There are mainly 5 Party-Logistics providers, and all of them offer something different and are suitable for different types of logistics operations. But the most common and most successful are 3PL and 4PL. 3PL is where the shift starts from simple pick and drops to a sustainable change, and 4PL takes it further. In this article, we’ll briefly the difference between 3PL and 4PL, and talk about their advantages and disadvantages. We’ll also analyze which Provider is more useful in certain scenarios.Â
3PL:3RD PARTY LOGISTICS, ITS TYPES, ADVANTAGES, AND DISADVANTAGES:
3PL is the logistic provider that’s drastically changed from its predecessors 1PL and 2PL. Where 1PL and 2PL are only providing simple operations such as lifting cargo from A point and delivering it to point B, they have no say or impact on the company’s operations. On the other hand, 3PL doesn’t only oversee the transportation, it also supervises and manages the operations of the warehouse, as well as updating the inventory, and preparing orders. It’s like a small network instead of a straightforward logistic service.
3PL is a vast model and is divided into several categories:
- Distribution:
Distribution or the management of warehouse operations is the major change in 3PL compared to the 1PL and 2PL. Overseeing the warehouse adds a layer to the logistics operations and forms a cohesive supply chain system.
- Transportation/Shipping:
Another major 3PL focuses solely on transportation. Most huge logistic companies adopt this model, they are hired by an individual or a company as an external source to deliver products.
- Financial Enhancement:
These specific 3PL service providers also handle the financial operations, tasks such as auditing, pricing, accounting, and freight payments. Financial 3PLs use multiple software and technologies to enhance their financial operations.
- Freight Forwarders:
A freight forwarder is an agent or a company that provides complete logistic services, expanding from acquiring goods from manufacturers, providing them to the producers, getting them into marketplaces, and finally delivering them to the customers. It’s a complete and thorough cycle of logistics that provides the best delivery solutions.
ADVANTAGES AND DISADVANTAGES OF 3PL:
3PLs have multiple advantages, bringing creative solutions to your supply chain and improving the business. It is the most cost-effective method to sustain a supply chain. 3PL is a complete cycle, so you don’t have to worry about anything. It saves you time and money because you can outsource the operations instead of hiring new employees and providing them training. 3PLs have the capability to handle massive businesses, so even if you’re growing at a rapid pace you can rely on the supply chain. 3PL is much more than just transportation, it offers multiple services such as inventory management, auditing, warehouse management, etc.
There’s no doubt that 3PL has several advantages and a high success rate but it also has some limitations. First of all, if you don’t have massive operations then outsourcing your logistic services may cost you a lot more than you can afford. Outsourcing your operations and involving a third party can increase the chances of misunderstandings and mishaps due to miscommunication. Since 3PL workers are not directly your employees, they may not treat your customers in an ideal way, causing damage to your brand. Â
4PL:4TH PARTY LOGISTICS, ITS TYPES, ADVANTAGES, AND DISADVANTAGES:
4PL is the next level of the supply chain, it is a complex system providing multiple services to the companies. It includes supervising all the procedures of the supply chain, ranging from transportation, inventory update, warehouse management, and final deliveries to the retail stores. 4PL is used by the companies that outsource the entire process.
Managing all these procedures requires the latest technology and data analysis to ensure all the procedures remain intact and run seamlessly.
ADVANTAGES AND DISADVANTAGES OF 4PL
4PL services have a lot of advantages since it is considered one of the most successful logistic providers out of all five. All the logistic procedures are completely outsourced, which helps in reducing costs and saves time for the company. 4PL utilizes the latest technology and data analysis that enhances the procedures faster than ever. Along with transportation and warehouse management, the collection of numbers and customer data helps in formulating future strategies.
4PL services are completely outsourced services, which means that you do not have much control over the procedures. It is also quite expensive because it covers all the procedures.
WHICH ONE IS FOR YOU?
Both 3PL and 4PL are effective logistic providers, and hold significance in their rights. Depending on the magnitude of your procedures, you can break down the pros and cons written in this article and use them to determine which suits your needs better. 3PL is better for smaller businesses and start-ups and 4pl is mostly used by massive companies with large-scale logistic operations. So both are useful for diverse areas, it’s upon you to decide which one fulfils your need.
