4PL vs 3PL: Strategically Outsourcing Your Logistics

Shippers looking for logistics services in the US will invariably run into industry-specific terms like 3PL and 4PL, which can easily cause some confusion. For instance, what does “4PL” even mean, and does it imply the existence of 1, 2, and 3PLs? The answer to the second question is yes, sort of. The first question of defining what a 4PL is can be best answered by comparing it to other, similar practices in logistics.

Defining Fourth Party Logistics

Fourth party logistics providers can be defined as logistics specialists who exhibit the following criteria.

• They are not asset based, which is to say they own no trucks or storage facilities themselves.
• Rather than only managing carriers and warehouses, they may also manage multiple 3PLs on behalf of enterprise-level clients with nationwide shipping requirements.
• They’re mostly concerned with creating bespoke logistics strategies for their clients rather than having the in-house resources necessary to execute tasks themselves.
• They provide a single point of contact for operations who require extensive logistics services with a personalized touch.

We can better understand a 4PL’s role and responsibilities by contrasting it with other numbered logistics practices.

First, Second, and Third Party Logistics Explained

Although you’ll almost certainly never run into terms like 1PL and 2PL while looking for shipping and warehousing services, understanding what they entail can further contextualize what a 4PL does. To simplify things, I’ll use an example based on delivering flowers:

• First Party Logistics (1PL): I have a small flower shop which receives a few standing orders a week. I store and deliver them myself via a single refrigerated box truck and on-site storage. 
• Second Party Logistics (2PL): My online business begins to thrive and my single box truck can’t handle the demand. While keeping storage on-site, I now outsource deliveries to a local last-mile provider with a fleet of vehicles.
• Third Party Logistics (3PL): Demand has increased to the point that I must now outsource storage and shipping to, you guessed it, a third party. This gives me access to more  strategically positioned warehouses and distribution centers, opening up opportunities for cost savings via full truckload (FTL) and other intermodal shipping options. 
• Fourth Party Logistics (4PL): People really like my flowers, so now I need a single contact point who can align customs clearance, storage, and delivery strategies across multiple brokerages and other logistics providers, ensuring consistent service across the US.

Each successive degree includes a “scaling up” of responsibilities and roles. This can get confusing quickly once you hit number three, especially when you realize that a lot of 3PLs offer what could be interpreted as 4PL services. 

It’s also worth noting that some industry experts have begun speculating that outsourced logistics can be divided into seven levels based on criteria like warehouse management systems and AI integration. Before I let things get too out of hand, let’s instead focus on what separates a 3PL from a 4PL so you can decide which solution your business needs.

Differences Between 3PL and 4PL Providers

When deciding between these two types of agencies, start by referring to their primary differences and similarities, which I’ve laid out in the graphic below.

Let’s move on to examine some of the ups and downs that come with 3PL and 4PL partnerships. 

Related: 3PL Vs Freight Broker: Outsourcing Your Logistics Needs

Fourth Party Logistics: Advantages and Disadvantages

Work with a 4PL if you feel your business would benefit from the following:

• End-to-end management by experienced customs professionals
• A single point of contact orchestrating hundreds of freight movements on your behalf
• Access to multiple 3PLs across the country along with their storage and carrier network

On the other hand, some potentially offputting aspects of working with a 4PL include:

• One more degree of separation between you and the carriers who store and haul your products
• Reliance on sub-contractors for resources like trucks and storage space: no asset-based models
• 4PLs have a great deal of latitude in making logistics-based decisions on your behalf

For many business owners, the desire to balance handing off logistics responsibilities with hands-on decision making and full operational transparency makes 3PLs a more appealing option.

Third Party Logistics: Advantages and Disadvantages

Working with a proven, reputable 3PL brings many advantages for shippers, such as:

• Access to multiple warehouses, distribution centers (DCs), and carrier network(s)

• Expert logistics support that still relies on your final decision making authority
• Fewer links in the chain of communication between you and the carriers moving your goods
• Optional consultation sessions for more in-depth contributions to your logistics strategy as needed

Conversely, 3PL logistics may not be your best choice if you:

• Want as little involvement in your company’s shipping and warehousing strategies as possible
• Consistently sell high volumes of goods across multiple regions of the United States
• Have a highly complex supply chain involving exporting and re-importing goods during the manufacturing process

Generally speaking, small to medium-size businesses will get a better balance of price to performance from a 3PL than a 4PL. It’s once you need to scale up to full nationwide operations that a 4PL might have more to offer your business. 

While our own operations are more accurately described as those of a 3PL rather than a 4PL, our capacity for software integration and handling US customs clearance for imported goods lets us strike a balance between the two logistics practices. 

Manage Your Company’s Logistics with USA Truckload Shipping

As a shipper, your real question isn’t about the differences between a 4PL vs 3PL, but rather what each provider brings to the table to help your business succeed. We understand that, which is why we offer the hands-on, full visibility of a 3PL with the strategic input of a 4PL.

USA Truckload Shipping is more than just a trucking company: we’re a one-stop logistics powerhouse with access to warehouses, DCs, and carrier networks across the country. While you’re working on growing your business, you can leave the following to us:

• FTL and LTL freight shipping
• Time sensitive, expedited freight options
• White glove delivery
• And more

Call us today at (866) 352-7178 or get a hassle-free quote online. Quick, before someone starts inventing 8PLs!