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Warehousing & Fulfillment

What is a 4PL? The Difference Between 4PL vs. 3PL

What is 4PL? How is different than 3PL? Learn more about lead logistics providers and how they affect the supply chain here.
What is a 4PL? The Difference Between 4PL vs. 3PL
Jules

By Jules

 

April 23, 2019

Key Points:

  • The main difference between 3PL and 4PL is that a 4PL handles the entirety of a supply chain
  • 3PL services is a model is where a manufacturer maintains oversight of their supply chain but outsources their transportation and logistics operations to a 3PL provider
  • 4PL services oversee the organization and management of a whole supply chain for manufacturers and wholesalers

Oftentimes, it’s a tough decision for businesses to choose either 3PL or 4PL logistics in order to optimize their supply chain management. Understanding the differences between them and their own unique advantages and disadvantages is crucial to maximizing the efficiency and cost-effectiveness of your supply chain, giving your business a competitive edge overall.

Third-party logistics, otherwise known as 3PL  is where a manufacturer maintains oversight of their supply chain but outsources their transportation and logistics operations to a 3PL provider. Fourth-party logistics, also known as 4PL or lead logistics providers, is a logistics model in which manufacturers outsource both the organization and oversight of all aspects of the supply chain to a 4PL provider. Though they are similar, 3PL and 4PL logistics differ in many aspects.

Easyship can help you choose between 3PL vs. 4PL logistic providers. Our expert staff and warehouse onboarding managers can walk you through all the steps and considerations for choosing the right partner for your global logistics needs.

Here's a look at how 3PL vs. 4PL work and the main differences between them.

Table of Contents

What's The Difference Between 3PL vs. 4PL?

The main difference between 3PL vs. 4PL is that a 4PL handles the entirety of a supply chain. By contrast, a 3PL is mainly concerned with handling just the logistics management process.

3PL vs. 4PL is hotly debated between companies these days as to which model is superior. Ultimately, each one works better for different situations, and understanding how 3PL and 4PL logistics differ is crucial for every company.

Some of their key differences between 3PL vs. 4PL include:

  • 3PLs are more suitable for small-to-medium businesses, while 4PLs are generally better suited for medium-to-large businesses when comparing 3PL and 4PL logistics
  • 3PLs focus more on daily operations, while 4PLs function at the optimization and integration level
  • 4PLs can effectively coordinate the activities of 3PLs when comparing 3PL and 4PL logistics
  • 3PLs don’t own assets like trucks and warehouses as 4PLs do
  • 3PLs are focused more on one-off transactions, while 4PLs provides a higher level of logistics services for a great value when comparing 3PL and 4PL logistics
  • 3PLs cost less because 4PLs outsource both the organization and oversight of their supply chain to a 4PL provider

What is 3PL?

Third-party logistics, or 3PL services, is a model is where a manufacturer maintains oversight of their supply chain but outsources their transportation and logistics operations to a 3PL provider.

3PL vs. 4PL are similar in many ways but differ in some key respects. For example, a 3PL provider working for a farm may package and store produce in addition to transporting it to a grocery store. Unlike a 4PL, however, it won't oversee the entirety of the supply chain management and organization.

Some of the services rendered by 3PL include:

  • Inventory storage
  • Proper inventory management
  • Customs brokerage
  • Freight forwarding
  • Contract management
  • Picking and packing of goods
  • Cross-docking
  • IT solutions

Pros & Cons of 3PL

3PL providers serve as intermediaries between manufacturers and retailers and, just like 4PL companies, come with their own advantages and disadvantages. Here, we’ll weigh the pros and cons of using a 3PL provider so you can figure out whether 3PL and 4PL logistics works best for your business.

Pros of 3PL

  • Saves time and money
  • Great for local and international distributions
  • Affordable for small businesses with fast-growing orders
  • Ability to have control over returns
  • Highly decentralization reduces the risk
  • Responsive logistics model
Advantages of 3PL

Cons of 3PL

  • Less control over inventory
  • Expensive if orders are low
  • Only suitable for small-to-medium businesses generally
  • Limited control over the customer service experience and order fulfillment

As 3PL companies act as managers between manufacturers and retailers, the service provider doesn’t take ownership of the goods or products being shipped. If your supply chain turns out to be too complex for you to internally manage effectively, then a 3PL provider may be a suitable option for your business.

What is 4PL?

Not sure about the 4PL meaning or logistics behind it? 4PL services oversee the organization and management of a whole supply chain for manufacturers and wholesalers.

