While there is some overlap in functionality between a third-party logistics (3PL) and a fourth-party logistics (4PL) model, there are significant differences with specific benefits and drawbacks for your company, depending on its size.
3PL and 4PL Defined
A 3PL acts as an intermediary between manufacturers and retailers without taking ownership of the products or goods that are shipped. Since the 1970s, the Council of Supply Chain Management Professionals (CSCMP) has defined a 3PL as a specialized company to which all, or much of another company’s logistics operations are outsourced. An official legislative definition was adopted in 2008: “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”
Simply put—and generally speaking—3PLs are all about the logistics of freight transportation.
A 4PL, also known as a “lead logistics provider,” offers a broad scope of management for an organization’s entire supply chain, including arranging for 3PLs to handle the logistics portion for its wholesale and manufacturing clients.
Which is Better?
Your company’s needs, as well as size, can help determine whether 3PL or 4PL will be the best choice. Some believe that for medium to large companies, a 4PL— which provide a single point of contact across a supply chain and which can sometimes have a greater focus on optimization and integration—can be best and that a 3PL’s focus on daily operations makes it the superior choice for small to medium companies.
The 3PL logistics model generally includes:
- Warehousing and Inventory management
- Picking, packing, and product assembly
- Integrated or cloud-based TMS solutions
- Freight shipping via LTL, FTL, or partial truckload
The 4PL model sometimes offers additional features such as business planning, coordination of supplier bases, and network design. Both models may own assets like trucks and warehouses, but it is more common with 4PLs.
The Best of Both Worlds
Amware, a full-service 3PL, not only offers strategically located warehousing services in its modern Cleveland, Ohio facilities with diverse product handling and complete distribution from front to back, it can offer other 3PL businesses competitive rates for their clients.
Click below and discover how our cloud-based Amrate 7.0 TMS platform can reduce your freight and transportation logistics costs today!