3PL vs 4PL: Choosing the Right Logistics Solution
If you find logistics terminology confusing, you’re not alone!
This article explains 3PL vs 4PL in terms anyone can understand. We also summarise 1PL, 2PL, and the latest arrival on the logistics scene, 5PL, so this crash course on understanding logistics companies covers all bases.
We go on to highlight the differences between 3PL and 4PL logistics, as these definitions are frequently mixed up and used interchangeably (there’s a reason for this, as we’ll clarify). Finally, we’ll help you understand how to choose between 3PL vs 4PL by listing the key advantages of each, to make this important logistics decision easier.
PL stands for “party logistics.” “3PL” is an abbreviation of “third-party logistics.”
The numbers are a way to denote the extent to which the logistics services are outsourced in the supply chain and how many independent “logistics parties” are involved in providing the services (and who manages them). The lower numbers refer to direct services with fewer intermediaries, and the higher numbers imply more parties are being outsourced to.
Following this logic, 1 to 3 are linked to the physical operation, and from 4, management of the process is also included. 4PL is not better than 3PL. To determine that depends wholly on the needs of your company.
Another way to ask the question is who are 3PL, 4PL and the rest of the PLs? What services do each logistics company offer?
In short, it depends entirely upon your company’s requirements and resources. The key questions to ask are:
Ninety percent of Fortune 500 companies turn to 3PL providers.
3PLs are ideal for when you want to outsource logistics services while still maintaining central control. While hiring a 3PL provider takes care of the moving and storing of cargo, it also requires steady work on your end, as the management side of the supply chain is wholly in your own hands.
If your company doesn’t have the staffing or expertise for this level of logistics management, it’s better to go with a 3PL provider.
Key advantages of 3PL:
4PL providers offer a higher level of consulting, communication and services, but it does mean signing over total control of the supply chain. This is often a good thing, leading to more efficient and cost-saving operations. After all, the goal of a good 4PL is to optimise your business. The best way to picture a 4PL is as a logistics partner rather than a logistics provider.
Key advantages of 4PL:
As mentioned earlier, many 3PL companies define themselves as 4PLs, and vice versa. As integrated services and outsourcing solutions evolve, the lines between what constitutes a 3PL and a 4PL will remain blurred. In the end, perfect nomenclature isn’t crucial. What’s more important is to know exactly what services that logistics provider can carry out for your business.
Still not sure whether to opt for a 3PL or 4PL provider?
Confused about what a 3PL or 4PL logistics company really does?
Unsure which 3PL or 4PL services are best for you, or if it even fits with your infrastructure and budget?
Thankfully, there are companies that provide both 3PL and 4PL solutions.
Hillebrand offers 3PL services where you remain an integral part of the supply chain, or you can leave every aspect of logistics management in our capable hands, and we’ll work together as partners in a 4PL context.
We make sure anything is possible. Talk to us to work out which of our logistics solutions fits your needs!