What's the difference between 3PL and 4PL?
Knowing whether to go for 3PL or 4PL when you’re considering outsourcing your logistics is a difficult choice to make, but being aware of the pros and cons of both will make the decision easier. 3PL is the most common logistics service, but that doesn’t mean it’s the right one for you!
We’ve broken down what 3PL and 4PL are and the advantages and disadvantages of both so you can decide for yourself which logistics service is the right fit for you.
What is 3PL?
3PL, also known as third-party logistics or TPL, is when a variety of logistics services are offered to a company that needs its products shipped, stored and transported. Examples of logistics services include order fulfilment, product delivery and warehousing.
The role of a third-party logistics provider typically covers:
- Warehousing - Having the capacity to store your products in the environment they need to be kept in
- Transportation - Both inbound and outbound
- Fulfilment - From pick and pack to ensuring all orders are delivered as expected to your customers
By working with a 3PL provider, you will still have oversight of your supply chain, but you outsource this part of your business to a 3PL provider, so they carry out the necessary services for you.
Advantages of 3PL?
- Save time and money
- No upfront costs
- Access a logistics company’s expertise and experience, including their contacts within the industry
- Flexibility
- Scalability
- Short delivery times
- Access to advanced technologies
- Optimised inventory management
- Opportunity to handle a large number of clients at a time
Disadvantages of 3PL?
- Less control over customer satisfaction
- Potential reverse logistics complexities
- It can be more costly when dealing with low order volumes
What is 4PL?
Fourth-party logistics, also known as lead logistics providers (LLPs), include everything listed under 3PL management but also covers outsourcing your entire supply chain management and logistics to the 4PL service provider.
Advantages of 4PL?
- Extra time to focus on other aspects of your business
- Reduced logistics and supply chain complexities
- Cost savings
- Market-leading data visibility
- Operational efficiencies
- Liaising with one point of contact
- Flexibility by having the ability to react to market trends
Disadvantages of 4PL?
- Cost
- Hiring a 4PL can be costly as they are responsible for managing every part of your supply chain
- Limited Operational Control
- As the 4PL will manage the entire supply chain, you’ll have little to no control over how they choose to run this aspect of your business
- Long-term Agreement
- Since your 4PL will manage the full supply chain, it will be difficult to revert back to managing this in-house. As it is unlikely that you’ll have the same level of skills and experience to manage your supply chain to the same level
What is the difference between 3PL and 4PL?
Which one is right for your business?
The main deciding factor on whether 3PL or 4PL is best for you is down to the size of your business and the scale at which you’re growing.
3PL services tend to be better suited for small to medium-sized businesses, as their management of certain aspects of your supply chain will allow you to focus your efforts on sales, marketing and product development. This will allow your business to grow at a sustainable rate.
4PL is better suited for larger businesses that have surpassed the 3PL stage and are ready to take it to the next level. Whether that’s looking at how the business can expand, growing your niche within the industry or investing money into aspects of your business that can’t be outsourced.
If you're still undecided on the best option for you or you’re questioning how 3PL or 4PL will benefit your business, get in touch today, and we can help answer your questions.