3PL and 4PL Logistics:
When you are looking for logistics services, some people would say that you should go with 3PL or Third Party Logistics while others state that 4PL or Fourth Party Logistics is the best option. It’s important to keep in mind that they are different and they offer different levels of logistical services. In what concerns to logistics, many businesses choose to rely on an outside provider. If this is your case, then you’ll need to choose between a 3PL and a 4PL service.
What Is 3PL Or Third Party Logistics?
Simply put, the 3PL service involves having the manufacturer maintaining oversight of their supply chain but outsources both the transportation and logistics to a 3PL provider.
Key Services in 3PL:
- Inventory storage.
- Proper inventory management.
- Customs brokerage.
- Freight forwarding.
- Contract management.
- Picking and packing of goods.
- IT solutions.
Characteristics of 3PL:
As you can easily understand, a 3PL provider will not only receive but also handle, store, and deliver your goods. On most occasions, they will do these services in the name of your business.
In order to comply with the services, the 3PL company needs to provide a warehouse, do the packing, and even some of the inventory management of your products and stock. However, these functions are limited to what was agreed and to the needs of your own business.
What Is 4PL Or Fourth Party Logistics?
Unlike 3PL providers, 4PL providers oversee the organization as well as the management of a whole supply chain for both manufacturers and wholesalers.
Just to give you a more practical idea, in a 4PL model, the manufacturer of a product outsources not only the logistics but also the packaging, warehousing, and even the delivery of the product. As you can see, if you choose this option, the 4PL company will take control of all the logistical operations for manufacturing companies.
Key Services In 4PL:
- Freight sourcing strategies.
- Logistics strategy.
- Analysis of transportation expenses.
- Analysis of carrier performance.
- Effective management of third-party logistics.
- Business planning.
- Project management.
- Proper management of inbound, outbound, and reverse logistics.
- Proper coordination of a wide supplier base in various geographic locations.
- Change of management.
- Network analysis and designs.
- Analysis of capacity utilization.
- Proper inventory planning and management.
Characteristics Of 4PL:
As you probably already figured out, a 4PL model includes everything a 3PL service includes and even more. The more is related to managing the overall supply chain, legal paperwork, and even managerial decisions.
Ultimately, the 4Pl will be using their own resources to make sure that the supply chain needs of your business are met but you don’t have any control over them.
3PL VS 4PL Logistics:
So, which one should you pick – the 3PL or the 4PL model?
The main difference between the two is the fact that while a 4PL handles the entirety of a supply chain, a 3PL is mainly concerned with handling just the logistical process. This may be understood in more details by the students of diploma in supply chain management and supply chain management degree programs, offered by AIMS.
So, to make a decision, you need to consider the needs of your business. Some of the aspects to keep in mind include:
- 4PL are usually best suited for larger businesses and 3PL for smaller businesses.
- 4PL mainly focuses on the optimization and integration levels while 3PL focuses on daily operations.
- 4PL use their own warehouses and trucks and 3PL don’t need these assets.
- 4PL providers take care of the entire process and the business has no control over what happens.