Understanding 3PL and 4PL:
When you are looking for logistics services, some people would say that you should go with 3PL Logistics while others state that 4PL 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 them, and understand 3pl VS 4PL.
What is 3PLLogistics?
Simply put, the 3PL logistics 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 Logistics:
- Inventory storage.
- Proper inventory management.
- Customs brokerage.
- Freight forwarding.
- Contract management.
- Picking and packing of goods.
- Cross-docking.
- IT solutions.
Characteristics of 3PL:
As you can easily understand, a 3PL logistics provider 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 third party logistics 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 Logistics?
Unlike third party providers, 4PL logistics providers, while considering the supply chain innovation, 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 Logistics:
- Freight sourcing strategies.
- Logistics strategy.
- Consultancy.
- 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 fourth party logistics model includes everything a third party logistics service includes and even more. The more is related to managing the overall supply chain, legal paperwork, and even managerial decisions.
Ultimately, the 4Pl logistics 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:
So, to find the model that you should pick, let us take a look at 3PL VS 4PL. The main difference between 3pl and 4pl is the fact that while a fourth party logistics handles the entirety of a supply chain, a third party logistics is mainly concerned with handling just the logistical process. This may be understood in more details, during the diploma in supply chain management and supply chain management certification studies, offered by AIMS’ institute of supply management.
So, to make a decision for your business needs, you need to compare 3pl vs 4pl. Some of the aspects to keep in mind include:
- Fourth party logistics are usually best suited for larger businesses and third party logistics for smaller businesses.
- Fourth party logistics mainly focuses on the optimization and integration levels while third party logistics focuses on daily operations.
- Fourth party logistics use their own warehouses and trucks and third party logistics don’t need these assets.
- Fourth party providers take care of the entire process and the business has no control over what happens.