Third Party Logistics (3PL) And

Fourth Party Logistics (4PL)

What is a 3PL?
A third party logistics company is one that works with shippers in order to manage
another company’s logistics operations department. 3PL is the action of outsourcing
activities that are related to logistics and distribution.
What is a 4PL?
The concept of a 4PL provider is an integrator that accumulates resources, capabilities
and technologies to run complete supply chain solutions.
Main Difference between 3PLs and 4PLs
The 3PL targets a single function, whereas the 4PL manages the entire process. A 4PL
may manage the 3PL.

3PL
Third party logistics providers usually specialise in

 Integrating operations
 Warehousing
 Transportation services
 Cross-docking
 Inventory management
 Packaging
 Freight forwarding

These services are scaled and customised to the customer’s specific needs based on their
market conditions and the different demands and delivery service requirements for their
products or materials.
There are thousands of 3PLs in the market that offer different models and perform
different tasks. For example, certain 3PLs may only specialise in certain industries.
The 3PL have a large footprint throughout the country. This makes it viable for
companies to service clients in remote regions at a much lower cost than doing it
themselves.
Types of 3PL Providers
1. Standard
Basic activities: Pick and pack, warehousing and distribution.
2. Service Developer
Value-added services such as tracking and tracing, cross-docking and specific packaging
3. Customer Adapter
This comes in at the request of a customer. It is when the 3PL takes over complete
logistics of the firm.
4. Customer Developer
This is the highest level of 3PL. This is when the 3PL integrates itself with the company,
and ends up taking over the entire logistics operation.

4PL:
Functions provided by a 4PL company
 Procurement
 Storage
 Distribution
 Processes

A 4PL company takes over the logistics section of a business. This could be the entire
process, or a side business that’s imperative to have as part of the main business.
An example here would be a bicycle importer. The main function is to import bicycles
however, they need to have spare parts for these unique bikes. A 4PL would manage the
total logistic operations for the spare parts business.

Fourth Party Logistics (4PLP); what this means for your Supply Chain

Posted by Dave Jordan on Tue, Sep 07, 2010

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While third-party logistics outsourcing is accepted business practice (though not without risk),
corporations are now looking to outsource to a single partner who will assess, design, build, run and
measure integrated comprehensive supply chain solutions on their behalf. This evolution in supply chain
outsourcing is Fourth-party Logistics or 4PL.

A 4PL provider is a supply chain integrator. The 4PL assembles and manages all resources, capabilities
and technology of an organisation’s Supply Chain and its array of providers.

An experienced and reliable 4PL provider will bring value and a reengineered approach to your
organisation as it will manage the logistics process, regardless of what carriers, forwarders or
warehouses are used. As the centralised contact with the client, 4PL has overall responsibility for
logistics performance and the ability to impact the entire supply chain and not just single elements.
Consider how many discrete discussions you need to have in your company to ensure your product gets
into consumers hands!
Like Business Process Outsourcing, a 4PL solution aims to manage people, process and technology.
Importantly, 4PL outsourcing must not be seen as a pure cost reduction issue and if it is considered as
such then it is prone to failure. Adopting a 4PL approach brings a different perspective, knowledge,
experience and technology to the existing in-house function. Successful 4PL partnerships will see both
parties work side by side motivated by mutual success and reward.

Some of the 4PL benefits include: access to a broader base of potential suppliers; back-end system
integration; increased market transparency for goods and services; standardisation and automation of
order placement; reduced procurement costs and order cycle times. If your business and people are
sufficiently mature you might also integrate the 4PL into the S&OP process. Think how powerful that
could be!

Organisations are exploring this solution because it can improve their own bottom line through increased
and sustainable business efficiency. A word of warning; do not go down this road unless your existing
supply chain is already robust AND people are sufficiently experienced to cope with a very different way
of doing business.