3PL vs. 4PL: Differences, Pros/Cons & Choosing the Right Model

As you start comparing fulfillment providers, you’ll come across two terms pretty quickly: 3PL and 4PL. They both deal with outsourcing logistics, but they serve very different roles in how much of that responsibility they take off your plate.

A 3PL provider performs three primary functions, including product storage, order packaging, and customer delivery services. The coordination of operations remains your responsibility, even though you are the one behind the scenes.

A 4PL provider conducts a complete supply chain assessment for your business. The 4PL provider oversees all supply chain operations by controlling 3PL services.

Hence, which is the right model for you? In this article, you’ll understand the difference between these two, which helps you figure out what level of control and involvement you want to keep. 

Let’s dive in…

3PL (Third-Party Logistics) refers to the practice of outsourcing specific logistics functions, including warehousing, transportation, and order fulfillment. A 3PL provider is responsible for the operational aspects, including storing inventory, picking and packing orders, and shipping them to customers.

Many businesses choose to use 3PLs to expand their logistics operations without having to build the entire infrastructure from scratch.

Fourth-party logistics, or 4PL, is more than just the day-to-day handling of goods. Instead of managing individual tasks, a 4PL oversees the entire supply chain on your behalf.

They act as the main point of contact and coordinate multiple 3PLs and vendors involved in your logistics network. Their role is more strategic, ensuring that your logistics operations are integrated, efficient, and aligned with your business goals.

In short:

• 3PL focuses on execution (shipping, warehousing, fulfillment).
• 4PL focuses on end-to-end management and optimization of the supply chain, often including the oversight of one or more 3PLs.

The selection between third-party and fourth-party logistics models requires understanding how each model operates and how their responsibilities are defined. The main distinctions between these models follows:

1. Role in the Supply Chain

3PL: The primary focus of 3PL companies is executing logistics tasks, which include inventory storage, order packaging, and transportation management. Your Shopify and Amazon order fulfillment across multiple regions can be managed by a third-party logistics (3PL) provider.

4PL: The supply chain operates under complete control of 4PL from its beginning to its end. A 4PL operates as the lead organization to create and enhance the whole logistics process while selecting and directing various 3PL providers. 

2. Scope of Services

3PL: Covers operational services. You maintain responsibility for logistics planning alongside vendor coordination and performance analysis activities.

4PL: The organization manages logistics strategy along with execution and continuous improvement processes. A 4PL can assist retail brands to lower delivery times by conducting regional carrier performance evaluations to secure new contracts and redesign distribution zones.

3. Relationship with Your Business

3PL: The agreements for 3PL services specify particular tasks, including storage of X pallets and fulfillment of Y daily orders. A service-provider relationship functions through price and volume.

4PL: The partnership resembles that of a logistics consultant who functions as an advisor. They participate in supply chain decision-making, perform performance assessments, and create cost strategies. 

4. Asset Ownership

3PL: The physical assets, such as warehouses, freight vehicles, and distribution hubs, are owned by 3PL companies. They can perform rapid fulfillment, but their asset network restricts their operations. A California-based 3PL warehouse would not be suitable for your East Coast customer base.

4PL: Generally non-asset-based. The organization uses its network of 3PLs, carriers, and suppliers to identify the most suitable solution for your needs. 

5. Technology and Integration

3PL: The typical inventory tracking and order management, along with shipping notification tools, are provided by most 3PL operators. The tools operate separately from one another. You need to access separate platforms for managing each 3PL provider.

4PL: The platform provides central technology integration, which collects data from all supply chain partners. A 4PL enables you to monitor your warehouse stock levels and delivery times from a single dashboard interface.

6. Vendor Management

3PL: You need to manage relationships with various providers, including warehousing services, transportation services, and last-mile delivery operations. Your operation remains manageable when it stays small or remains localized.

4PL: Consolidated vendor management systems are available. You will interact with your 4PL, who oversees all your logistics vendors, instead of handling five different logistics vendors directly. 

7. Cost Efficiency

3PL: Can reduce operational costs by leveraging shared resources. For example, you can utilize a shared warehouse space instead of incurring the costs of a dedicated facility.

4PL: Takes a higher-level view of cost savings. A 4PL will analyze your end-to-end operations, including procurement, warehousing, and last-mile delivery, and identify structural inefficiencies to improve margins.

