By now, you’re likely well versed regarding Third Party Logistic (3PL) companies. But did you know that there’s such a thing as a Fourth Party Logistics company (4PL)? Keep reading to learn what exactly a 4PL is and the difference between the two.
As we’ve discussed in articles past, a 3PL helps business clients with some or all of a businesses’ shipping needs. Whether it’s moving goods from a manufacturer to a distributor, or a distributor to the end user, 3PLs are an integral part of the supply chain.
In addition to transportation services (LTL and FTL), 3PL services may also include warehousing and inventory management, product assembly and fulfillment services, as well as tracking and claims management.
A fourth-party logistics (4PL) provides many of the same services as a 3PL, with a few major differences.
As we discussed in last month’s article, “Demystifying Logistics Services,” we talked about the difference between logistics and supply chain. In short, logistics is concerned with the movement of goods from point A to B. Supply chain encompasses the product’s life cycle from conception to delivery to the end user.
A 3PL is a logistics service provider and a 4PL is a supply chain partner. According to supply chain expert, Apics, 4PL is defined as:
“Fourth-party logistics differs from third-party logistics in the following ways: (1) the 4PL organization is often a separate entity formed by a joint venture or other long-term contract between a client and one or more partners; (2) the 4PL organization is an interface between the client and multiple logistics services providers; (3) ideally, all aspects of the client’s supply chain are managed by the 4PL organization; and, (4) it is possible for a major 3PL organization to form a 4PL organization within its existing structure.”
3PL or 4PL
What would make a business choose one over the other?
Businesses with a mature product and solid manufacturing relationships may benefit more by working with a 3PL to warehouse and move that product.
A new business interested in developing a complex or extremely high cost product may benefit from working with a 4PL.
Scalability and Growth
A 3PL provider can typically scale quicker and easier than a 4PL. A 4PL may be able to offer lower transportation costs within the supply chain, but they’re also going to be more restrictive and less flexible with changes as development and distribution is more tightly controlled.
A 3PL has the advantage of working with many carriers, offering clients competitive transportation costs. Additionally, a 3PL will likely have warehousing options available which can scale to client demand. A 4PL will likely utilize an in-house management model with private warehousing. Utilizing a 3PL frees up labor and private warehousing costs.
The 3PL Partner
Depending on the product and need, some businesses will be better served to maintain in-house shipping and logistics. Others will greatly benefit by using a 3PL (or 4PL). Many companies don’t have the expertise or pricing leverage with carriers a 3PL can offer.
Amware is a Cleveland, Ohio-based 3PL. Amware offers clients a state-of-the-art LTL software application (Amrate) as well as public warehousing with no contract and flexible storage options. Located within a one-day drive to over 80% of the country, Amware is ideally suited to maximize transportation logistics and costs for its clients.
Contact Amware today to learn more, or download a free 30-day trial of Amrate below.