3PL vs 4PL: Which One Does Your Business Need?

Your supply chain is one of the most important aspects of your business. From keeping your inventory organised to ensuring your customers receive their orders on time, reducing unnecessary hiccups can set you apart from your competitors.

But if you’re unable to run your company’s supply chain under your own steam, you could be in trouble. Without serious assistance, you run the risk of disappointing your customers and disrupting your business — far from ideal.

Enter 3PL and 4PL services.

Whether you aim to improve parts of your logistics operations or overhaul your entire supply chain, 3PL (third party logistics) and 4PL (fourth party logistics) offer valuable solutions. But what’s the difference between the two?

Even as an experienced business owner, choosing the right service can be a little confusing — and whichever solution you choose, it’ll have a big impact on your business. So, it’s time to get clued up.

Here’s all you need to know about 3PL and 4PL services.

What are the main differences between 3PL and 4PL services?

3PLs handle the physical movement of goods and focus on specific logistics functions. That means if you need support with, let’s say, air freight services but you’ve got the packing side of things covered, 3PLs can provide the exact level of support you need. They typically own physical assets, like trucks and warehouses, and are suitable for small-to-medium businesses.

On the other hand, 4PLs manage entire supply chains but outsource these processes to 3PL providers. They essentially act as the single point of contact for businesses, organising which step of the process is done by which 3PL service. They also work on supply chain optimisation, so while handling the outsourcing of your operations, they’re also figuring out how to improve and streamline each component.

Both of these services differ significantly from first-party and second-party logistics. First-party logistics (1PL) refers to a company handling all logistics activities internally using its own resources and infrastructure, while second-party logistics (2PL) involves outsourcing specific logistics functions to external carriers or freight companies, who handle transportation but don’t typically offer broader supply chain services.

What is 3PL? A deeper dive

Third-party logistics (3PL) focuses on the day-to-day logistics of order fulfilment such as warehousing and order processing. They provide the assets, expertise and infrastructure (such as warehouses, personnel and vehicles) necessary to move products efficiently within the supply chain. A 3PL provider is one part of your supply chain, but you work directly with them.

With a 4PL provider, the company hires a 3PL provider to handle the fulfillment as they don’t have the assets available themselves. This adds an extra layer of separation between you and the logistics services, but can also streamline complex logistics.

Types of 3PL services

3PL services can provide as much or as little support as your supply chain needs, and this flexibility is remarkably handy for businesses seeking adaptable, scalable solutions.

3PL services can include:

• Warehousing: Providing storage facilities for goods until they are needed for shipping.
• Inventory Management: Tracking and managing stock levels to ensure products are available when needed.
• Shipping: Handling the transportation of goods from the warehouse to the final destination.
• Picking and Packing: Selecting items from the warehouse and packaging them for shipment to customers.
• Assembly Kitting: Combining individual items into ready-to-ship kits or sets.
• Freight Forwarding: Coordinating the transportation of goods across different carriers and routes to optimise delivery.

3PLs can tailor their services to meet the specific needs of your supply chain. Whether you’re shipping toys or beauty products, you can really tighten up on specific parts of your process with the help of a 3PL partner.

What are the benefits of using third-party logistics?

There are many benefits to choosing an experienced 3PL provider (like ours), but if you’re still on the fence, let’s outline some of the biggest upsides:

They own their assets and processes

3PLs own their assets, and therefore control the people, technology, and processes involved. This means that if something does go awry, rectifying it and making adjustments becomes much easier.

Suited to small to medium-sized businesses

3PLs are ideal for smaller businesses that need scalable logistics solutions without the overhead costs of managing it on their own. If you’re not in a position to hand everything over just yet, 3PLs can support you while you grow.

Focus on specific areas of logistics

Because 3PLs provide modular supply chain solutions (such as air freight, kitting and assembly, warehousing etc), businesses can hand pick the specific services they need, without paying for any unnecessary extras.

What is 4PL?

4PLs offer full supply chain management, rather than overseeing specific parts of the supply chain. 4PLs contract out the work needed, such as transportation or pick and packing, and manage 3PLs on behalf of their client.

The goal of using a 4PL service is to have one single point of contact for every aspect of your supply chain, and with so many components working at the same time, this can be handy! Beyond this, a 4PL team works in the background optimising your supply chain and offering more strategic operational support than 3PLs. They are experienced in strategy building, which means not only do they manage each function of your supply chain but they develop comprehensive strategies to improve them too.

Types of 4PL services

A fourth-party logistics provider outsources its fulfilment services to 3PLs, so they can provide multiple logistics services such as inventory management and warehousing — but they’re not actually doing it themselves. What makes their services different from a 3PL is the additional strategy development expertise.

4PL services can include:

• Entire supply chain management: Overseeing and managing the whole supply chain process from start to finish, ensuring seamless operations.
• Provider selection: Choosing the best logistics providers and partners to meet specific business needs and optimise supply chain performance.
• Technology implementation: Integrating advanced technologies to improve supply chain operations, efficiency, visibility, and coordination.
• Supply chain strategies, planning and optimisation: Developing and implementing strategies to optimise supply chain processes, reduce costs, and improve overall performance.

