I realized increasingly within supply chain industry the use of different level of PL terminology as part of their supply chain operation. And recently we keep hearing 3PL and 4 PL terminologies more and more. In this article we discuss the differences between 3PL and 4PL.
Before we look into what may differentiate 4PL form 3PL we need to understand the PL terminology. First PL would be the owner of the cargo , this could be the consignee or the shipper and they within the organization control the distribution type , origin and destination. Second PL involves the carriers to provide transportation services for the cargo owners supply chain operation. 2PL companies could be the carriers , trucking and rail companies.
The use of 3PL started around 1970s and before that the communications were only between the shippers and the carriers. With the intermodal companies getting into the picture and became part of shipper’s operation by accepting shipments from the shippers and offering them to the rail carriers they started to create 3PL.
And the idea of 3PL has widened and become more complex throughout the time as the companies started to offer different and more complex logistical services such as transportation , warehousing , freight forwarding , inventory management , warehousing , packaging integrated all in one. today the 3PL logistics providers could be considered as freight forwarders , other companies offering integrated logistics services and offering solutions to complex operations .
4PL service providers also been referred as “Lead Logistics Providers” started being used in the business world by late 90’s. 4 Party Logistics providers may not own the actual equipment and assets but they perform to offer wide supply chain solutions based on their clients’ needs. With the 4PL service provider in the theory all the logistical and supply chain need of the client should be managed. Most of the time 4PL companies have long term agreement with their client and more partners and they act like a single entity between the different logistics providers and their clients. 4 party logistics companies can even manage 3PLs that their clients have set up with and majority of 4PL companies also take care of the electronic set up needs of their clients and their venders they work with as part of their supply chain.
This could be considered as a debate subject as to some supply chain professional these layers of applications of PL’s is helping the companies have better supply chain solutions for their complex needs and to some causing mistakes and causing some opportunity lost . Whichever you agree on let’s not forget every company’s need is unique and depending on the cargo owner‘s set up it is up to them to find the best solution to make their supply chain more efficient.