3PL vs 4PL: How is it different?

Sherian Batallones


Last updated:

July 16, 2024
Warehouse worker in a 3PL warehouse
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To stay competitive in the eCommerce market, businesses must navigate complex logistics processes to optimise order fulfillment. Choosing a reliable logistics partner plays a pivotal role, and often, the decision comes down to deciding between third-party logistics (3PL) and fourth-party logistics (4PL) providers.

While the ultimate choice would depend on the eCommerce brand’s requirements, understanding the differences between these two can significantly impact how brands can make informed decisions on which model is best used for business efficiency, customer satisfaction, and profitability.

In this blog, we’ll go through a detailed exploration to help you discern which model, 3PL or 4PL, aligns best with your operational needs and business goals.

A Quick Look into the 3PL vs 4PL Difference

3PLs, or third-party logistics providers, manage specific aspects of logistics such as warehousing, transportation and distribution. They help businesses optimise their supply chain operations, reduce costs, and improve efficiency by being intermediaries between manufacturers or retailers and their customers.

A fourth-party logistics provider, on the other hand, is essentially a level up from 3PL, that integrates and manages all resources, capabilities, and technology of a supply chain comprehensively. 

Unlike 3PL providers that specialise in singular operational facets, 4PLs serve as a single point of contact for all supply chain-related services. They coordinate the actions of 3PLs, transporters, warehouse operators, and other stakeholders to streamline the entire logistics process.

In simpler terms:

3PL providers offer essential services such as warehousing, pick and pack solutions, and shipping, allowing businesses to focus on their core competencies. In contrast, 4PL providers manage the entire supply chain, integrating various logistics functions and often leveraging advanced technology and analytics to optimise operations.

3PL vs 4PL in eCommerce Logistics

According to recent research, the Australian 3PL market is projected to reach $19.62 billion by 2028. Meanwhile, the 4PL market is also on the rise, with a forecasted growth rate of 4.4% from 2021 to 2028. This growth is driven by the increasing complexity of supply chains and the rising demand for comprehensive logistics solutions.

While both are equally beneficial, the crux of 4PL vs 3PL decision-making lies in comprehending your specific operational and logistics needs. 

3PL providers offer logistics services that are more executional. These encompass transportation, warehousing, picking and packing, inventory forecasting, order fulfillment, and shipping. They operate on behalf of their clients to ensure products are stored, handled, and delivered efficiently.

3PL services are ideal for businesses that need expert handling of their logistics but lack the internal resources or prefer not to manage these operations themselves. For instance, an eCommerce enterprise looking to expand its market reach can rely on a 3PL's distribution network without investing in additional infrastructure. 

On the other hand, if your business requires a more overarching approach – with an emphasis on strategic alignment of your supply chain, technology implementation, and network analysis – considering a 4PL provider would be beneficial. They bring a holistic view and can streamline your multi-faceted logistics setup through their managerial expertise.

A key aspect of what is 4PL lies in its strategic oversight. 4PLs offer tactical insights and management over supply chains to optimise operations and reduce costs. This could include everything from inventory management, detailed analytics on logistics performance to recommendations on improving supply chain infrastructure.

Key Benefits: 3PL Logistics vs 4PL Logistics

3PLs can reduce overhead costs significantly. They eliminate the need for additional warehousing, staff, and transport resources. Their industry expertise in distribution and storage can lead to improved customer service and faster delivery times.

4PLs, meanwhile, bring innovation and integration to the table. They can transform a supply chain with their ability to oversee and synchronise multiple aspects of logistics. The result? Enhanced visibility across the chain, advanced data analytics for better decision-making, and overall cost savings through improved efficiency.

3PL and 4PL Integration for Enhanced Order Fulfillment

From the rise of eCommerce to global trade shifts, the need for efficient and adaptable logistics solutions has never been greater. By understanding the nuances of 3PL and 4PL, companies can make informed decisions, positioning themselves for growth and resilience in an ever-changing market landscape.

But what if you could integrate the two: leveraging the efficiency of 3PL logistics while having access to innovative technology at par with 4PL providers? 

By merging technology with logistics, SKUTOPIA paves the way for seamless, rapid, and error-free order processing - reinforcing the benefits of a solid 3PL partner doused with technology akin to 4PL oversight.

With SKUTOPIA’s end-to-end logistics solution, leverage robotic order fulfillment for maximised 3PL efficiency and accuracy while having access to a platform that lets you handle your fulfilment network for enhanced oversight. Plus, get last mile delivery services that complete your entire order fulfilment without having to manage multiple providers. 

Choose a partner that not only understands the mechanical aspects of logistics but also brings strategic vision to foster your growth. Sign up with SKUTOPIA today.