The confusion and the debate between a 3PL, third party logistics and a 4PL, fourth party logistics has grown over the past few years, making it challenging for companies to choose what’s right for them – 3PL or 4PL. Opting for the most suitable option is a must, given the significant costs involved. To clear the fine line between the two, we take you through the key differences between 3PL and 4PL.
What are 3PL and 4PL?
3PL, third party logistics, is a logistics service provider to their customers. Initially, 3PLs were only considered for shipping and freight forwarding, but over the years they have expanded their purview to offering integrated and seamless logistics that include shipping, custom clearance, warehousing, fulfillment and distribution of products to the end customer or retailers. However, the control over the logistics operations remains with the company. 3PL only assists with the execution of t ransport and logistics. 3PLs are preferred largely by small and medium size businesses where the level of strategic logistics operations is moderate.
Top 3PL companies have a huge network of agents, experience and expertise to carry out the logistics operations for you in the most suitable method, which is chosen by you.
4PL, also known as fourth party logistics, is the concept where a customer hands over the entire management and responsibility of their logistics / supply chain to a 4PL company. A 4PL is more like a logistics management company that not only undertakes logistics operations for you, but also supervises these services including legal and managerial aspects. 4PLs are usually opted by companies that have a big supply chain and don’t particularly have in-house personnel to handle the logistics operations.
4PL companies provide advice from a strategic perspective that their customer can profit from; meaning, a 4PL vendor offers a consultative angle as compared to the 3PL, albeit numerous 3PLs can provide this as well. To put it plainly, appointing a 4PL is like appointing a logistics department as a whole outside of your organization that makes informed and strategic supply chain decisions on your behalf.
Difference between 3PL and 4PL
- A 3PL partner takes care of actual moving, storing and distribution of your inventory, letting you take decisions of logistics operations. Whereas, a 4PL company is appointed to oversee the entire logistics operations, right from taking strategic decisions, completing legal paperwork to execution of the operations.
- Companies lose significant command on their logistics decisions with a 4PL, unlike with 3PLs where it is the in-house team that decides the most suitable shipping or storing options.
- A 4PL can appoint a 3PL provider to carry out freight forwarding, warehousing or other operations for its customers. Whereas a 3PL can only provide its scope of services to its client who in turn chooses the best suitable way to execute.
- A 4PL service provider aims at optimizing and integrating the logistics for its clients, while a 3PL majorly focuses on day to day operations without interfering in the business side of deicsions of its customers.
- 4PLs can easily co-ordinate with various 3PLs and become the single point of contact for their customers; while 3PLs co-ordinate with the logistics personnel of the organization.
- 4PLs are more suited for medium and large enterprises whose supply chains are mature and demanding, whereas 3PLs prove to be beneficial for small and medium size businesses.
Which One Should You Choose – 3PL or 4PL?
Choosing between 3PL and 4PL can be a confusing and debatable. Factors like your organization structure, budget, business model, etc. would play an important role while considering the logistics service provider options. If you are happy outsourcing your entire logistics arm to an external partner, okay with sharing business details and are a medium to large scale business, then 4PL is likely a good bet. However, if you’d like to retain control of your shipping and storage of goods, then appointing a 3PL is what you need.
ProConnect Integrated Logistics is a full service 3PL service provider with strong presence in UAE, Saudi Arabia, India and Nigeria. Apart from tailored integrated logistics services, we also offer valuable insights and advice on the best way to optimize your logistics operations.
Still unable to decide between a 3PL and a 4PL? Drop in your query to evaluate our services and competitive prices.