For example, under the 4PL model, the manufacturer of a product outsources the logistics, packaging, warehousing, and delivery of a product to a retailer to a 4PL company. Essentially, 4PL companies take control of the entirety of all logistical operations for manufacturing companies.

What is 4PL logistics? Some of the services rendered by 4PL logistics companies include:

  • 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

Pros & Cons of 4PL

4PL services just like every other business model come with their own advantages and disadvantages. 4PL offers the following:

Pros of 4PL

  • Unique and professional operational support
  • Effective outsourcing of all logistics needs of a given business
  • Offers a single point of contact for all the parties involved in the supply chain
  • Gives more sense of ownership and control over your business
  • Creates a lean and cost-effective supply chain for improved profit margin
  • Outsources all logistics to third-party professionals, letting manufacturers focus on their product

Cons of 4PL

  • Minimal control over order fulfillment and logistics processes
  • Maybe cost-prohibitive for some small businesses and startups

With 4PLs, companies can minimize inefficiencies in their supply chain and ensure they focus more on their product as opposed to dealing with the complexities of their supply chain.

What is 5PL?

Fifth-party logistics companies (5PL) refers to an organization that sources all its supply chains to a logistics service provider. Similar to the services of 3PL vs. 4PL, 5PL employs the same services of both logistics providers. Plus, 5PLs have control and manage all networks in the given supply chain.

5PL providers serve three primary functions:

  • Manage and oversee the entire logistics solutions
  • Planning the 5PL logistics process
  • Constantly optimize and improve the process for maximum efficiency

Overall, 5PLs are focused on e-business and strive to deliver the aforementioned services at minimum cost.

Pros & Cons of 5PL

5PL services just like every other business model come with their own advantages and disadvantages. Let’s weigh the pros and cons of using a 5PL logistics service.

Pros of 5PL

  • Ability to manage multiple supply chains, which can be beneficial for fast-growing companies
  • Negotiate rates with other service providers, so users can have the best rates possible
  • 5PLs providers offer innovative automation systems to help speed up the logistics process

Cons of 5PL

  • 5PLs may deal with competitors in the same industry, and you may not want a logistics provider who does business with the competition
  • Requires your business to be completely electronic, which gives business owners virtually no control over the order fulfillment process

Transitioning to a 3PL with Easyship

For eCommerce brands looking to scale, using a 3PL can be a game-changer. However, you might be hesitating to take the next step – and we don't blame you.

Handing over responsibility requires a lot of thought and care. Through this process, your best point of contact will be a warehouse onboarding manager. These consultants can give you the big picture view of what happens when you outsource your shipping and logistics, plus all the details about how to do it right. Learn more about warehouse onboarding managers in this blog.

Easyship maintains partnerships with a wide network of 3PL companies around the world, plus we offer 250+ shipping solutions with up to 89% real-time shipping rates.

This means we have connections to the right people to help you with storing merchandise, accelerating deliveries, and cutting costs on shipping. Don’t believe us, check our feature page to learn how Easyship can scale your business globally.

3PL vs. 4PL: Which is Right for You?

While 3PL vs. 4PL logistic companies offer many advantages, the choice of the logistics model you choose is mostly determined by your existing business model, company size, budget, infrastructure, and other factors. Ultimately, the choice of logistics model depends on what works best for your own business, leaving you to decide if 3PL vs. 4PL services are better.

With Easyship, your business can enjoy access to our global courier network with pre-negotiated rates and to warehouses all around the world with both B2B and B2C shipping.

Sign up for free today to scale your business globally and efficiently!

3PL vs. 4PL FAQ

What is the 3PL vs. 4PL meaning?

3PL means a manufacturer maintains oversight of their supply chain but outsources their transportation and logistics operations to a 3PL provider. On the other hand, 4PL providers oversee the organization and management of a whole supply chain for manufacturers and wholesalers.

What is 7PL logistics?

7PL provider offers both the services of a 3PL provider (warehouse and transport solutions), plus the consultation services of a 4PL. Essentially, it is the combination of both services.

Is FedEx a 3PL?

Yes, FedEx is a major 3PL provider.

Is Easyship a 3PL?

Easyship is the world’s leading shipping platform that connects thousands of sellers and marketplaces to couriers. You’ll get instant access to our global fulfillment network. Plus, you’ll receive up to 89% shipping rates from 250+ couriers.

Is Amazon a 3PL or 4PL?

Amazon acts as their own 4PL because they own and manage the entire supply chain.


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