3PL, 4PL or LLP

In a recent post we discussed transportation carrier types and how they might fit into your supply chain strategy. Another strategic decision is how you manage warehouse/distribution operations. Is your organization competent enough to efficiently manage your own warehouse or should you outsource to another organization (3PL). If you do manage your own operations and become really, really good at it, should your company form another company/division to provide logistics services to others (LLP). Finally, if you do outsource to 3PLs and you have multiple 3PLs in your network, should you contract with another third party to manage your 3PLs (4PL)?

3PL 4PL LLP

Understanding these terms and concepts are extremely relevant to professionals in the era of the extended supply chain. A 2013 survey from PricewaterhouseCoopers, ‘Next-Generation Supply Chains: Efficient, fast and tailored’ found the highest percent of outsourced supply chain activities involve the Deliver process of the SCOR Framework, specifically inbound and outbound logistics.

The APICS Dictionary, 15th edition, defines

third-party logistics (3PL) as:

‘A buyer and supplier team with a third party that provides product delivery services.’

fourth-party logistics (4PL) as:

 ‘4PL differs from 3PL by:

  1. 4PL is often a separate entity
  2. 4PL is a client interface
  3. 4PL provide management services
  4. 3PL can offer 4PL services.’

Lead logistics provider (LLP) as:

 ‘Organizations that oversee the third-party logistics operations of their clients.’

In my professional opinion, there is a very, very thin line (almost invisible) between and LLP and a 4PL. An LLP strategy is generally an evolution of a great collaborative relationship a company has with their 3PL, Penske Logistics Named as Lead Logistics Provider by Whirlpool. Depending on the marketing literature you read, 4PL and LLP are one in the same. Another tell of the blurring boundary between 4PL and LLP is the trademark of the term 4PL. In 1996, Accenture, a global consultancy (and my former employer) trade marked the term 4PL but has since let the trademark lapse.

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