3PL vs 4PL - Definition and Meaning
Logistics is more than just the transport of goods - it is the science of having products exactly where they are needed, when they are needed.
In this context, 3PL and 4PL are two terms that come up again and again. But what exactly do they mean and how do they differ?
In this article, we take a close look at these two key terms, their meaning and shed light on their central role in the modern supply chain.
- Definition: What is 3PL?
- How 3PL logistics = "Third Party Logistics" works
- 3PL in e-commerce: a practical example
- 3PL vs 4PL: The differences simply explained
- What does a 4PL service provider do? A practical example
- The role of 3PL in the supply chain
- What makes 3PL companies so valuable?
Definition: What is 3PL?
- 3PL is short for "Third Party Logistics".
3PL companies take care of the logistical processing of tasks for other companies. 3PL is often equated with "fulfiment".
A "fulfilment service provider" is basically a third party logistics company, that is responsible for storing, packing and shipping the goods of other companies, mainly online retailers. For example, we are also a fulfilment provider.
Let's say you run a business, but everything to do with logistics - storage, transport, sales - isn't your thing. This is where the 3PL service provider comes in, the fulfilment specialist. This company takes care of all these matters so you can concentrate on what you do best.
You practically put your logistics in the hands of this fulfilment company. A 3PL service provider is basically a reliable partner who handles all the logistical difficulties for you.
How 3PL = "Third Party Logistics" works
The "third party" in 3PL emphasises that a third, i.e. external, company is involved. This company is neither the manufacturer nor the seller, but a separate actor in the supply chain.
Such "third" companies are specialists in their field and take the burden off companies to handle complex logistical processes. Here, the principle of logistics outsourcing is fully exploited to improve operations.
3PL in e-commerce: a practical example
To illustrate:
A shoe manufacturer wants to operate internationally and distribute his products worldwide. Instead of setting up his own warehouses and establishing an international shipping system, he hires a 3PL service provider, also known as a fulfilment service provider.
The latter manages the shoes, processes orders, takes care of packaging and shipping and also oversees any returns. So the producer can focus on manufacturing and promotion, while the 3PL service provider handles all the logistics.
3PL vs 4PL: The differences simply explained
While 3PL service providers focus on specific logistics services, 4PL, i.e. "Fourth Party Logistics", goes one step further:
- A 4PL service provider not only deals with individual logistical challenges, but also considers the entire supply chain. He manages several 3PL service providers, uses the necessary technologies and optimises logistical processes.
You could say that a 4PL service provider acts like a maestro, ensuring that all parts of the supply chain interact as smoothly as possible.
What does a 4PL service provider do? A practical example
4PL professionals do not limit themselves to logistics, they manage and improve the entire supply chain.
A simple scenario:
An international company producing electrical goods works with multiple suppliers, production sites and warehouses around the world. It hires different 3PL service providers for transport, warehousing and regional distribution. Coordination problems arise in the process.
This is where the 4PL service provider comes into action:
This 4PL expert first surveys the company's entire supply chain, identifies bottlenecks, ineffective processes and potential savings. Based on this, he presents an individually tailored strategy for optimising the supply chain.
Since he has no assets of his own, i.e. no trucks, ships or warehouses, he objectively selects the best 3PL service providers. He coordinates all logistical activities, negotiates contracts and implements cutting-edge technology for monitoring and analysis in order to make decisions quickly.
With the help of the 4PL service provider, the company can not only save money but also make its supply chain more agile and responsive. In the event of unexpected market changes or disruptions, for example due to natural disasters, the 4PL service provider can quickly find alternative supply chain partners or routes.
Ultimately, the company benefits from a streamlined, cost-effective and resilient supply chain, all thanks to the strategic leadership of the 4PL service provider.
The role of 3PL in the supply chain
- The "supply chain" describes the entire process from production to the consumer.
3PL service providers are key players in ensuring that products get from A to B efficiently.
They can take over parts or all of the logistics and thus help to ensure that the supply chain functions smoothly and cost-efficiently. With their expertise, they help companies to master challenges in logistics and achieve competitive advantages.
What makes 3PL companies so valuable?
A 3PL company is more than just a service provider.
It is a partner that has special tools, technologies and an extensive network. Such a company offers value-added services that go beyond mere storage and transport. With their expertise, they advise customers, optimise processes and ensure effective and efficient logistics.
The bottom line is that these fulfilment providers ease and take over your logistics worries and make sure that everything runs professionally. We are one of these fulfilment providers - discover our extensive range here.
The best thing about it is that you can focus on growing your business and your logistics will scale with it, without having to change much structurally.
Do you have questions or need support with your logistics?
Sources
These are the largest transport companies in the world
www.capital.de
Statistics and market volume of the logistics market - Statista
en.statista.com
LOGISTICS BASICS: NOT MUCH WORKS WITHOUT IT
www.oncampus.de/blog/
Logistics and ports - the foundation of German prosperity
www.wfb-bremen.de
Image sources:
LOGSTA / Quivo © 2023
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