We are used to 3PL (third-party) logistic but where does fourth-party logistics come into the picture? 3PL and 4PL are indeed different and offer different levels of logistical services. Sometimes the decision to choose 3PL or 4PL Logistics gets really tough, understanding the differences between them and utilizing the differences to our use and making the best efficiency and cost-effective supply chain to our business is of great importance.
What is 4PL?
Fourth Party Logistics, also known as lead logistic providers or 4PL, they assume many of the similar roles as third-party logistics providers but have much more responsibilities and accountability in helping the customers to reach their strategic goals.
Fourth Party logistics providers provide additional services than 3PL and even manage external 3PLs to design, build, and provide a supply chain for the business.
4PL services typically circumscribe 3PL services as well such as:
1. Strategy for logistics
2. Change in management
3. Managing project
4. Inventory planning and management
5. Outbound, Inbound and reverse logistics managements
6. Planning the business
7. Network design
8. Network Analysis
9. Analytics including transportation spend, analysis, capacity utilization, and career performance.
Pros of 4PL
1. It gives you more ownership and control over your business.
2. Creates a slope and cost-effective supply chain for improved profit margin.
3. It provides additional outsourcing to third-party professionals by letting manufacturers focus only on their product.
Cons of 4PL
1. Minimal control over logistics processes and fulfillment.
2. Cost-prohibitive for startups and small businesses.
What is 3PL?
Third-Party Logistics is outsourcing all or much of a company’s logistics operation to a specialized company. 3PL allows you to focus on various other parts of your business as it allows you to expand operational logistics from warehousing. Third-Party logistics services can make up part or sometimes all of their supply chains, including:
2. Inventory Discovery
3. Order Fulfilment
5. Order tracking
6. Technical services/IT solutions
7. Freight forwarding
Pros of 3PL
1. A vast network of resources across countries, the company can also expand its market outside the country and manage internationalization.
2. 3PL works well for business which is growing at a faster rate and for large order volumes.
3.Finding the right 3PL can save you a lot of time and money.
Cons of 3PL
1. It can be challenging if the customer doesn’t get the product on time. The customer will ask a question from you and no one will blame the 3PL party.
2. Products are not in easy reach of 3PL.
3. Large cost for investment at the beginning, and if you don’t need a big warehouse or you do not have many orders, the cost of 3PL can be prohibitive.
3PL vs 4PL — What’s best for your Company?
As third party logistics and fourth-party logistics operate in a similar manner but consists of different parts. A 3PL company arranges carries and warehousing by directly dealing with the service providers, where the 4PL company arranges the same services and does a lot more for a client by employing companies for the clients such as employing 3PL companies who use their vast network of carriers and warehousing providers. 4PL companies manage other companies to provide a client with a comprehensive end-to-end supply.
If you are constantly dealing with an increasingly complex supply chain and struggling to meet the expectation of your trusted customers for faster reasons, then an innovative 3PL or 4PL may be the best solution for you.