3PL vs 4PL: What are these PLs, Anyway?

Layers of Logistics
Explained
Logistics // Steve Norall // August 8, 2013 // 23 comments

Learning the difference between a third party logistics (3PL) and fourth party logistics (4PL) as well as 1PL and 2PL , and the rise of even Fifth Party
Logistics (5PLs) is both confusing and highly debated among those in the supply chain industry.

3PL vs 4PL: The Great (LinkedIn) Debate

This is evident in a LinkedIn Discussion (which you can read in its entirety here) where the debate of 3PL vs 4PL garnished 70 comments!

In the 3PL vs 4PL debate, Adrian Chen, an Advisory Board Member (Asia Pacific) at ISCEA -International Supply Chain Education Alliance had
this great comment to finish the debate:

Great comments from many herein, although it would be fantastic to hear more from other logistics professionals, but with gratitude, many of the
comments hold true to the fact that we have an over-lapping of the functionality from within the 3PLs in walking that extra mile to accommodate
many of the responsibilities that would assume a 4PLs role ultimately.

I see the generation of 4PLs evolving & advancing to an extent from the legacy 3PLs work scope with specific themes created to address value-add
requirements with their clients partnerships. The basic concepts of 3PLs are hereto stay (specifically the assets-based providers) & the
evolution to extend services as a 4PL will be the deciding factor many shippers (small companies or large multinational corporations) stand on in
their selection of a provision partner. Naturally, we do see spin-offs again, from a 4PL pint-of-view, whereby some retain specialty in specific
knowledge & skill-sets (ie. IT / MRP / direct & indirect sourcing etc.), but yet there are many of the 4PLs who would be entrenched in the general
provisions as 3PL managers to co-ordinate the overall fulfillment processes B2B2C ultimately.

3PL vs 4PL: The Academic Definitions from CSCMP

The Council of Supply Chain Management Professionals glossary, defines both 3PL and 4PL, and is one I have found to be generally true across the
board.

The CSCMP defines 3PL as follows:

Outsourcing all or much of a companys logistics operations to a specialized company. The term 3PL was first used in the early 1970s to identify
intermodal marketing companies (IMCs) in transportation contracts. Up to that point, contracts for transportation had featured only two parties, the
shipper and the carrier. When IMCs entered the pictureas intermediaries that accepted shipments from the shippers and tendered them to the rail
carriersthey became the third party to the contract, the 3PL. Definition has broadened to the point where these days, every company that offers
some kind of logistics service for hire calls itself a 3PL. Preferably, these services are integrated, or bundled, together by the provider. Services
they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. In 2008 legislation passed
declaring that the legal definition of 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.
Third-party logistics providers are:

Freight forwarders
Courier companies
Other companies integrating & offering subcontracted logistics and transportation services

The CSCMP defines 4PL as follows:

Differs from third party logistics in the following ways; 1)4PL organization is often a separate entity established as a joint venture or long-term
contract between a primary client and one or more partners; 2)4PL organization acts as a single interface between the client and multiple logistics
service providers; 3) All aspects (ideally) of the clients supply chain are managed by the 4PL organization; and, 4) It is possible for a major third-
party logistics provider to form a 4PL organization within its existing structure.

However, 4PL was oringally defined by Accenture as a trademark in 1996 and defined as A supply chain integrator that assembles and manages
the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply
chain solution., but is no longer registered.

4PLs have also been referred to as Lead Logistics Providers. Now a new crop of companies have emerged who are actual transportation companies
too. While a 4PL is sometimes described as non-asset-owning service provider, their role is to provide broader scope managing of the entire supply
chain.

Ok, So we Got 3PL vs 4PL, But What About all These Other PLs?
In the PL terminology, it is important to differentiate the 3PL vs. 4PL from the other logistics layers:

First Party Logistics (1PL). Concerns beneficial cargo owners which can be the shipper (such as a manufacturing firm delivering to
customers) or the consignee (such as a retailer picking up cargo from a supplier). They dictates the origin (supply) and the destination
(demand) of the cargo with distribution being an entirely internal process assumed by the firm. With globalization and the related
outsourcing and offshoring of manufacturing, distribution services that used to be assumed internally tend be contracted to external service
providers.
Second Party Logistics (2PL). Concerns the carriers that are providing a transport service over a specific segment of a transport chain. It
could involve a maritime shipping company, a rail operator or a trucking company that are hired to haul cargo from an origin (e.g. a
distribution center) to a destination (e.g. a port terminal).

Now, along comes the 5PL who sometimes define themselves as broadening the scope further to e-business.

You might question anything more elaborate than a 3rd party providing logistics consultation or management, no matter how advanced or far-
reaching their service might be. So are they still 3PLs who just invented a fancy title to set them apart from the competition, or is there a real
differentiation?

A 4PL is neutral and will manage the logistics process, regardless of what carriers, forwarders, or warehouses are used. The 4PL can and will even
manage 3PLs that the customer is already currently using. Many 4PLs have addressed the huge requirements of electronic interface between
numerous companies.

This area is where its difficult to define Cerasis as a 3PL or 4PL. We are a non-asset logistics provider ,who provides technology and services
focusing on over the road motor freight management, specifically offering a TMS with services around carrier relationship and inbound freight
programs. So, loosely, we belong somewhere in between 3PL and 4PL. What would you call us, given that knowledge? And how would you define
3PL vs 4PL? Let me know in the comments below.

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