What is the difference between a 3PL and 4PL?
A 3rd party logistics company, also known as 3PL, is a company that provides warehousing and distribution services to other organizations. In the past, many companies had their own warehouses and distribution centers. But in recent years, the trend has been to outsource these services to a 3PL.
The reasons for this are two-fold. First, as a result of technological advances and changing economic conditions, it has become less expensive to outsource these services. And second, with the advent of e-commerce, companies need to think about their distribution networks in a new way. For example, companies are now no longer limited to their own warehouses for storing inventory. They can now store their products in multiple locations, which allows for more flexibility in fulfillment and supply chain.
A 4PL is a logistics services provider who is able to offer a mixture of services utilizing their own logistics facilities and others that are well integrated into a logistics network. The benefit of working with a 4PL is the ability to deploy a large network that better benefits from economies of scale to lower logistics costs. A 4PL is managed by an expert logistics management company that is able to provide a reliable and homogenous logistics experience leveraging a group of logistics partners.
There are software platforms, like Shipedge that have the ability to help manage some of the more challenging aspects of this process like centralized stock availability, inventory insights across a network, distribution of products across many facilities, financial accounting for services provided by various groups, and more.