Capabilities of 3PLs Versus 4PLs

When outsourcing your logistics operations, many are faced with the option of a 3PL verses a 4PL solution offering.

The offerings of 3PLs and 4PLs can overlap greatly, and some companies handle the services of both, which can make it difficult to tell the difference between the two business models. While both options offer similar services, they are drastically different when it comes to core responsibilities and scale.

What is a 3PL?​

Third-party logistics providers (3PLs) focus on order fulfillment. When working with a 3PL, businesses remain fully in control of the management of their supply chain and will still need to handle some of their logistics needs internally. 3PLs usually specialize in a particular area of logistics, such as last-mile deliveries, cross docking or freight forwarding. In many cases, these services cover regions or specific warehouses. 3PLs can be limited to certain methods of transportation, such as road freight or ocean freight.

3PLs can solve your shipping needs by leveraging their networks of carriers to get your shipments delivered safely and compliantly. In addition to moving items from point A to point B, an effective 3PL will offer other services that add value. These can include customer relations, claims response services and reverse logistics. This business model also involves IT integrations and analytics that allow you to track performance.

What is a 4PL?

Fourth-party logistics providers (4PLs) focus on optimizing your entire supply chain. These types of companies function as a strategic partner for businesses and have greater accountability and responsibilities than 3PLs.  Rather than concentrating on fulfilling orders, a 4PL will oversee all aspects of your company’s logistics operations, removing the need for an in-house logistics solution. 4PL services include managed transportation, control tower solutions, management of 3PL providers and global shipping coordination. Many 4PLs also offer 3PL services.

If a company is looking to reduce costs, improve compliance, grow their shipping capabilities or make their supply chain more efficient, they may outsource their logistics operations to a 4PL. These types of providers have the capacity to handle networks on a global scale across all modes of transportation, making them a common choice for companies with international shipping needs. Like 3PLs, this business model also involves IT integrations, but on a much larger scale, giving you in-depth information about every part of your operations. Because 4PL services involve connecting every part of your logistics operations, technology is a core focus of many 4PL providers.

Which option is best for your business?

Choosing a 3PL or 4PL will depend on your operational needs. If you need to handle regional deliveries or are lacking warehouse space, working with a 3PL may be your best option. With a 3PL, you will still retain most of the control over your supply chain. 3PLs work to optimize their specific services, but they do not offer end-to-end strategic consulting services as an integrated partner with the customer.

Mid-to-large-size companies with national or global logistics operations can benefit from partnering with a 4PL. Managing your company’s logistics in house can quickly become complicated – especially when you’re overseeing numerous carriers, 3PLs and warehouses. By working with a 4PL, you’ll have a single point of contact for all your logistics operations. 4PL providers have access to large networks, making them highly flexible whenever your needs shift.

RXO’s global network of control towers is a complete end-to-end solution offering 3PL and 4PL services.  When you partner with us, we’ll build a unique strategy to streamline your company’s logistics operations. Our managed transportation solutions include:

• Robust carrier selection and partner management
• Global shipment coordination
• End-to-end visibility of orders and shipments
• Ensuring carrier compliance and performance
• In-depth performance analysis and network optimization
• Freight audit and payment and claims management
• Web and mobile-based customer portal for clients, carriers, suppliers
• Real-time business intelligence analysis and reporting
• Continuous improvement and sustainable practices

Our massive capacity allows us to offer fully customized logistics strategies to companies of any size. At RXO, control-tower teams manage millions of shipments annually, with our largest operation, located in Naperville, IL, managing over one million shipments per year. Our team of experts is trained in operations, analytics, procurement and customer service. With RXO, you’ll have access to your managed transportation team 24/7, providing you with a bird’s-eye view of your freight activities whenever needed.

The RXO control tower selects carriers to get your product where it needs to go as efficiently as possible. As your strategic partner, we’ll utilize reliable carriers and plan routes to achieve optimal freight-shipping performance. The RXO control tower approach also provides opportunities for continuous improvement. By applying a Lean-based analysis to your shipping patterns, we can identify process improvements and design cost-saving solutions based on your needs.

RXO leverages AI and machine learning to provide cutting-edge technology to customers. Our proprietary technology, RXO Connect, connects over 10,000 customers to a network of over 100,000 contract carriers. In Q1 of 2023, over 96 percent of all loads were created or covered digitally, making it simple for our customers to track freight. At RXO, we use API software and IT integrations to seamlessly connect your suppliers, distribution centers, logistics carriers and customers.

Get expert assistance with RXO

Our logistics experts at RXO can work with you directly with customized solutions that fit your business needs. Contact us today for more information at [email protected] or Request a Quote to have one of our RXO experts get in touch.