3PL vs 4PL and when a seller needs each

A 3PL (third-party logistics provider) runs your fulfillment. It stores your inventory, picks and packs your orders, and hands them to carriers. 

A 4PL (fourth-party logistics provider) runs your logistics network: it chooses, contracts, and coordinates the 3PLs, carriers, and freight forwarders on your behalf, and it usually owns no warehouses or trucks of its own.

The 3PL vs 4PL decision comes down to how many providers and countries your inventory passes through, and whether you want someone outside the business choosing and managing them. A large seller shipping through one 3PL in one country gives a 4PL less to manage than a smaller seller with providers in several.

3PL vs 4PL at a glance

The most important row is who chooses the providers. With a 3PL, you choose which 3PL to use and stay responsible for how it works with your other locations and sales channels. With a 4PL, those vendor and supply chain decisions typically move to the 4PL.

Where a 3PL’s job ends

The decisions around that work stay with you. You still decide how much inventory to send the 3PL, and its inventory counts and tracking numbers still have to get back to every channel you sell on. With one 3PL, that’s one set of handoffs.

Add a second 3PL, or use FBA (Fulfillment by Amazon) alongside your own warehouse, and the handoffs multiply. You have to split inventory between locations, and every incoming order needs a location assigned before it ships.

Our guides to when an ecommerce business needs a 3PL and how much a 3PL costs cover the signs it’s time to outsource fulfillment and what a 3PL charges.

What 4PL logistics adds

Accenture introduced the 4PL concept in 1996 and described the provider as a “supply chain integrator that assembles and manages the resources, capabilities, and technology.” Accenture’s original framing treated being non-asset-based as fundamental, so the 4PL could choose partners neutrally. 

Hiring a 4PL means its team chooses and contracts your 3PLs and carriers, lines up inbound freight with outbound fulfillment, and reports on the whole network. You get one party accountable for delivery across every provider. In return, the 4PL makes the provider decisions, and it charges a management fee on top of what those providers already charge. If your team wants to pick its own 3PLs, a 4PL won’t work for you. If nobody on your team has time to manage them, a 4PL can. 

Check who owns the 4PL before you sign. Some large 3PLs and freight forwarders run 4PL divisions of their own. A 4PL tied to a provider loses some of the neutrality the model was built on. Ask how often it places clients with providers outside its parent company.

When a 3PL is enough

A 3PL, or a few of them, is enough when your constraint is warehouse capacity rather than coordinating the companies around the warehouse. If you’re short on warehouse space, warehouse staff, or room for peak volume, and most outbound orders are packages to consumers, a 3PL adds that capacity directly.

The other condition is that your team can handle the coordination itself. Your team or your suppliers can book inbound freight without a forwarder lining up several legs, and someone has time to review each 3PL’s invoices, service levels, and inventory counts. If both are true, a 4PL would charge you to coordinate work your team already does.

Signs you need a 4PL

Inbound Logistics lists five factors to weigh when choosing between a 3PL and a 4PL. The first is company size and logistics volume, since large businesses with high order volumes may need end-to-end control and strategic support. Volume alone gives a 4PL little to manage, though. It counts alongside the other four factors, which describe how complicated the operation is and who has the people and systems to run it.

Supply chain complexity covers global sourcing, multiple vendors, and compliance requirements, which call for someone to manage the whole chain. Budget and internal resources point toward a 4PL when there’s no in-house logistics expertise or system to run the network. Companies that want centralized oversight, a single point of control across vendors and channels, tend to lean toward a 4PL. So do businesses that need technology integration, where a 4PL connects tracking and forecasting tools into one system.

The part that remains yours

Part of technology integration stays with you whichever model you choose. A 4PL connects tracking and forecasting tools across its providers, but your marketplace accounts, listings, and channel inventory counts remain yours. Getting orders from every channel into one queue, and keeping inventory counts matched across every location, is software you run. Each order still has to travel from the channel to the right location and back:

1. An order comes in on Amazon, eBay, or your own store and lands in one order queue.
2. A rule picks the fulfillment location based on criteria you set, such as destination, SKU (stock keeping unit), or channel.
3. The order goes to that location, whether it’s your own warehouse, FBA, or a 3PL.
4. The location ships it and sends the tracking number back.
5. The channel receives the tracking number, and the inventory change reaches every other channel that lists that SKU.

When those steps run automatically, adding a second or third 3PL becomes a contract decision instead of a new manual workload. What software can’t do is negotiate freight, book ocean containers, or decide where your next warehouse should go. That work belongs to a 4PL or to a logistics lead on your own team.

How Linnworks connects 3PLs and sales channels

Linnworks order management automates the route from channel to fulfillment location and back. It sits between your sales channels and every location that ships for you, so orders, inventory changes, and tracking numbers move between them without anyone re-keying them.

• Routing: The Rules Engine can send each order to your own warehouse, Amazon FBA, or a 3PL based on criteria you define, including channel, destination, and SKU.
• 3PL connections: The CIRRO Fulfillment integration syncs orders every 15 minutes, tracks inventory by location in both systems, and sends tracking numbers back. ShipBob and other 3PL integrations are listed in the integration directory.
• Split shipments: When an order’s items ship from different locations, the order can be split so each location gets its share.
• Tracking to channels: When a 3PL or FBA confirms shipment, the tracking number is logged and sent to the channel the order came from.

Before you make a decision

List every location that ships for you, who decides which orders go to each one, and how each tracking number gets back to the channel. 

Then mark where the work breaks down. 

Shortfalls in warehouse space or warehouse staff point to a 3PL. Not having the people to manage providers across countries points to a 4PL. If orders, inventory counts, or tracking numbers don’t move cleanly between your channels and locations, that’s a systems fix, and the first quarter, once peak is over, is the time to make it. See how Linnworks routes orders across your warehouse, FBA, and 3PLs. Book a demo.

FAQs

Is a lead logistics provider the same as a 4PL?

Usually, yes. DSV, for one, sells its 4PL logistics service as lead logistics, and Logistics Manager notes the model is also called managed supply chain operations.

Is Amazon FBA a 3PL or a 4PL?

Functionally, a 3PL. Amazon stores your inventory and picks, packs, and ships the orders, but it doesn’t choose or manage other providers on your behalf. Our guide to when an ecommerce business needs a 3PL compares FBA with independent 3PLs.

Does a 4PL cost more than a 3PL?

In fees, yes. You pay the 3PLs and carriers either way, and a 4PL adds its management fee on top. Whether the fee is worth it depends on the staff time it saves you, and Red Stag Fulfillment notes that a business needs enough sales volume for a 4PL’s savings to outweigh its cost.

What is a 5PL?

A provider a level above a 4PL, though the term is used loosely. Red Stag Fulfillment describes a 5PL as one that pools the shipping needs of several 3PLs to negotiate better carrier rates.