Third-party logistics (3PL) providers handle standard transport and logistics functions that companies don't have the capacity to handle or that are more expedient to outsource. Fourth-party logistics providers (4PLs) take it to another level and handle phases of the operation that are generally considered more internal and even part of a company's core competencies, including strategic planning.
How can you tell if you need to adopt a combination of 3PLs and 4PLs in supply chain management to move your business forward?
Companies that grow and prosper generally do so in stages as their customer base changes and expands and their range of products transforms. Companies can start off with their own warehousing and delivery services staffed with their own employees driving vehicles owned or leased by the company.
But as companies grow to multiple locations and experience more demanding schedules, they may need to enlist the help of an outsourced service -- a 3PL. 3PLs typically take over some, if not all, of the packing, shipping and other functions related to getting products to market. This is nothing new, but it enables companies to offload non-core competencies and refocus on the products they are selling to customers.
Combining 3PL and 4PL in supply chain management
As companies expand further by bringing in different products, acquiring other companies in different regions and adapting to the changing marketplace, their logistics operations change, as well, and often beyond even what their 3PL services are able to help with. This is the point at which a combination of 3PLs and 4PLs in supply chain management can make a difference and improve a company's overall business.
4PL adds another level of outsourced service to the equation, sometimes to the point of taking over a company's entire logistics function. The combination of 3PL and 4PL can transform a disparate supply chain into one that takes advantage of current methodologies and technologies to function in a more integrated, synchronized manner.
Companies focusing on their core business often lose track of what's happening across a diverse enterprise, and rightfully so because they have to optimize their efforts around their products.
The addition of a 4PL can offer fresh perspectives to an entrenched and stagnant mode of operation. By combining 3PL and 4PL tools, you can take advantage of the relationships already in place with existing 3PLs, warehouse operations, and other aspects of supply chain logistics and standardized processes, contractual agreements and operational processes.