3PL vs. 4PL global supply chain outsourcing

Save time, reduce costs, and leverage your supply chain by working with a 4PL logistics company.

The world of logistics may seem perplexing to you. But after all, aren’t we only discussing moving product from point A to point B? If only it were that straightforward.

Today, the world of logistics has become much more far-reaching. Manufacturers and distributors alike are now not only facing logistical issues but global supply chain outsourcing issues. The change has been so tremendous that an entire niche of companies entered the market to handle the challenges. The smartest solution here is outsourcing: hiring a third party, or even a fourth party, to complete projects, prepare services, and oversee global supply chain outsourcing for your company.

The nature of logistics has expanded to encompass more than just suppliers and distributors. In turn, this is where we begin to see the terms 3PL and 4PL starting to emerge in the logistics scene. Read on to learn about first (1PL), second (2PL), third (3PL), and fourth (4PL) party logistics companies, and to understand what they are, and which ones can be utilized as leverage in the world of supply chain logistics. 

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The first-party logistics company (1PL)

When speaking about a supply chain, the first level is a company that manages all of the cargo freight and transportation themselves. In the case of 1PL, the manufacturer supplies directly to the customer. There are no middlemen between the two. In this instance, the manufacturer carries all the overhead costs of manufacturing, global supply chain outsourcing, and logistical controls themselves. This is often only beneficial in a situation where a company manufactures a single type of product or a specialty product that involves stringent logistical controls (i.e., natural gas production).  You may think this is all you need to operate your company—and it is, if you are thinking on a very simplified scale. But what if there is the potential to gain greater benefits to your business? 

The second-party logistics company (2PL)

A 2PL only provides transportation of your goods from your manufacturing facility to the customer. Think of companies like UPS or FedEx: They typically don't provide any services for warehousing or any global supply chain outsourcing solutions. The benefit is that you don't have to carry the overhead costs of logistics vehicles, employees, or management of shipping routes. This may seem like a quick and easy way to save money. All companies want to find ways to save money because, let’s face it, more profit equals happier business owners. But the limitation is that 2PL companies are not looking for ways to optimize your supply chain. You can realize greater cost reductions if you can instead increase the overall efficiency of your supply chain

shipping port with containers illustrating transportation of parts and goods via maritime channels

The third-party logistics company (3PL)

When thinking on a broader scale for your supply chain, you may want to consider outsourcing to a 3PL. These companies were originally referred to as intermodal marketing companies, and you still hear this vocabulary used today. A 3PL provides all the benefits of a 2PL plus additional services, such as warehousing or global supply chain outsourcing of a specific product. These companies are often distributors of products that also offer warehousing options. You may think of this like a local lumber store. The local lumber store provides all the work for you to get the types of products you need, and they provide warehousing of the product until you need it. However, they don’t typically handle global supply chain outsourcing for you. These companies can simplify your day-to-day operations because they work for you. They can sign contracts on your behalf with transportation carriers, as well as offer warehousing services in order to supply logistics solutions to your suppliers. Another benefit to using a 3PL is that they may own equipment and assets to complete jobs, such as trucks, trailers, or even warehouses. 3PLs are also able to outsource shipping and warehousing. 

Suppliers often hire 3PLs for handling transportation logistics. This process alleviates the supplier from this responsibility. This, in turn, usually saves the supplier money, since most 3PLs have solid contracts in place, allowing them to pass savings on to the suppliers. Since the 3PL’s sole job is handling the logistics precisely, the supplier achieves an overall increase in efficiency. As you can see, creating a partnership with a 3PL has many benefits for your business. Now imagine implementing this type of logistical control for every outsourced product your company utilizes. Read on to learn more about this in the next section on fourth-party logistics. 

The fourth-party logistics company (4PL)

As technology has advanced and the complexity of the global supply chain has multiplied by high orders of magnitude, a new player in global supply chain outsourcing has emerged: the 4PL. This is the ultimate, one-stop-shop, single-point-of-contact solution to all your logistics issues. To simplify all aspects of your supply chain, you will want to partner with a 4PL, often referred to as a Lead Logistics Provider (LLP). A 4PL, like Nelson Miller Group, serves as a single interface between the client and multiple suppliers, including any 1PL, 2PL, or even 3PL sources. 4PLs can handle 100% of a supplier’s inbound, outbound, and warehousing needs. 4PLs utilize advanced data analysis and the most current technology to advise their customers regarding all aspects of supply chain logistics, especially when dealing on global terms. 4PLs are contracted to handle many other tasks than just shipping and planning services. They are involved in the logistics and the management of the responsibilities of the business, therefore taking care of your whole chain of supply. 

Hopefully, this information makes you more prepared to make the best decision for your company’s global supply chain outsourcing needs. Who you end up connecting with will likely be based on the amount of logistical support that your business needs.  You don't want to miss an opportunity to save a significant amount of time and money and avoid complications by finding a stable logistics partner.

A partnership with a 4PL, like NMG, is the ultimate global supply chain outsourcing solution. NMG is an expert on end-to-end supply chain solutions that can help you mitigate the complications of day-to-day operations and manage your inbound, outbound, and warehousing needs through a single point of contact. 

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About NMG 

NMG has more than 85 years of experience partnering with organizations to bring their industrial, IoT, lighting, medical, telecommunications, consumer, and aerospace products to life. We solve your most complex challenges in engineering design, manufacturing, and supply chain management.  

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