3PL and 4PL: assumptions and differences

Smooth logistics plays a key role in operation of manufacturing companies and distribution enterprises on the modern market. This is why current services rendered by outside logistics entities are not limited only to transporting and warehousing goods. In 3L and 4L models, their commitment is bigger. See how they are different.

3L, 4L – what they stand for?

3L, 4L, and sometimes 5L refer to involvement of the outside logistics company in business processes in enterprises which deal with production and distribution. At present enterprises are less and less frequently willing to warehouse and send goods – these tasks are taken over by experienced partners. This is highly conspicuous in the e-commerce, where logistic support of the third party is not only a need but a must.

Both approaches, 3PL and 4PL, entail a certain commitment of the logistics company to the customer’s business operations.

3PL – what is it?

3PL, that is „Third Party Logistics”, is a strategy based on a transfer of one or several logistics-related functions to the outside partner. In this model, enterprises most commonly entrust the third party with the following:

• transportation tasks,
• handling of customs and loading procedures,
• warehousing – including contract warehousing,
• distribution of goods,
• transport management.

In this model, the logistics services provider becomes a logistics operator, while the range of service is flexibly adapted to needs of the specific customer.

Importantly in 3PL model the entrepreneur can also take advantage of a series of additional services. These are such solutions as co-packing, highly useful for non-professional customer service.

4PL – what is it? 

4PL is one step ahead. In this model, the logistics operator and the manufacturing/distribution company cooperate even more closely. Such a cooperation usually takes place under a new business entity – the company whose shareholders are both parties to the transaction. In this situation the logistics company most often selects all resources which focus on satisfying needs of one customer – a large e-store, for instance. This is why 4PL model is enriched with the following services:

• management logistics – it is the logistics company that manages all processes at all stages of supply chain: starting from collection of goods from outside suppliers and ending up with delivery to the final customer;
• purchasing department – that is managing the stock on behalf of the customer,
• integral software – for example the one which can be “coupled” with applications related to the online store to gain a credible and permanently updated information on stocks as well as transparently settle accounts with regard to all transactions with customers.

Aren’t you sure what kind of cooperation with the logistics company to choose? It is advisable to contact experts – the right decision is dependent upon the scale of your business or business niche.