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Outsourcing logistics will grow by over 6%, using fifth-party logistics

Outsourcing logistics will grow by over 6%, using fifth-party logistics
Outsourcing logistics will grow by over 6%, using fifth-party logistics

Companies are realizing that gone are the days when you have to battle silently to get your logistics done while you have zero capacity to execute it all by yourself. A recent study released by Adroit Market Research backs this up, with fifth-party logistics (5PL) estimated at a value of $9.27 billion. 

It’s expected to increase by over 6.3% to reach $17.28 billion in the next six years.

The impact of the COVID-19 pandemic has changed the scene in logistics, with many companies still grappling with the aftermath.

What is 5PL? 

Fifth-party logistics (5PL) services third-party logistics (3PL) as a middleman broker. According to Red Stag Fulfilment: “They bundle the needs of multiple 3PLs to get better rates on services, including freight.”

Fifth-party logistics acts like a consultant, “combining the shipping needs of various 3PLs.”

The benefit of this? 

  • It gives a company the upper hand to negotiate a better carrier rate. With more options to choose from, better rates can be arranged. 

  • A 5PL provider also helps streamline all aspects of the supply chain process. From negotiating contracts to sorting out supply chain hiccups. 

Versatility of 5PL

The research paper states that 5PL is a “dynamic business model” incorporating services from multiple third-party logistics (3PL) providers and specialized service providers. When it comes to fourth-party logistics providers, 5PLs don’t own physical assets. It focuses instead on managing and coordinating supplier relationships. This enables it to offer clients more “effective and cost-efficient services.”

Fifth-party logistics providers include warehouses, transportation, and other infrastructure. It also encompasses transport on land, sea, and air, giving businesses a more comprehensive range of options to choose from that suit their budget. 

Regarding warehouse services, 5PLs cover “storage, packing and product distribution,” ensuring businesses make the best financial decision to optimize their inventory.  

ALSO READ: ACFS Port Logistics launches paperless truck entry system

5PLs add value to businesses

As more businesses and online shops choose to outsource their logistics service, fifth-party logistics is set to grow even faster. 

Adroit Market Research says that omnichannel commerce is particularly popular as businesses sell their products through various channels. But be aware there are some challenges. It’s a warning about a lack of clear information about costs and terms of service agreements. 

The logistics sector relies heavily on “technologial breaththroughs like automation,” reports Global Trade Magazine. The North American logistics industry is reportedly on e of the largest of its kind, due to the powerful economies of the US and Candada. 

Despite these challenges, the opportunities in the 5PL logistics market are growing, creating more possibilities for expansion. 

NOW READ: Flexport launches Convoy platform for shippers, carriers, brokers

About the author

Mia is a multi-award-winning journalist. She has more than 14 years of experience in mainstream media. She's covered many historic moments that happened in Africa and internationally. She has a strong focus on human interest stories, to bring her readers and viewers closer to the topics at hand. Do you have a story you would like her to expose, report on, or consider? Please send your request to Newsdesk@locate2u.com.

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