4PLs manage all aspects of the supply chain and coordinate multiple 3PLs and other service providers to deliver comprehensive, end-to-end solutions.

What are the benefits of using fourth-party logistics?

What are the advantages of using 4PL services? In a nutshell, they’re great for business owners seeking an expert team to oversee and manage their supply chain. Where 3PLs offer modular services and direct control over each process, 4PLs manage the entire supply chain on a strategic level.

The benefits of using 4PL services include:

Holistic view of the entire supply chain

Through integrated supply chain services, 4PLs oversee the entire logistics operation, from planning and strategy to execution, ensuring all parts of the supply chain work seamlessly together.

More efficient supply chain management

They provide strategic insights and planning to optimise supply chain processes, reducing costs and improving effectiveness.

Logistics expertise and knowledge

With deep expertise in logistics, 4PLs bring advanced knowledge and best practices to enhance supply chain management.

How do 3PLs and 4PLs work together?

3PLs and 4PLs collaborate to deliver an end-to-end supply chain solution. The 4PL provides strategic management over the complete supply chain and coordinates the logistics. 3PLs then execute the specific logistics services using their available assets. In other words, all 4PL providers rely on 3PL services.

Which logistics model is best for your business?

Deciding whether to opt for a 3PL or 4PL service will depend on the needs and strategies of your business. Neither option is better than the other, they’re merely different tools that perform similar functions.

Ask yourself the following:

Am I seeking assistance with the day-to-day runnings of an isolated part of my supply chain, or complete, end-to-end management?

If, for example, you only require help with delivery fulfilment, then a 3PL service would be the ideal fit. On the other hand, if your company is buckling under the weight of huge order volumes, operational unpredictability and a general lack of in-house expertise in logistical strategy, a 4PL may be more suitable.

Here are some key factors to consider when choosing between a third-party and fourth-party logistics provider:

Cost

3PL: Often a more cost-effective option for businesses needing specific logistics services without additional layers of management.

4PL: May involve higher costs due to comprehensive management and strategic oversight, but can lead to long-term savings through optimised supply chain efficiency.

Control and involvement

3PL: If you want to maintain more control and direct involvement in your supply chain management, a 3PL partner can support this.

4PL: If you prefer to delegate logistics operations to an outside expert, a 4PL partner may be more suitable.

Size and complexity of your business

3PL: Suitable for small to medium-sized businesses with less complex supply chains.

4PL: Ideal for larger businesses with complex, multi-faceted supply chains requiring end-to-end management and integration.

Scalability

3PL: Offers scalable solutions for individual logistics services, allowing businesses to expand specific areas as needed.

4PL: Provides scalable, integrated solutions that can grow a supply chain, adapting to business expansion and increased complexity.

Communication style

3PL: Direct communication with specific service providers, allowing for hands-on management and quick adjustments.

4PL: Single point of contact for the entire supply chain, simplifying communication and reducing the need for multiple vendor interactions.

Expertise and knowledge

3PL: Specialised expertise in specific logistics areas such as shipping, warehousing, or freight forwarding.

4PL: Broad expertise across the entire supply chain, providing strategic insights and comprehensive management.

Flexibility

3PL: Provides flexible options for businesses to select and customise specific services.

4PL: While 4PLs can provide flexibility in optimizing the entire supply chain, they may be slower to respond to immediate operational issues since they rely on other providers (like 3PLs) for execution.

The decision between 3PL vs 4PL service depends on your needs and the objectives required. A third-party logistics company can be great at managing key components of your supply chain without handing over its entire management, so always consider carefully the level of support you need.

3PL vs 4PL: FAQs

Which type of provider is better for small businesses?

3PLs are typically better for small to medium-sized businesses. They focus on the specific logistics service required, which often makes them more cost-effective, while additional services can be added later down the line if needed.

What level of control does a business have with each type of provider?

With a 3PL, businesses have more direct control over specific logistics functions. You’ll have more insight into how things are done and you can contact them directly if needed, whereas a 4PL has less day-to-day control but greater strategic oversight and coordination.

How do 3PLs and 4PLs handle scalability?

A third-party logistics provider provides scalable solutions for specific logistics processes, allowing businesses to grow in individual areas as needed. Alternatively, a 4PL service already offers a full range of solutions for the entire supply chain.

How do communication processes differ between 3PLs and 4PLs?

Communication processes differ between 3PLs and 4PLs mainly in terms of scope and coordination. With third-party logistics services, communication is typically more focused on managing specific logistics tasks like warehousing, transportation, and distribution. You work directly with the 3PL provider to oversee these operations.

In contrast, fourth-party logistics providers tend to act as a single point of contact that oversees and integrates all aspects of the supply chain, often including the management of multiple 3PLs. Communication with a 4PL is more strategic, involving higher-level planning and coordination across the supply chain.

Looking for a third party logistics service with UK and global outreach? At Pro3PL we offer flexible and comprehensive fulfilment solutions across the UK and beyond including warehousing, packing, and transportation services.

Get in touch with us today and find out how our 3PL services can work for your business.