What’s the difference between a 3PL and a 4PL? Well, before we go there, how about a 1PL and 2PL? A 1PL is simply the owner of the cargo who manages the entire distribution process internally. A 2PL is a for-hire air, ground, rail or ocean carrier that directly provides transportation service to a shipper. As far as 3PLs and 4PLs are concerned, according to the defintions of the Council of Supply Chain Management Professionals (CSCMP), they are as follows:
Third-Party Logistics (3PL)
Outsourcing all or much of a company’s logistics operations to a specialized company. The term “3PL” was first used in the early 1970s to identify intermodal marketing companies (IMCs) in transportation contracts. Up to that point, contracts for transportation had featured only two parties, the shipper and the carrier. When IMCs entered the picture—as intermediaries that accepted shipments from the shippers and tendered them to the rail carriers—they became the third party to the contract, the 3PL. Definition has broadened to the point where these days, every company that offers some kind of logistics service for hire calls itself a 3PL. Preferably, these services are integrated, or “bundled,” together by the provider. Services they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. In 2008 legislation passed declaring that the legal definition of a 3PL is “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”
Fourth-Party Logistics (4PL)
Differs from third party logistics in the following ways; 1) 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners; 2) 4PL organization acts as a single interface between the client and multiple logistics service providers; 3) All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and, 4) It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure. However, 4PL was originally defined by Accenture as a trademark in 1996 and defined as “A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.”, but is no longer registered.
Why consider a 4PL?
Implementing a 4PL freight management system brings to the cargo owner many benefits including selecting the most appropriate service provider for the transport and logistics service you require. A 3PL company may be strong in Belgrade but not in Athens: Which one do you choose? Choosing two or more though requires internal resources to manage them and allign both of them to the corporate strategy. A 4PL is a single neutral interface that looks out for your interests and will achieve it for you.
So some of the benefits are:
Network design (and redesign)
Single point of contact
Neutrality – acting on behalf of the client and implementing their strategy
Open-book management, full transparency – no margin on transportation, freight spend remains in the hands of the client
Material flow optimization – our transport management system enables freight consolidation and "back haul" opportunities
Substantial logistics costs savings – direct savings through logistics sourcing and consolidated transport spend, logistics cost avoidance & infrastructure savings for the client
Gain in productivity – the routing center can handle all your logistics needs on your behalf
Global sourcing strategy & synergies – regular strategic reviews to identify process improvements and cost reduction opportunities
Industry best practices benchmarking – process optimization and market intelligence
Data ownership & visibility
Continuity of personnel – by providing qualified and well trained personnel and ensure personnel continuity.