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5PL - Fifth Party Logistics

5PL - Fifth Party Logistics / What is Fifth Party Logistics?

5PL - Fifth Party Logistics is the approach in which the entire Supply Chain is managed by Outsourcing.



5PL - Fifth Party Logistics Purposes of Use

Achieving greater control of market data by using technology and Big Data more intensively

Being involved in Supply Chain Networks rather than Supply Chain Management.



Differences Between Outsourcing Logistics Service Procurement

  • 1 PL = All power obtained:  All processes are managed by the business itself.

  • 2 PL = Shipping: The business uses a standard shipping company for last-mile delivery. It does not offer any logistics solutions.

  • 3 PL = Outsourcing Logistics: It is the outsourcing of distribution centers of businesses such as E-Commerce.

  • 4 PL = Outsource Logistics Management: Uses multiple 3PLs in multiple locations.

  • 5 PL = Supply Chain: The business outsources order management and all subsequent processes, except production. In a way, we can say that all Supply Chain Management, except Purchasing, is outsourced.



Outsourcing Logistics Service Procurement Comparison Matrix

Outsourcing Logistics Service Procurement Comparison Matrix

5PL – Fifth Party Logistics / Fifth Party Logistics Risks

  1. Overdependence: Companies can become overly dependent on their 5PL provider. This can lead to serious disruptions, especially in cases of operational problems or bankruptcy of the provider.

  2. Data Security and Privacy Risks: 5PL services often process companies' sensitive data. Therefore, data breaches and privacy issues are among the significant risks.

  3. Technological Compatibility Problems: Incompatibilities may occur in the integration of companies' existing systems and the 5PL provider's technologies. This can lead to operational inefficiencies and cost increases.

  4. Contracts and Disputes: Uncertainties or disputes in 5PL service contracts can lead to adverse effects on service quality and costs.

  5. Loss of Management and Control:The use of 5PL may reduce companies' control over Supply chain operations. This may affect the company's strategic decision-making processes.

  6. Loss of Flexibility: In some cases, 5PL solutions may be insufficient to quickly adapt to companies' specific needs.

  7. Performance and Quality Issues: If a 5PL provider's performance does not meet customer expectations or comply with quality standards, this may negatively impact the company's overall performance and customer satisfaction.

  8. Cost Management: Unexpected cost increases or 5PL services exceeding estimated costs may make budget planning difficult.

  9. Adaptation to Market Changes: Failure of the 5PL provider to react quickly enough to rapidly changing market conditions may lead to a competitive disadvantage. The company's indifference to the problems experienced in the market also magnifies the problem at this point.



In summary...

Especially from 3PL the next levels are between 4PL and 5PL There is some ambiguity here as some points have not been clarified yet. At this point, there may be different approaches on an industry and country basis.


General advice is to avoid losing control 3PL – Third Party Logistics service. 3PL Sort of Sweet Spot  is the most useful situation that we can describe. In this way, you can focus on your main line of business without losing control.



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