Understanding logistics can be a bit complicated and even frustrating for anyone who is simply trying to create a great product and get it in the hands of the consumer.
That’s why we tell our customers that they can do what they do best and outsource the rest. Do you have a product that needs to get in the hands of customers? Or perhaps you need components that you use to create your products? Then you need a logistics provider. Understanding what kind of logistics provider you need starts with understanding your options.
First Party Logistics providers (1PL) is a company, organization or individual who needs to send or receive cargo of any kind. This could be freight or merchandise ordered online from a catalog. This term usually involves those who are seeking logistics services.
Second Party Logistics (2PL) are the providers who provide the transportation services that make the product or freight arrive from point A to point B. This could include a trucking service or even a shipping company. Our last mile services at On Time Logistics would be an example of 2PL service.
What most companies who provide products and merchandise need, however, is either a 3PL or a 4PL service. You guessed it, a Third Party Logistics provider or a Fourth Party Logistics provider. On Time Logistics services fall in between these two, by the way. We provide mostly 3PL style services for our clients.
So what’s the difference between 3PL and 4PL?
Third Party Logistics (3PL) services generally refer to services provided by a company that manages multiple facets of the logistics process including warehousing and delivery. Legislation passed in 2008 says that a 3PL is a person who “solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”
Often times the logistics services are bundled to include multiple logistical components.
Fourth Party Logistics providers provide not only the various logistics services including transportation and warehousing, but they also provide the coordination of those services between all parties.
A 4PL provider is usually a separate entity created as a joint venture or long-term contract between a primary client and its partners. In an ideal situation, all of the client’s supply chain needs are managed through the 4PL organization. Sometimes a 4PL organization will contract with a 3PL organization for fulfillment purposes.
So which do you need? It’s best to discuss your logistics needs with a provider and they will be able to help you decide if they are a good fit for your company. Do you need multiple parts brought in to make your product then help getting that product sent to various places? Or do you simply need documents delivered from your office to somewhere else? These are just some of the considerations when deciding between a 3PL and 4PL provider.