Logistics (5th Article)

3rd Party and 4th Party Logistics Services

     Definitions:

• First Party: The manufacturer, Wholesaler, or Retailer, otherwise called the “Shipper”
• Second Party: The Customer (or supplier) of the first party
• Third Party: The logistics provider, such as a freight carrier or public warehouse.

A third party may also be a provider of (pure) services, such as freight broker, forwarder, consolidator, customs broker, etc.….

• Forth Party: The term "fourth-party logistics provider" is a trademarked term owned by Andersen Consulting, it refers to the evolution in logistics from suppliers focused on warehousing and transportation (third-party logistics providers) to suppliers offering a more integrated solution

So; now what is the difference between 3PL & 4PL?

The main difference between a 4PL and a 3PL is that a 4PL handles the whole supply chain while a 3PL is mainly concerned with handling just the logistical and transportation process.

Here are some keys of differences:

• Fourth-party logistics are better suited for medium-to-large businesses
• Third-party logistics are more suitable for small-to-medium businesses
• Fourth-party logistics providers may own assets like trucks and warehouses
• Third-party logistics providers generally don’t own such assets.

As everything; there are advantages and disadvantages for both designs

Let’s see a summary:

4PL Advantages:

• It has a single point of contact covering all Supply Chain parties
• Provides a lean and cost-effective that improve a profit margin
• Provide manufacturers more space to focus on the production, as it provides 3rd party professionals to cover all logistics activities

4PL Disadvantages:

• Minimal control over logistics processes
• Not suitable for small to medium projects 

3PL Advantages:

• Saves time and money
• Fit for small business with a fast growth
• Reduce the risks
• Fully control in all processes

3PL Disadvantages:

• Minimal control over inventory management
• Cost a lot for the small orders
• Suitable only small to medium projects

By the End; we can’t say which is better as 3PL is better in some projects and 4PL is better in some other projects

Your business style and objectives are the owner to decide which is best fit to your case.