When it comes to supply chain management, businesses have a handful of options for handling them. Should you do everything in-house or outsource some aspects? Or perhaps you can outsource all the aspects of the supply chain management and focus on your core business. Finding the right solution for your business is critical for maximising profitability and minimising costs.
Third-party logistics (3PL) and fourth-party logistics (4PL) services are among the most popular choices for contemporary businesses. In this blog, we will help you learn the difference between 3PL And 4PL in supply chain management and how to choose the best for your business.
A] What Is 3PL In Supply Chain Management?
3PL (third-party logistics provider) provides a wide range of logistics services, including transportation, warehousing, and order fulfilment. They are a type of specialised service provider that offers logistics solutions only when an order is placed. The ability to scale or descale your supply chain according to demand helps to minimise overhead costs and utilise expert services.
3PL companies have their own facilities and transportation making them reliable. They act as an intermediary between your company and your customers. Their expertise helps to offer faster delivery and accurate order tracking to your customers, enhancing customer satisfaction. The Global 3PL Market sector was valued at USD 1 Billion in 2023 and is expected to grow to USD 2.3 Billion by 2032.
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B] What Is 4PL In Supply Chain Management?
A 4PL service provider is a supply chain model where the business outsources the entire logistics process. A 4PL service provider has more responsibility than a 3PL service provider, including managing resources, technology, and infrastructure. Unlike a 3PL provider, a 4PL service provider is the only point of contact for the customer, the business, and all other parties involved.
A 4PL service provider often works with multiple 3PL providers across the country and oversees and manages them. This means that your supply chain will be completely automated; however, you will not have much control over how that happens. 4PL is often the best choice for large companies with high supply chain volume.
C] Key Differences Between 3PL and 4PL Services
| 3PL (Third-Party Logistics) | 4PL (Fourth-Party Logistics) | |
|---|---|---|
| Role And Focus | 3PLs offer multiple services that are required in the functioning of a supply chain. They are a service provider that handles certain aspects of your business’s logistics. | 4PL providers oversee your entire supply chain and work to optimise it. They are the single point of contact for you in the entire supply chain as they take care of all aspects. |
| Vendor Relationship | A 3PL provider maintains a business relationship with the business that extends to the transactions. The business only contacts the service provider when there is a need for their services. | The relationship between the fourth-party logistics provider and the business is more strategic. The service provider works to design, lead, and implement the supply chain and also helps to optimise it. They coordinate with the business as well as dozens of other 3PLs to fulfil each order. |
| Finances | 3PL requires long-term contracts relating to a range of services. They are more cost-saving than handling logistics in-house. | 4PL offers on-demand services that are often bound by SLAs. This reduces the cost of operations to only the services you use. |
| Integrated Technology | 3PLs use a variety of technologies for tracking inventory levels, delivery, and order fulfilment. This software and applications help to optimise the logistics cost and order fulfilment time. | 4PL’s work model is based on a single cloud-based platform that helps to coordinate all aspects of the supply chain. These platforms offer plug-and-play modules making it easier for businesses to get started. |
| Professional Support | A 3PL company offers day-to-day support for issues regarding logistics processes like transportation delays and warehousing problems to optimise your processes. They, however, do not provide support for optimising your business strategy. | 4PL management offers businesses advice for inventorying, distribution, and management, helping them to optimise the supply chain processes. They implement processes to make your supply chain more efficient. |
| Process | 3PL manages the physical movement of goods from the business to the warehouse to the vendor. | 4PL manages the entire supply chain process. They coordinate with multiple 3PL providers for the physical movement of the goods while focusing on process optimisation. |
D] Key Factors That Will Help You Choose The Right Model For Your Business
1. Business Size
3PL is best suited for businesses that are experiencing rapid growth and need a way to scale fast. They are generally preferred by medium-sized businesses that can afford to outsource their logistics. However, large organisations with complex logistics processes often need 4PL to handle everything with efficiency.
2. Control Over The Process
If you have direct involvement and control over your logistics process and want to keep it that way, 3PL is the way to go. The service providers will take care of everything but you will have the last say. But if you want to delegate your logistics processes and don’t mind losing control over it, go for 4PL.
3. Scalability
If you want a number of logistics services in a short period of time to cater to an increase in demand, 3PL offers the flexibility to do so. 4PL is better suited for organisations that are already scaled up and need expertise in coordination.
4. Cost
4PL often charges higher than 3PL providers as they have a greater scope of responsibilities and deliverables. You need to choose the right service according to your business needs and budget.
5. Services You Need
If you are only looking for someone to take care of your logistic services like transport, warehousing, and completing orders, 3PL offers exactly what you need. However, if you need someone to take care of multiple 3PLs and enhance the supply chain management, choose a 4PL.
Conclusion
Choosing the right logistics solutions helps to enhance your business and gives you the freedom to invest your time and resources in scaling your business. You can either choose a 3PL provider to outsource the logistics process of supplying the goods from one location to another or choose a 4PL provider to oversee your complete supply chain.
If you are looking to outsource your logistics process to a dedicated 3PL service provider, contact us today! We have a dedicated team of expert delivery drivers, a fleet of temperature-controlled vehicles, and warehouses across the country.
Mansi Mahansaria
I’m Mansi Mahansaria, CEO and Founder of JustDeliveries, a B2B logistics company specializing in the food and beverage sector. With a background in Chemical Technology (ICT Mumbai), an MBA (FMS Delhi), and experience at IDFC Private Equity and Tata Group, I’ve built a plug-and-play logistics network helping F&B brands scale efficiently. I also share insights on entrepreneurship and logistics at industry and academic events.
