Third-party logistics providers (3PL) provide logistics and supply chain management to customers, while fourth-party logistics providers (4PL) integrate the resources of all components of the supply chain in order to build improvements and provide expertise to the entire supply chain management function.
As businesses have become more complex, working with vendors and customers in an increasingly fast-paced economy, effective and profitable supply chain management requires expertise that most companies do not have in-house. According to Dr. Jean-Paul Rodrigue, professor of Global Studies at Hofstra University, the use of 3PL and 4PL logistics providers allows businesses to capitalize on the production and distribution knowledge of companies that are entirely focused on supply chain management. These providers are much more complex than a simple cargo company (a first-party logistics provider, or 1PL) or a multi-stage carrier company (a second-party logistics provider, or 2PL). Depending on the complexity of a customer's needs, a 4PL may be required in order to negotiate with multiple carriers and warehouses, coordinate electronic transfer of data between differing systems and offer consulting on possible process improvements and cost savings. This improved level of service has contributed to the shift from 3PL to 4PL, as more industries are interested in taking a hands-off approach to logistics management, something that was often cited as a challenge when working with third-party logistics providers.