What is 3PL and 4PL in logistics? What is the difference between 3PL and 4PL companies? Read and find out!
It can be difficult to determine whether you need a 3PL service provider or 4PL logistics company to improve your supply chain. For some businesses, making the wrong decision can negatively impact your service and can cost millions of dollars.
In this article, we will explain what is 3PL and 4PL in logistics.
3PL or third-party logistics provider offers outsourced professional logistics services to businesses of all sizes. These professional services can improve the supply chain management functions such as inventory storage and management, freight forwarding, shipping and distribution, picking and packaging, customs brokerage, contract management, IT solutions, and cross-docking.
One example is UPS which is a well-known 3PL logistics provider. UPS offers all the services we just mentioned and operate globally.
3PL logistics companies come with numerous benefits including advantages for fast-growing businesses with large order volumes, speedier delivery, multiple storage locations, optimized customer service, and much more.
4PL or fourth-party logistics providers which take 3PL logistics companies a step further by managing technology, resources, and infrastructure. The 4PL companies offer business planning, project management, change management, consultancy, freight sourcing strategies, network design and analytics, logistics strategy, and inventory planning and management. Deloitte is one great example of 4PL companies that offer more than traditional 3PL logistics services and offer their clients strategic business insights, as well as, professional services for logistics execution.
4PL logistics companies can outsource and improve the entire logistics process of a business and offer an operation support.
The 4PLs are a new concept, however, they are used by medium and large-size businesses or enterprises that are looking for an improved or complete logistics solution from a strategic and operational perspective.
The difference between 3PL and 4PL is debatable and there are no significant differences you should know about. The best way to think about these two concepts is that each type of logistics provider provides services that can help you optimize the supply chain.
Many ecommerce businesses go for 3PLs because they are a good combination of flexibility, support, and cost-effectiveness.
As for which concept will work for you and your business, depends on your business infrastructure, budget, requirements, and how much control you want over the supply chain.