For a customer, it can be really tough to decide whether he needs a 3PL logistics company or a 4PL logistics service provider. Before we derive a conclusion on whether 3PL or 4PL will rule 2019, lets quickly understand what is 3PL & 4PL.
3PL refers to the logistics model, where a company manages the complete logistics, but outsources the transportation as well as logistics to another provider. This provider may again sub-contract certain part of the outsourced services. In this case, additional tasks such as packaging and boxing needed to be done. However, in the case of 4PL logistics services even the management of the logistics along with its execution across the supply chain, is completely outsourced. 4PL logistic solutions could be defined as a much more refined approach to 3PL logistics. The 4PL logistic solutions provide more strategic insight and offer professional management of supply chain of the enterprise.
Undoubtedly 4PL logistics services have a definite edge over 3PL logistics services, but that doesn’t mean that it will rule in 2019. A lot depends in this case on the end customer, who will engage the logistics provider. So, if it is a manufacturer, his best bet will be 4PL logistic service providers. A manufacturer may engage a 4PL logistics company to outsource the entire logistics operations. In this case, the 4PL company will manage the entire communication process on behalf of the manufacturer and engage the other parties. It will take care of the packaging, boxing, inventory management, fleet management etc. In short everything. It will also make strategic decisions on behalf of the manufacturer.
3PL and 4PL, are two spectrums of logistics models. The spectrum starts from 1PL and currently ends at 5PL. As we move up in the spectrum, more functions get added to the logistics provider. In this way, we can say the 4PL logistics provider will have more functions than a 3PL logistic company. However, more functions mean more cost. So, it is quite obvious that 4PL services are costlier than 3PL. So, in the end, apart from requirement it also depends on the budget of enterprise, which is looking for logistic services. A lot of enterprises who are simply looking to ship their products might simply engage a 3PL service provider, and do the end to end management themselves. This might be a cheaper option for them. Conventionally, 3PL is around from 1970 and is still one of the most dominant logistic models. 4PL is still at its nascent stage but becoming popular quickly. As we have mentioned, 4PL is not for everyone’s needs, rather its utility is specific to an enterprise’s requirements. So, going by the trends it would not be wrong to say that 3PL might still rule over 4PL in 2019.
Today, most of the logistic service providers exist as 3PL, providing transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. Most of the enterprises approach 3PL logistic companies when their supply chain becomes too complex to manage. To summarise, 3PL provides attractive pricing and a cost-effective solution. However, 3PL services lack direct control and coordination, as its service is provided by an outsourced service provider. This might affect the overall service quality. This is where 4PL logistic services play an important part, as the service provider takes care of complete supply chain management strategically. 4PL service providers optimize the supply chain process. 4PL ensures complete quality as well as the highest level of services to their clients. So, in case an enterprise has a much complex supply chain that cannot be handled by 3PL, then it can opt for 4PL provided that it can afford the cost. 4PL is still at its evolution stage, even though it is there from 1990. However, it will still take some time to overtake 3PL.