3-4. Transition from 1PL/2PL/3PL and the Next Generation of "Joint Logistics"
In modern corporate management, it has become extremely difficult to maintain an increasingly complex supply chain using only in-house resources. Therefore, when formulating a cutting-edge logistics facility plan, determining to what extent to own facilities in-house and what to outsource to specialized external companies (outsourcing strategy) is the first step of the project.
In this chapter, we unravel the evolutionary history of outsourcing—starting from in-house logistics to 1PL, 2PL, and 3PL—and thoroughly explain, using diagrams, the mechanism of "joint logistics", which is currently the most important issue in the logistics industry, and its impact on logistics facility planning.
Section 1: What are 1PL, 2PL, and 3PL (Forms of Logistics Outsourcing)
Depending on how a company manages its logistics operations and to whom it outsources them, the form of logistics has significantly evolved from "1PL" to "3PL," and further to "4PL." In each form, the primary entity constructing the system and the scope of operational responsibility differ.
■ 1PL (First-Party Logistics / In-house Logistics)
Format: The most traditional format where the shipper (companies themselves, such as manufacturers or retailers) builds and owns logistics systems like warehouses using their own capital. Logistics operators (such as transport companies) merely undertake "practical tasks (like transport by truck)" under the constructed system.
Challenge: While there is the merit of accumulating unique know-how, the fixed costs (depreciation expenses) required to build and maintain massive warehouses in-house squeeze management. Moreover, it is difficult to respond flexibly to volume fluctuations (the difference between slow and busy seasons), and this increasingly becomes a burden in modern fast-paced business expansion.
■ 2PL (Second-Party Logistics)
Format: Taking one step forward from 1PL, this is a format where the logistics operator (warehouse company or transport company) builds and owns logistics systems such as warehouses with its own funds. However, the entire system is not completely left to the outside; the logistics department and some logistics facilities of the shipper company remain in-house.
Challenge: Operational areas tend to overlap between the shipper and the logistics operator, and the location of systems and responsibilities often becomes ambiguous. It can be called a transitional model.
■ 3PL (Third-Party Logistics / Complete Logistics Outsourcing)
Format: This is the mainstream model today. The shipper scales down or abolishes its in-house logistics department and comprehensively outsources its logistics operations to a logistics operator (3PL provider). The 3PL operator not only builds and owns the optimal logistics system itself, but also single-handedly undertakes all logistics functions, from daily center operation to transport and delivery management.
Merits: The shipper avoids having to hold huge fixed assets like warehouses (off-balancing), allowing them to centrally invest the freed-up management resources into their true core business (product development and sales). Even in logistics facility planning for launching a new hub, by utilizing the specialized know-how of the 3PL operator, it becomes possible to speedily build an advanced center equipped with the latest automated facilities.
💡 What is the Further Evolved "4PL"?
A format that adds an advanced consulting function by stepping into upstream areas such as "business planning (product R&D, sales forecasting, production planning/manufacturing, marketing & sales)" and "general information management (administrative processing)" in addition to the "basic logistics operations," "ancillary logistics operations," and "information management" provided by 3PL is called "4PL." It is the ultimate partner that drives the optimization of the entire supply chain from the same perspective as upper management.
Section 2: Diverse Origins and Classifications of 3PL Operators
Even though we say 3PL in a word, the fields they excel in differ depending on what kind of business the company originally evolved from (its origins).
- Manufacturer Logistics Subsidiary Type: Possesses know-how specialized in the parent company's product characteristics. Examples include food company types (Meito Transportation, Ajinomoto Logistics, Kewpie Jyozo, etc.) and electronics manufacturer types (Hitachi Transport System, Toshiba Logistics, Sanyo Electric Logistics, Sony Supply Chain Solutions, Alps Logistics, etc.).
- Trading Company / Wholesale Logistics Subsidiary Type: Their strength lies in a broad network tied to global commercial flows. Examples include i-Logistics (Itochu), Alltrans (Sumitomo Corporation), Marubeni Logistics, MBK Logistics Partners (Mitsui & Co.), MC TRANS (Mitsubishi Corporation), as well as wholesale-derived Ryoshoku, Kokubu, and Gurumen.
