It can be pretty easy to get confused when looking at 3PL and 4PL providers – two similar acronyms that aren’t quite the same thing. You might have heard of both of them before, or maybe you’re wondering what they are or how they differ from one another. In this article, we’ll explain the difference between 3PLs and 4PLs so that you can decide which option is right for your business’s needs.
What is 3PL?
3PL companies are much more common than 4PL, and people have typically heard of them before. In simpler terms, 3PLs are responsible for the movement of goods from one location to another. They’re not responsible or involved with the manufacturing of products themselves though.
They are third party logistics providers that offer outsourced services to their customers, usually focused on order fulfilment, but with a variety of other functions, including warehousing, distribution and transportation. 3PLs offer a lot of value to companies that don’t have their own facilities for handling logistics.
For example, if you’re an online retailer with warehouses but not enough space to store everything that’s been ordered online over time — you might consider working with a third-party logistics provider (3PL).
3PLs are an integral part of supply chains, and they’re becoming more important as companies try to reduce costs in increasingly more competitive marketplaces.
How is 4PL different?
4PL companies integrate the core services of 3PL but take it a step further by handling everything across the entire supply chain process. When it comes to logistics services, they can assist with everything from warehousing, to packaging, to inventory management. They have more information about a client’s supply chain than a 3PL does and can really make a difference in their efficiency.
A client may choose to use a single-source provider as an extension of its own supply chain management, or it may opt for an independent 3PL that provides a range of solutions. 4PL companies can help to manage the relationship between different 3PL providers so you don’t have to. In either case, the client benefits from reduced costs and risks while gaining access to a more complete range of services.
For example, if you need to move your goods from one location to another, a 4PL company might have a better delivery network than you do internally and will be able to offer faster service at lower cost than if they were using their resources.
4PLs can likewise help companies further improve customer service levels by providing the right storage facilities at key locations, in order for customers’ orders to arrive on time and in good condition. They also ensure that items are picked up from suppliers before they run out of stock so that products are always available when customers place an order with them.
Much more than a middleman, 4PLs offer a range of services for their clients as a full-service logistics provider, helping all sorts of companies reduce costs in their supply chain.
Which one should you use?
You’re probably wondering which type of third-party logistics provider (3PL or 4PL) is right for your company. A 3PL focuses more on the logistics of moving freight, while a 4PL is more involved holistically in the supply chain, such as warehousing and inventory management. A 4PL may also provide transportation planning and support services ancillary to its core business.
Using 4PLs will also remove you one step further from the supply chain, which means a simplified process but can also mean less control as well – a key point worth considering.
In addition to being focused exclusively on logistics as opposed to broader supply chain management activities like procurement and distribution, 3PLs often have lower operating costs than 4PLs.
Utilising a 4PL company will typically cost more than a 3PL company, but if they help to enhance your supply chain efficiency, then the overall savings could be significant.