With the growth of e-commerce at a stupendous rate, conditions have never been riper to find and sell to customers all across the globe. However, with the demand comes challenges as in
customers want their orders to be processed and delivered in a faster and cheaper manner than ever before. Thus, there is great amount pressure on companies to deliver, and hence, an
effective supply chain strategy is crucial.
The boom in e-commerce contributed to the world economy in a significant way and so did logistics. Without logistics, the implementation of the e-commerce concept would have been
far from possible.
Various types of logistics exist at present such as 1PL, 2PL, 3PL, 4PL, and 5PL. They are unique in their own ways. First party logistics or 1PL refers to the consigner of various goods and services and arrange the transport of goods to their expected destinations. Second party logistics or 2PL refers to provider of services such as storage and warehousing along with transport services.
Third party logistics or 3PL service providers offer services keeping the entire supply chain in mind. Acting as consultants, they provide specific expertise, constant monitoring and efficient communication, thus bringing more strategic insight and management over the supply chain.
Fourth party logistics or 4PL logistics services are managed by companies that provide integration solutions to coordinate each and every aspect of the supply chain. They integrate 3PL resources and others and focus on digital tools. Fifth-party logistics or 5PL the provider offers expertise in engineering and cutting-edge innovative flow automation systems.
3PL existed for over five decades, 4PL are much more modern and 5PL is slowly gaining pace and emerging as an innovation to meet the demands of the rapidly booming e-commerce industry. Focusing mainly on technology, 5PL concentrates on wider supply chains, planning, organization, and implementation of all elements of the logistics needs of an organization.
Making use of technologies such as blockchain, robotics, artificial intelligence, machine learning, and more, the system gains increased value and efficiency from the beginning to the end of the supply chain. Though a novel addition to the logistics sector, 5PLs have the ability to manage numerous supply chains altogether, thus making them an attractive proposition for established and rapidly growing online retailers. Fifth-party logistics manages and coordinates
the operations of 3PLs and 4PLs via strategic solutions related to supply and demand in the e- commerce sector. 5PL comprises Order Management System (OMS), Warehouse Management System (WMS) and Transport Management System (TMS) which are interrelated in a unified system and information technology.
One of the recent developments that took place in the fifth-party logistics space is the agreement between Ni Hsin Ecologistics Sdn Bhd, a subsidiary of Ni Hsin Group Berhad, and Pride Logistics Alliance Sdn Bhd for the 60% acquisition of the latter by the former company.
Pride Logistics is a company that deals with freight, forwarding, haulage & transportation, warehouse and international agency services. According to Khoo Chee Kong, Managing Director of Ni Hsin Ecologistics Sdn Bhd, they plan to set foot into the logistics market with the aim of supporting their food and beverage business. They believe that the acquisition complements their ecosystem using electric vehicles for delivery and by leveraging the knowledge and expertise of Pride Logistics, they would achieve handsome growth in coming years. Ni Hsin also believes that by using fifth-party logistics (5PL), it can carry out all supply-chain methods for
customers.
The 5PL solutions are set to grow exponentially in the coming years as industries continue to automate and the e-commerce industry continues to witness growth. According to a report by Allied Market research, the fifth-party logistics market stood at a revenue of $9.21 billion in 2025, and is likely to reach $17.30 billion in 2035, registering a CAGR of 6.5% by 2035. The growth of the market is backed by factors such as expansion of the e-commerce industry, rise in efficiency of supply chain and management systems, and increase in international trade.
Moreover, technological advancements and introduction of technologies such as blockchain are expected to offer lucrative growth opportunities for the market players. The Covid-19 pandemic led to the decline in market growth in 2020, however, the market started making a steady growth again by the end of 2021.
In order to expand market presence and enhance their solution capabilities, many players started adopting key strategies such as partnering with local vendors, to build up their supply chain offerings. In addition, they are also upgrading the existing logistics solutions to combine emerging technologies such as Internet of Things (IoT), blockchain, artificial intelligence (AI) and
others.
The adoption of the fifth-party logistics solutions varies across regions globally. For instance, Europe is seeing a prolific growth in the sector owing to increase in demand for better logistics
services and rise in number of free trade agreements in the region. Asia is another market where 5PL solutions experiences an exponential growth, owing to rise in manufacturing productions for electronics, automotive and others.
As the needs and demands of the e-commerce industry evolve, so too must the capabilities of the 5PL system. Thanks to the vast degree of technological advancements and innovations which allows unprecedented amounts of data to be captured from various supply chain sources, enabling 5PL to transform supply chain.
Author’s Bio
Sharmistha Sarkar has always had a keen interest in reading and writing. An engineering graduate, she forayed into the field of writing due to her love for words and the urge to do something different. Allied Market Research has given her the chance to gain knowledge about different subjects as a Specialist Content Writer. She can be reached at sharmistha.bose@alliedanalytics.com