Are you trying to make a decision between 3PL and 4PL? Do you know the difference? Even experienced business professionals have a tough time differentiating the two. When it comes to 3PL vs. 4PL, it is best to understand the basic functions of each before proceeding with a contract or partnership. Once you get the basics, you will have a better idea of what will work best for you.
The Basic Definitions
First, establish a clear delineation between the two:
- 3PL: Logistics and distribution tasks are outsourced to a company working with shippers to maintain logistical operations.
- 4PL: The provider integrates resources, technologies and abilities into a holistic supply chain system.
While 3PLs focus on singular functions, 4PLs manage the whole supply chain process and can manage a 3PL.
Third-Party Logistics
3PLs often specialize in a task like warehousing, packaging or inventory management. There are four main types of providers:
- Standard: Includes basic packaging, warehousing and distribution activities.
- Service developer: Covers additional services such as cross-docking, tracking and customized packaging.
- Customer adapter: Takes over all logistics and is requested by customer.
- Customer developer: Integrates fully into the company, takes over logistical operations and is the highest 3PL.
Fourth-Party Logistics
Since 4PLs take a most holistic approach, what kinds of functions to they perform?
- Storage
- Processing
- Procurement
- Distribution
4PLs take over a designated section of the main business. For instance, a cookie shop needs to import truffles as a business element. A 4PL would run the importing logistics.
In the battle of 3PL vs. 4PL, the winner will depend on the parties involved. What does your business need from a logistical entity? Once you have determined that, you can align your goals with the definitions of either. If you need a micro solution, choose a 3PL. However, if you need more expansive solutions, a 4PL might be a more suitable partner.
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