When your business has grown to the point where you no longer can handle all of your logistics needs internally, you may want to reach out to a third party.
Luckily, there are plenty of options when it comes to outsourcing your logistics needs.
While third-party logistics (3PL) is the most common, with the global market worth $935.31 billion in 2020 (Source), there are other prominent solutions like fourth-party logistics (4PL) and fifth-party logistics (5PL).
These numerous forms of external outsourced logistics solutions can become confusing and make it difficult for businesses to decide what is best for their needs. Throughout this article, we will break down 3PL, 4PL, and 5PL, their differences, and how to decide which one is right for your business.
What is Third-Party Logistics (3PL)?
Third-party logistics (3PL) is the act of outsourcing your logistics needs to a third part business. This can include warehousing, inventory management, order fulfillment, and more. 3PL services are excellent for businesses that do not have to resources needed to handle their logistics. Due to their wide range of knowledge and years of experience, 3PLs can find the most optimal solutions for your business to ensure maximum efficiency for your supply chain.
One of the main reasons for 3PL’s growing prominence is the growth of the e-commerce business, which exploded in the past ten years. Now, 3PLs offer a more diverse range of services to supply logistics needs for businesses of any size.
What is Fourth-Party Logistics (4PL)?
With fourth-party logistics (4PL), a business’s logistics solutions are not only provided by an outsourced company but are also managed externally as well. 4PL analyzes and optimizes their client’s entire supply chain to improve efficiency and save money when possible. Because of this, consistent communication and transparency are necessary for 4PL providers to provide the optimal solutions for their client’s needs.
4PLs do not have warehouses or means of transportation themselves; instead, they find the most optimal solution for their clients and manage them to be as beneficial as possible. The role of a 4PL involves working closely with the service supplier as not only are the logistics solutions outsourced, but the monitoring of those solutions is as well.
The Difference Between 3PLs and 4PLs
The most notable difference between 3PLs and 4PLs is the provider’s amount of control and accountability over their client’s supply chain. 4PLs provide their clients with consulting services regarding their supply chains processes, such as efficiency, impartial feedback, cost strategies, and neutral management. 3PLs simply provide the logistic services with no additional managing, planning, or coordinating the supply chain.
What is Fifth-Party Logistics (5PL)?
Fifth-party logistics (5PL) is a much newer business model than 3PL and 4PL and looks beyond individual supply chains, focusing instead on broader supply networks, ideal for substantial companies.
5PLs organize, optimize, and implement their client’s logistics solutions, taking over each part of their supply chain management and focus on the entire supply network, overseeing every supply chain within an organization.
Choosing Between 3PL, 4PL, and 5PL
When choosing a logistics provider for your business, it is best to focus on how much your business can do internally and how much you wish you outsource. It is important to note that partnering with a provider means losing some control and oversight over your supply chain, so it is crucial to choose a provider that understands your business’s goals.
Doing a lot of research, speaking to multiple providers, and finding one that fits your business is a must when partnering with a 3PL, 4PL, or 5PL.
At FlexSpace Logistics, we offer comprehensive 3PL services across Canada, so regardless of the location of your business, we will have the resources to accommodate. We will handle your shipping and logistic needs with care so you can get back to the more pertinent aspects of your business.
If you’d like to get started, get a quote today, or contact one of our FlexSpace Logistics advisors to find the right solution for your business at 1-844-985-3539.