In the diverse and complex world of logistics, it is easy to get carried away with all the terms and definitions. Two of the most commonly confused terms are 3PL and 4PL. While both third-party logistics and fourth-party logistics act as an intermediate party that has something to do with freight transportation, there are many differences between a 3PL and a 4PL. To understand the intricacies of both types, it’s important to know the definition of 3PL and 4PL.

What is a 3PL?

A third-party logistics provider (3PL) is a company or organization that handles certain transportation operations and supply chain functions of a particular business. While the main competency of a 3PL is moving freight, it also provides additional logistics services. 3PL’s gained popularity in the 1970’s when they were tendering freight to railroad companies. Since then, third parties have increased their impact and now play a crucial role in the transportation industry. If a company’s supply chain becomes too complex to manage internally, outsourcing to a 3PL is a great solution. You are still in control of the overall logistics processes and strategy, but burdensome manual operations are handled by a third party. Typically, a 3PL provides the following services:

  • Freight forwarding
  • Load management & dispatch
  • Warehouse and inventory management
  • Supply chain management
  • Technology integration

What is a 4PL?

A fourth-party logistics provider, also known as a lead logistics provider, is basically a 3PL with extended functionality. It appeared as a service for companies that need more coverage in terms of logistics and supply chain management. Usually, 4PL’s provide a wide span of services and hold more responsibility and accountability. 4PL’s will most likely manage your entire supply chain.  A 4PL typically provides the following services:

  • Strategic supply chain and logistics management
  • Warehouse and inventory management
  • Accounting
  • Freight forwarding
  • Transportation management
  • Optimization of operations

What is the difference between a 3PL and 4PL?

Both 3PL’s and 4PL’s provide transportation and logistics services to businesses. The main difference is that a 4PL focuses on strategic goals, extensive service coverage, and close partnerships, while a 3PL lets you control the overall strategy but outsource tedious operations.