8. Business Fit

3PL: Best suited for businesses that want to outsource logistics execution but still keep control of the strategy. For instance, a DTC brand shipping mostly within one country may find a 3PL is sufficient for fulfillment and delivery.

4PL: Ideal for larger businesses or those expanding across regions and needing integrated logistics oversight. A manufacturer or multi-brand retailer with complex operations across supply chains would benefit from a 4PL’s ability to unify, optimize, and manage it all under one roof. 

3PL providers can be a smart move for growing businesses that want to outsource fulfillment, but they also come with trade-offs. Here’s a quick comparison to help you weigh the benefits and limitations:

4PL manages and optimizes your entire supply chain. This end-to-end control can offer significant strategic value, but it also means relinquishing more ownership. Here's a quick breakdown:

A standard e-commerce business that requires basic fulfillment, including inventory storage, order packaging, and shipping, will benefit from a 3PL service.

A 4PL system delivers better results for business operations that require managing multiple warehouses, international shipping services, numerous carriers, and various 3PL providers.

In short:

A 3PL should be selected for execution support while maintaining hands-on involvement.

Select a 4PL provider when your supply chain becomes complex, as you require comprehensive end-to-end management.

Your selection depends on your preferred level of control, as well as your management needs regarding complexity.

The first step requires you to identify which areas need your support.

The efficiency of product delivery from warehouse to doorstep makes 3PL a suitable choice for your business. Search for a provider that offers complete warehouse coverage, seamless sales channel integrations, and clear pricing structures.

A 4PL system becomes essential when handling multiple vendors, regional distribution centers, international delivery services, and scattered data networks. 

Key decision drivers:

• Need control + help executing? → Go with a 3PL.
• Need strategy + full coordination? → Consider a 4PL.
• Shipping volume manageable, but growing? → Start with a 3PL and upgrade when complexity increases.
• Already using multiple 3PLs or crossing borders? → A 4PL can streamline operations.

FarEye offers straightforward logistics management solutions to 3PL providers, which perform daily fulfillment operations, and 4PL providers, who oversee complex supply chain networks.

FarEye provides 3PLs with enhanced delivery speed and efficiency through:

• The system includes pre-configured connections to order management systems for quick order processing.
• The automation of shipping labels shortens the overall fulfillment period.
• The system enables easy delivery options through its multiple carrier connections, including curbside service, same-day delivery, and time-window delivery.
• The system implements intelligent carrier selection by combining cost, performance, and serviceability metrics.

For 4PLs, FarEye brings visibility and control across the entire logistics network:

• The platform serves as a single interface that allows 4PLs to control and monitor multiple 3PLs and last-mile delivery providers.
• Through real-time performance data, 4PLs can enhance their delivery networks without asset ownership, thanks to FarEye.
• The system offers innovative rate shopping capabilities, along with automatic invoice reconciliation features.
• The system allows quick addition of new carriers to its network.

1. The logistics industry generates substantial emissions, so customers now demand sustainable practices. The industry shift toward electric fleets, eco-friendly packaging, and carbon offset programs is happening among 3PLs and 4PLs to decrease their environmental impact.

2. Small businesses and new market entrants can benefit from 4PL services because these providers deliver essential tools and expertise, as well as local connections, that help companies build efficient logistics operations without incurring initial setup costs.

3. The logistics industry advances through smarter operations, as providers now deliver value-added services that include planning and analytics, as well as real-time monitoring, to help businesses achieve better visibility, coordination, and improved long-term performance.

Choosing between a 3PL and 4PL comes down to your business’s size, complexity, and long-term goals. 3PLs are ideal when you need hands-on support for warehousing and fulfillment. 

At the same time, 4PLs take it a step further by managing your entire logistics network, allowing you to focus on strategy and growth. Both models offer unique advantages, and understanding your current stage in the growth journey is key to selecting the right partner.

How FarEye helps you succeed

• Seamless multi-carrier integration to offer flexible delivery options across regions
• Automated carrier selection and real-time performance monitoring to cut costs and improve speed
• Centralized visibility and control for businesses managing multiple 3PLs or shifting toward a 4PL model

Talk to FarEye and see how their platform can power your next stage of growth.