What is the difference between a 3pl and a 4pl provider?

The main difference between 3PL and 4PL is that 4PL handles nearly the entirety of a supply chain, while 3PL is primarily concerned with handling just the logistical process.

Third-party Logistics: 3PL

A third-party logistics company handles physical distribution and logistics. 3PL companies do this by using their own resources, such as a network of freight transportation providers and warehouse facilities to help clients ship or store their products to meet their needs.

3PL companies leverage their experience and partner contacts o ensure all steps are taken to keep the client’s products safe.

Still, a third-party logistics company can have many variations depending on their specialties. According to the Council of Supply Chain Management Professionals (CSCMP), the legal definition is: “A person who solely receives holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”

In plain language this means that a 3PL company holds or transports a a client’s product (i.e., a product that they do not own).

What Does a 3PL Company Specialize In?

3PL companies tend to specialize in:

• Warehousing
• Distribution
• Order fulfillment
• Cross-docking
• Inbound and outbound freight
• Customs
• Freight consolidation
• Inventory management

The above third-party logistics services are scaled and customized to fit a client’s specific requirements.

One client may not require warehousing, whereas another will, yet another may require temperature controlled warehousing. This versatility and ability to accommodate makes 3PL companies adept at providing different services to different clients.

Fourth-party Logistics: 4PL

The full nature of 4PL is still heavily debated. There are other definitions out there, but here’s one that’s more popular:

In short, a 4PL company doesn’t stop at outsourcing logistics services, but also outsources the management of those same services

4PL companies will generally have no way of transportation or warehousing, but rather use the transportation and warehousing services of a 3PL company. There are of course exceptions to this.

What Does a 4PL Company Provide?

A fourth-party provider will tend to cover (generally through 3PL partners):

• Procurement
• Storage
• Distribution

If we reference the CSCMP again, a 4PL company differs from a 3PL company in the following ways:

1. 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners;
2. 4PL organization acts as a single interface between the client and multiple logistics service providers;
3. All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and,
4. It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure.

The CSCMP definition is a “supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution”.

This means is that a 4PL company essentially deals with the planning, management, designing, and optimization of a supply chain from start to end, and does so by outsourcing required services to trusted partners.

3PL vs 4PL: Which Logistics Service Is Right for You?

Overall, third-party logistics and fourth-party logistics inherently operate the same way, but consist of different moving parts.

Because a 3PL company arranges freight carriers and warehousing by dealing directly with the service providers, the fewer parts in play may work perfect for your small business.

A 4PL company, on the other hand, may be a good fit if your business is more expansive. A 4PL provider will arrange the same services and employ companies such as 3PL companies, who leverage their warehousing and vast network of carriers.

In the end, the goal of both 4PL and 3PL companies is to provide a client with a comprehensive, end-to-end supply chain.

There are instances and situations when a business is not able to carry out the logistics and supply chain management functions. A third party logistics (3PL) can help out in these situations.

What is 3PL? It is a service that is provided by an external company to provide distribution and fulfillment of the products on behalf of the company.

Startups and growing companies are more likely to need 3PL services. But even big companies looking for convenience and those that want to avoid the hassle of logistics can use 3PL services.

There are many reasons that a company may decide to use 3PL. One of the reasons is lack of warehousing facilities. A company without warehousing may still need storage; they can choose 3PL warehousing for their products.

Also, growing companies may be faced with transportation problems, or struggle with up-front investment in vehicles and transport equipment. What is 3PL? It is a solution to these problems.

Companies that want to expand into other markets also find 3PL services very useful, as they can send their products to places where they have not built any networks yet. Most of the ecommerce providers need 3PL services, especially those that provide drop-shipment services.

What is 3PL? Here are a few questions and answers that will help explain this concept:

• What are logistics providers? A logistics provider is a company that provides the management of flow of goods and materials from the point of origin all the way to the end user. Logistics providers handle shipping, warehousing, transportation, packaging, security, and inventory. A 3PL is a logistics service provider.

• What is the difference between 3PL and 4PL? A 3PL provides outsourced logistics services to a company, and may include part or all of the supply chain management services of the company. The services offered by a 3PL include warehousing, inventory, order packing and fulfillment, transportation and shipping coordination, order tracking and status communication, customer service, picking, cross docking, IT solutions, freight forwarding, returns processing, and reverse logistics, among other supply chain management services.

4PL (fourth party logistics) services, on the other hand, perform all the functions of 3PLs—but also offer consulting services, management of technology, resources and infrastructure, logistics strategy, business planning, project management, change management, and so much more. With a 4PL, the company benefits from strategic advice in addition to operational support.

• How much does a 3PL cost? Each 3PL companies will price their services differently. There are no real set standard prices for 3PLs, and therefore you will find that the prices range and differ greatly from one company to the other. It is easy, however, to find a company that will offer you good value for your money, if you take time to calculate how the expense will affect your production costs and the pricing of your product.

For most of the companies, you will find that there are both fixed and variable costs, depending on the services that you utilize. Hiring a great 3PL comes with a lot of peace of mind, allowing you to concentrate on the growth of your company.