A fourth party logistics company is a Third Party Logistics Company that offers additional services such as inventory purchasing and financing on behalf of its customers for a fee.
These additional services require a lot of expertise and is an involved process. There are only a handful of 3PL companies out there that offer. 4PL Companies are typically asset-based investing heavily in technology.
Why would you need a fourth party logistics provider?
One of the obvious reasons is that you as a company work with several 3PL companies that handle your logistics solutions where you have developed a good relationship with and would like to continue working with them however; it has become time consuming to manage all of them. This is where a 4PL Provider comes in.
A fourth party logistics provider can manage your 3pl companies so that you can focus on your core competencies. A 4PL company can streamline the process and make sure that you get the full benefits of your 3PL Providers. A 4PL will make sure that your 3PL’s work for you.
Having several “Third Party logistics providers” work for you is by no means a bad idea, the reason being is that some 3PL’s might not offer certain services such as International Freight Forwarding Services, others might not have a location in a new market you are expanding to. This is why you might have a few 3PL’s working for you. A 4Pl company will coordinate the interaction between these companies.
One of the other reasons to deal with a 4PL company is Inventory Purchasing and Financing. Some companies do not want to deal with the headache of buying the inventory, storing it and handling the distribution, other companies just do not have the experience necessary to handle such tasks. These companies turn over the whole function to a 4Pl company for a fee.
Usually, the 4Pl company will assume control of the production, shipping and order fulfillment. In this case the 3Pl will deliver 3 Pl services such as Freight Forwarding and Order fulfillment in addition to the inventory purchasing and control.