Third Party Logistics (3PL) and Fourth Party Logistics (4PL)

What is a 3PL?

A third party logistics company is one that works with shippers in order to manage another company’s logistics operations department. 3PL is the action of outsourcing activities that are related to logistics and distribution.

What is a 4PL?

The concept of a 4PL provider is an integrator that accumulates resources, capabilities and technologies to run complete supply chain solutions.

Main Difference between 3PLs and 4PLs

The 3PL targets a single function, whereas the 4PL manages the entire process. A 4PL may manage the 3PL.

3PL

Third party logistics providers usually specialise in

  • Integrating operations
  • Warehousing
  • Transportation services
  • Cross-docking
  • Inventory management
  • Packaging
  • Freight forwarding

These services are scaled and customised to the customer’s specific needs based on their market conditions and the different demands and delivery service requirements for their products or materials.

There are thousands of 3PLs in the market that offer different models and perform different tasks. For example, certain 3PLs may only specialise in certain industries.

The 3PL have a large footprint throughout the country. This makes it viable for companies to service clients in remote regions at a much lower cost than doing it themselves.

Types of 3PL Providers

1.     Standard

Basic activities: Pick and pack, warehousing and distribution.

2.     Service Developer

Value-added services such as tracking and tracing, cross-docking and specific packaging

3.     Customer Adapter

This comes in at the request of a customer. It is when the 3PL takes over complete logistics of the firm.

4.     Customer Developer

This is the highest level of 3PL. This is when the 3PL integrates itself with the company, and ends up taking over the entire logistics operation.

4PL:

Functions provided by a 4PL company

  • Procurement
  • Storage
  • Distribution
  • Processes

A 4PL company takes over the logistics section of a business. This could be the entire process, or a side business that’s imperative to have as part of the main business.

An example here would be a bicycle importer. The main function is to import bicycles however, they need to have spare parts for these unique bikes. A 4PL would manage the total logistic operations for the spare parts business.