What’s the difference between a 3PL and a 4PL?
You may have heard the term “4PL” buzzing around the transportation industry. While there are many 3PLs (third-party logistics companies) in the shipping world, 4PLs are the new kids on the block. Let’s go over the differences between the two.
What is a 3PL?
To put it in simple terms, a third-party logistics company is a provider of outsourced logistics services, often including freight shipping arrangement and warehousing. The term “logistics” really covers a spectrum of services, all dealing with the management of the way freight gets from one place to another.
What is a 4PL?
As of right now, there doesn’t seem to be an official definition for what a 4PL company does, since it’s such a new and shifting idea. With that being said, there’s definitely a common understanding of the term. To best break it down, let’s talk about all of the different “PLs”.
If you consider what “1PL” and “2PL” might mean, a 1PL would be considered the shipper and 2PLs would be asset-based carriers. 3PLs are the match-making link between the two.
A 4PL, then, would manage a network of 3PLs on behalf of their customer (the shipper), in addition to providing the technology needed by the customer. Think of a 4PL as the “eye-in-the-sky” that determines which providers would best suit their customers’ shipping and logistics needs. The 4PL takes control of the ins and outs of these outsourced parties and becomes the main point of contact for the customer.
But wait… how is that any different from a 3PL?
The main difference would be the control and responsibility a customer would have, or need to have, when it comes to their supply chain. By hiring a 4PL in a contracted relationship, a logistics manager would essentially “give up” the responsibility to find the best logistics companies or carriers to take care of getting their shipments from one place to another. The 4PL would take care of all coordination of these parties behind the scenes (at a cost, of course).
Shippers who use one or more 3PLs are still responsible for finding and managing the relationships with these providers, along with any asset-based carriers they also work with. These shippers tend to work with many different providers in order to obtain the best service and pricing possible for each lane and mode of transportation they need. By managing your own logistics providers, the decision is up to you – there are no contracts requiring you to work with any certain providers.
Which is best to work with?
Both 3PLs and 4PLs have their perks in regards to ease of use and cost savings. At the end of the day, choosing between the two depends on what you’re looking to get out of your supply chain management. If you’re looking for a “hands-off” approach to your company’s logistics and someone to just take care of the entire process from start to finish, contracting a 4PL may be your best bet.
However, if you’re looking for more flexibility and would like to maintain control over your transportation processes, working with a 3PL is likely a better fit for you.
While Trinity Logistics fits the definition of a 3PL, we also offer 4PL services for those customers who want to outsource more and more of their logistics processes. From transportation management software to full-on freight management, we now deliver a wide array of offerings to provide you with that higher level of service, while still maintaining the benefits of working with a 3PL. So, whether you need someone to take over your entire logistics department and supply chain, or you're just looking for a one-stop shop for a variety of shipping services, Trinity can be your go-to.
To learn more about how Trinity can help you and your business’ logistics needs, click here.