National, which is a well-known example of a 2PL provider. They specialize in transporting goods over long distances within the U.S., offering businesses a reliable means to move products across different states. Similarly, maritime shipping companies like Maersk Line provide ocean freight services, specializing in moving goods between countries via sea.
Cost efficiency
Outsourcing logistics to a 2PL provider often proves to be more cost-effective than handling it internally. Companies don’t have to invest in their own trucks, ships, airplanes, or warehouses, which are expensive to purchase and maintain. Instead, they can pay for the logistics service they need, whether that’s transportation or storage. This allows businesses to save money by avoiding the high overhead costs of maintaining their own fleet or storage facilities.
For example, a manufacturing company might choose to hire a 2PL trucking company to deliver its products to retail stores. This is far less expensive than buying its own fleet of trucks, hiring drivers, and maintaining the vehicles. Similarly, a business may use a 2PL warehousing provider, like Prologis, to store products in strategic locations close to markets, avoiding the need to build or lease their own warehouse.
Geographic reach
2PL providers often have an extensive network that allows businesses to reach locations they wouldn’t be able to access otherwise. This is particularly helpful for companies that need to expand into new markets or move products over long distances. 2PL providers already have the infrastructure in place to transport goods across vast regions or even internationally, which means businesses can grow without having to develop their own logistics capabilities in those areas.
For example, COSCO, a global shipping company, operates ships that carry cargo across the world’s oceans. Businesses looking to sell products in different countries can use COSCO’s services to get their goods to distant markets without having to manage international shipping themselves.
Compliance and risk management
One of the main challenges businesses face in logistics is keeping up with regulations and managing risks. This can involve anything from ensuring trucks are safely loaded to complying with customs laws for international shipments. 2PL providers are usually experts in these areas, which means they help businesses avoid costly delays, legal problems, or damages. By hiring a 2PL provider, companies can reduce their exposure to risks, knowing that their logistics partner understands how to handle these issues.
For instance, FedEx and DHL offer air freight services and have extensive knowledge about global shipping regulations, customs clearance, and the safe handling of goods. This expertise reduces the risk of delays or fines when goods are shipped internationally. For businesses, this means that they can trust their 2PL provider to handle the regulatory aspects of logistics, freeing them from having to worry about compliance.
Efficiency and focus
Another significant benefit of using 2PL services is that it allows companies to focus on their core business activities, such as manufacturing products, marketing, or customer service. When logistics tasks are outsourced to a 2PL provider, the company can concentrate on what it does best without the distraction of managing transportation or storage. This division of responsibilities often results in greater overall efficiency, with logistics experts handling transportation while the business focuses on sales and growth.
For example, a retailer might focus on serving customers and growing its market, while hiring a 2PL provider to handle the transportation of products from manufacturers to stores. This separation allows the retailer to improve its service while still ensuring that goods arrive where they need to be, when they need to be there.
4 real-life examples of 2PL services
There are many real-world examples of businesses using 2PL services for specific logistics needs. These companies usually focus on one aspect of logistics—whether that’s transportation by truck, ship, or airplane, or providing storage services. Below are some of the most common types of 2PL services.
1. Trucking companies (national or regional)
Trucking companies are a common type of 2PL provider. Businesses hire these companies to move goods over land, often over long distances or between different regions. These trucking companies own fleets of trucks and specialize in road transportation. By hiring a 2PL trucking company, businesses can avoid the expense of owning their own trucks or managing the logistics of long-distance transportation.
A company like XPO Logistics, for instance, provides trucking services that allow businesses to transport goods across the U.S. and even internationally. Similarly, Schneider National is another trucking company that handles national and regional transportation, ensuring that products get to where they need to go.
2. Shipping lines and airlines
For businesses needing to move goods over longer distances, shipping lines and airlines serve as 2PL providers. These companies own fleets of ships or airplanes that transport goods across oceans or continents. By hiring a shipping line or airline, companies can efficiently move goods between countries or across the world.
For example, Maersk Line is one of the largest maritime shipping companies in the world, and they provide ocean freight services that help businesses move goods internationally. On the air freight side, companies like FedEx and DHL own fleets of planes that transport goods quickly across large distances, ensuring timely deliveries.
3. Railway freight companies
Railway freight companies provide another form of 2PL service. These companies specialize in transporting large volumes of goods over long distances by rail. Rail transportation is often more cost-effective than road transport, especially for businesses that need to move large, heavy, or bulk goods, such as raw materials.
For example, Union Pacific Railroad operates freight services across the U.S., helping industries transport bulk items such as coal, steel, or agricultural products. For businesses in these industries, using a railway freight company offers a reliable and affordable way to transport goods over long distances.
4. Warehousing providers
In addition to transportation, 2PL services also include warehousing. Warehousing providers own and operate storage facilities where businesses can keep their products until they’re ready for distribution. These warehouses are often located in strategic locations near major markets or transportation hubs, which allows businesses to store goods closer to their customers.
A company like Prologis, for example, offers warehousing services that help businesses store their goods in key locations around the world. This allows businesses to manage their inventory more efficiently and ensures that products are available when and where they are needed.
What is the difference between 2PL and 3PL/4PL?
As logistics operations have become more complex, many businesses have begun using third-party and fourth-party logistics services (3PL and 4PL) to manage their supply chains more effectively. While 2PL focuses on a single logistics service, like transportation or warehousing, 3PL and 4PL providers offer more integrated solutions that manage multiple logistics activities. Understanding these differences is important for businesses deciding what type of logistics provider they need.
2PL vs. 3PL
A key difference between 2PL and 3PL is that while 2PL providers specialize in one aspect of logistics, 3PL providers manage multiple logistics functions. 3PL providers often handle everything from transportation to warehousing to inventory management. A 3PL provider may coordinate with several 2PL providers to ensure goods move efficiently through the supply chain.
For example, a 3PL provider might oversee transportation, warehousing, and distribution services, offering a more comprehensive solution than a 2PL provider that focuses solely on moving goods by truck or plane.
2PL vs. 4PL
4PL providers go one step further by managing the entire logistics process on behalf of the company. Unlike 2PL or 3PL providers, 4PL providers often don’t own their own transportation or warehousing assets. Instead, they act as logistics consultants, coordinating between multiple 2PL and 3PL providers to optimize the entire supply chain.
A 4PL provider focuses on strategy and logistics optimization, handling the full end-to-end logistics process for the client. This can include working with multiple 2PL providers to ensure the most efficient movement of goods.
In summary, Second-party logistics (2PL) refers to outsourcing specific logistics tasks, such as transportation or warehousing, to a company that owns and operates the necessary assets like trucks, ships, or warehouses.
