3PL vs. 4PL: What's Best for Your Business?

Your business' success is dependent on the quality of its logistics process. So, you must understand what resources you can draw from and which ones are ideal for your facility.  

In the world of logistics, third-party and fourth-party logistics (3PL and 4PL, respectively) can make the difference in efficiency, cost structure, inventory control, and more. But which is best? The answer to that question lies in your business structure and how much management your logistics operation needs. 

3PL vs. 4PL – The Difference

In both cases, manufacturers outsource their logistics processes to an outside entity. 3PL providers provide resources such as inventory storage and management, picking and packing, and information technology solutions while the manufacturer controls those operations. 4PL takes those services to the next level – adding the element of accountability and control as manufacturers outsource the entirety of their logistics process to an external source. 

In short: 3PL focuses on logistics alone while 4PL encompasses the entire supply chain. The two have several four key distinction categories: optimization, assets, coordination, and control. 

• Optimization – 4PL focuses on optimization and integration. 3PL focuses on day-to-day operations.
• Assets – 4PL providers generally have warehouse space and truck assets, while 3PL providers do not.
• Coordination – 4PL companies can function as a coordinator of 3PL provider activity. 
• Control – 3PL leaves aspects of the supply chain to an internal management entity; 4PL centralizes supply chain services with a single point of contact.

3PL vs. 4PL – Pros and Cons

Depending on your needs, either 3PL or 4PL providers can be of service to your organization. When choosing a provider, consider the advantages and disadvantages of each to determine which is the best fit. 

With 3PL services, your provider will have access to a network of other providers that can assist with in-house supply chain operations. They manage the logistics only – saving you time and money when it comes to that aspect. The elimination of your need for in-house warehouse storage is a plus, and you can scale your needs based on your business operations. On the other side, however, 3PL services offer less inventory control and can be costly depending on product volume.

4PL services embrace many of the advantages of 3PL – from a logistics perspective. But then, taking it a step further, they incorporate a more comprehensive operations management system, IT software and automation, and solution-oriented methods customized to your business. With a more extensive portfolio of services, 4PL providers can be costly for manufacturers with smaller operations. 

What's Best for My Business?

A small-to-medium-sized business is likely to choose 3PL services due to their operations' cost structure and volume needs. However, a medium-to-large-sized manufacturer may find that 4PL is better suited for them as it shifts management focus from supply chain needs to in-house operations.

Dream Logistics is a leading Louisville 4PL provider offering services such as:

• Warehousing Services
• Long or Short Term Storage
• Specialized or Overweight Product Needs
• Transloading Operations
• Cross-docking Operations
• Pick & Pack Services
• Palletization Services
• Packaging & Label Fulfillment Operations

Think 4PL is right for your business? Schedule a consultation with Dream Logistics today, and see how we can increase the value of your supply chain operations.