Do you know what the terms 1PL, 2PL, 3PL, and 4PL actually mean, or are they still a mystery to you? Either way, our article is here to shed light on the topic and broaden your horizons. We’ll take a closer look at how each logistics model works, explore their key advantages, and help you determine which one is the right fit for your business.
Well-executed logistics is a key factor in the successful operation of nearly all companies that distribute various types of products. However, each company manages logistics differently. Some handle all logistics processes internally, while others outsource everything to professionals—this is how we distinguish between different logistics models.
Logistics models represent how companies manage the movement of goods and information within the supply chain. The key difference between the models lies in the extent to which companies outsource responsibilities for storage, transport, or distribution to their logistics partners. Choosing the right model is crucial for the efficiency of the entire business and can also significantly reduce operational costs.
Logistics based on four (and soon more) models is a modern development. Historically, logistics services focused primarily on the transportation of goods. As client needs and expectations evolved, the offering expanded to include storage, distribution, packaging, and strategic supply chain management. New technologies emerging in recent years are further expanding the possibilities of logistics.
If logistics models are new to you, let’s first introduce each one. What defines 1PL, 2PL, 3PL, and 4PL?
1PL, or first-party logistics, refers to a situation where a company manages all of its logistics needs completely independently. The basic assumption is that the company has its own fleet, warehouses, and complete infrastructure needed for distribution.
With 1PL, the company has full control over all logistics and does not rely on third parties. This typically applies to two types of businesses—large enterprises with extensive resources to manage distribution, or small entrepreneurs and family businesses who handle everything themselves to minimize operating costs.
2PL means a company manages most of its logistics internally, but outsources transportation to a specialized company.
This model is based on outsourcing transport services to a company specializing in efficient shipping. This can include trucking, air freight, or courier services. However, 2PL typically includes only transport—no additional customized logistics services.
In the 3PL model, all logistics operations are outsourced. A logistics company handles the entire process—from storage and transportation to distribution. While this can be more expensive than in-house logistics (depending on company needs), it greatly simplifies and optimizes order fulfillment and can ultimately save costs.
In 3PL, a company specialized in comprehensive logistics solutions handles everything. They provide a fleet, storage facilities, infrastructure, and most importantly, the expertise that can save the client time and money.
4PL takes logistics outsourcing a step further than 3PL. In this case, a logistics company manages the entire supply chain. It becomes a strategic partner coordinating all components of the supply chain.
This model emphasizes strategic collaboration. The logistics provider is expected to optimize and improve the entire chain. At HOPI Logistics, we work with many of our clients within the 4PL model.
These models represent varying levels of logistics services and differ significantly in scope, control, and suitability for different types of businesses.
The main difference lies in how much external involvement the company allows in logistics processes. In 1PL, companies manage everything in-house. In 2PL, they delegate transport only—no more, no less.
3PL offers a wider range of services, including storage, distribution, packaging, and more. The most comprehensive model is 4PL, where the logistics provider oversees the entire supply chain and coordinates multiple service providers.
These models also differ in how much control companies retain over logistics. With 1PL, firms maintain full control—at the cost of more effort. In contrast, 3PL and 4PL models transfer major responsibilities to logistics providers, who become strategic partners rather than just service providers.
The right model depends primarily on your company’s needs. 1PL and 2PL are commonly used by smaller businesses focused on cost control. Larger companies typically benefit from the complexity and scalability of 3PL or 4PL models.
Each model has its pros and cons, depending on its structure. What’s a disadvantage for one company might be a key advantage for another.
In a 1PL model, the company handles all logistics processes independently.
Advantages:
Disadvantages:
In the 2PL model, the company manages most logistics but outsources transport services.
Advantages:
Disadvantages:
In the 3PL model, the company outsources most logistics operations, including storage, transport, and distribution.
Advantages:
Disadvantages:
The 4PL model involves complete outsourcing of supply chain management and coordination across multiple providers.
Advantages:
Disadvantages:
Are you thinking about outsourcing logistics? Or perhaps handling it internally? The right model depends on your needs and preferences.
Before choosing a logistics model, consider the following:
Small and medium-sized businesses usually don’t need complex logistics and can work with simpler models like 2PL—or 1PL if they have the capacity. Larger companies typically benefit from outsourcing logistics partially or completely.
Consider how much you’re willing to spend. If your budget is limited, 1PL or 2PL might be more appropriate. Larger firms can afford (and benefit from) investing in 3PL or 4PL solutions.
If you work with multiple suppliers, operate in different markets, or need strategic coordination, consider a more complex model like 4PL. For simpler operations involving fewer entities, 1PL or 2PL is often sufficient.
As a leading logistics provider in Europe, we have extensive experience with all models. Every client’s implementation is slightly different, but here are common patterns:
1PL
2PL
3PL
4PL
Logistics is a rapidly evolving field, constantly adapting to meet changing customer needs. New trends are already on the horizon.
As global supply chains become increasingly complex, the 5PL model is gaining traction. It involves integrated management of the entire supply chain ecosystem, including process optimization and digitalization. Emerging technologies such as blockchain, artificial intelligence, and automation will play a growing role in these advanced models.
Technology is reshaping not just logistics services, but the entire industry. Automation, robotics, IoT, and drones are already improving efficiency and reducing delivery times.
With AI and machine learning, we’ll see more accurate demand forecasts, automated inventory management, and smarter route optimization. Tracking technologies will also evolve, improving end-to-end visibility across supply chains.
