What on earth is 4PL?
There’s much debate in the transportation logistics industry about the difference between 3PL and 4PL service providers, which has led to confusion and frustration, particularly among manufacturers and shippers who simply want to save money and improve service levels.
This article explores the differences between 3PL and 4PL specifically, then gets down to business with a one-line summary of each of the four models (1PL, 2PL, 3PL and 4PL) and the advantages and disadvantages of each.
It may help, to start, by demystifying those two letters: PL. What exactly do they stand for? The answer is "party logistics." Technically speaking, 3PL providers are the third party to the contract between the first party (the company that needs to ship something) and the second party (the carrier). The third party became important as transportation became more complex, encompassing warehousing, packaging, intermodal transport, border crossings, freight forwarding and inventory management.
I think of 3PL providers as tactical. They're getting your stuff from A to B. It's classic outsourcing-a simple "lift and shift" to a third party. A 4PL provider, in contrast, is strategic. They manage your entire supply chain without requiring the use of its own assets. They're like a football coach for your supply chain, thinking strategically, researching the field, changing the players and bringing in special teams to provide maximum cost savings.
Now that we've offered a distinction between 3PL and 4PL, here are the distinguishing features of all the PL models, including their advantages and disadvantages.