- Warehouse Company Type: Excels in proposing solutions based on robust storage facilities (assets). Includes major players (Nippon Express, Mitsubishi Logistics, Mitsui-Soko, Sumitomo Warehouse), business format conversions from regional warehouses (Fuji Logitech, Japan Transcity, Sakata Logics), and logistics subsidiaries of major warehouse companies (Logistic Planner).
- Transport Operator Type: Their strength is a nationwide truck transport network. Besides major international freight forwarders (Nippon Express, Kintetsu World Express, Seino Transportation, Yamato Transport, Hankyu, Maruzen Showa) and special consolidation operators (Daiichi Kamotsu, Japan Logistic Systems, Fukuyama Transporting, Aichi Rikuun, Trancom), operators specializing in low-temperature transport like Hamakyorex and Runtec also fall into this category.
Section 3: What is "Joint Logistics," the Ultimate Efficiency?
While the logistics efficiency of individual companies has progressed with the spread of 3PL, the social challenges of recent times, such as the "2024 problem (severe driver shortage)" and the "demand for carbon neutrality (CO2 emission reduction)," can no longer be solved by the efforts of a single company alone. Therefore, what is currently being promoted across the industry is "joint logistics (joint delivery)."
■ A Mechanism for Joint Operations that Transcends Industry Boundaries
In traditional logistics, each manufacturer or wholesaler arranged their own trucks and headed out individually to deliver to stores like retail supermarkets. However, this causes multiple trucks with mostly empty beds to arrive at the same store, leading to congestion while waiting to unload (waiting time problem).
In joint logistics, multiple companies such as "Food Manufacturer A and B" and "Food Wholesaler C and D" consolidate their cargo into a single system (joint distribution center) using their mutual "business format, route, and region" as a key. Then, these cargos are mixed and delivered together in a single truck to "Food Retailer E (supermarket, etc.)."
■ The Leading Role Driving Joint Operations
The leading role in adjusting the interests among these complex stakeholders and running the actual operations is the logistics operator (transport company, etc.) that actually owns the means of transport (truck network). They are not merely transporters, but 3PL providers with advanced information systems, and they strongly assume the role of "joint delivery operator (the coordinator of joint delivery)."
Section 4: The Overwhelming Benefits and Operational Flow Brought by Joint Logistics
■ The 4 Major Benefits of Joint Operations
- 1. Increased Loading Efficiency: By combining the cargo of multiple companies like a puzzle, the empty space (air) in truck beds is reduced, allowing operations near full capacity.
- 2. Reduction of Hubs: By canceling the small warehouses that each company held separately and consolidating them into one huge joint distribution center, overall storage costs and fixed costs can be massively reduced.
- 3. Decreased Number of Trucks: Because the absolute number of trucks on the road decreases, it not only serves as a countermeasure to the severe driver shortage but also directly links to a significant reduction in CO2 emissions (environmental contribution).
- 4. Bulk Delivery: For the receiving side, such as retail stores (supermarkets, etc.), the burden of inspection and receiving work is dramatically reduced because the trucks that used to arrive separately now only need to come once.
■ The Flow of Inventory and Ownership within a Joint Center
Inside a joint distribution center, not only are goods physically moved, but the "transfer of ownership" in the data occurs in real time.
- At Receiving: At the point the goods are brought into the center, they are still stored in the area as "manufacturer-owned inventory."
- Name Change (Movement on the books): Shipping instruction data saying "please ship this product" flies from the wholesaler (Wholesaler C, Wholesaler D) to the logistics operator. At this moment, even if the product has not physically moved, a "name change (transfer of ownership)" is performed on the inventory item in the data, switching it to "wholesaler-owned inventory."
- Joint Delivery and Three Temperature Zones: Regardless of whether it is owned by a manufacturer or a wholesaler, the cargo ultimately heading to the same retail store is picked and consolidated. At this time, it is loaded onto the same truck while maintaining the quality standards of the "three temperature zones" (ambient, refrigerated, frozen) and delivered in bulk to the food retail store (joint delivery).
💡 Impact on New Logistics Facility Planning
In this way, when a logistics operator functions as an advanced 3PL and as a joint delivery operator, the nature of the hub changes fundamentally. In future logistics facility planning, it becomes a mandatory requirement to design a "large-scale, diverse, and multi-functional" distribution center specification to simultaneously process the cargo and information of multiple companies, rather than merely a storage shed.