Fourth-party Logistics (4PL): The Daily Definition
What is fourth-party logistics (4PL)?
Fourth-party logistics, or 4PL, is when supply chain logistics are managed on behalf of a primary client and one or more partners. It differs from third-party logistics (3PL) in that it is a service that manages all aspects of a supply chain, rather than a single warehouse, set of warehouses, or specific logistics activity.
If you find that the differences between 3PL and 4PL are tough to keep straight, just remember that 3PL services target a function (such as trucking), but 4PL services manage the entire logistics process for their clients.
So, let’s say you hire a 3PL service to help you with your trucking operations, but after a year or two, you find that you’re now having difficulty coordinating that 3PL’s services with the rest of your supply chain. You are at the point where 4PL services are something to seriously consider. That 4PL service manages your 3PL for you, in addition to managing the additional links in your supply chain.
A fourth-party logistics provider works directly with any 3PLs and the rest of your supply chain vendors/elements to create a smooth operation that propels your business forward. It’s a great option for companies experiencing exponential growth. By handing off supply chain management, you’re free to devote more of your time to further growing your distribution business.
Our two cents:
There’s simple (in theory) logistics, then there’s third-party logistics, then there’s reverse logistics…and then there’s fourth-party logistics. You pretty much need a 4PL service just to keep track of all the options! Or you could just bookmark our Daily Definitions page and check back often. Up to you.
One earmark of a business that might need a 4PL service, either now or in the future, is rapid, healthy growth. If you’re looking to ensure that your business can scale in order to keep up with such growth, make sure that your ERP solution supports such scaling. The last thing you want is for your ERP software to be the barrier between you and a thriving business.