The choice between a 3PL VS 4PL can be difficult for most people. Both appear to be efficient business strategies, however it’s not easy to decide which one is suitable for your particular product or setup for eCommerce, and making the incorrect choice could have serious implications.
This article provides a thorough review of the 3PL VS 4PL (3rd Party Logistics) and (4th Party Logistics) respectively. It will help you to choose which is best for your business.
Understanding 3PL VS 4PL
You may have run across the terms 3PL (third party logistics) and 4PL (fourth party logistics) while searching at outsourced fulfilment solutions. The two terms (3PL VS 4PL) are sometimes even used interchangeably. Although these two services may initially appear to be very similar, there are some significant differences between them in terms of network capacity, technology, and service levels.
What is 3PL?
Third-party logistics is a supply chain management strategy in which a business relies on an external agent to handle its warehousing, distribution, and fulfilment operations. According to market conditions, third-party logistics companies often concentrate on providing integrated transportation and warehousing services that may be scaled and adapted to fit clients’ needs.
Benefits of 3PLs may go beyond logistics to include value-added services for product manufacturing and delivery.
Advantages of 3PL
- They can save you a lot of money and time.
- They can be used for local and international distributions.
- Even small businesses can afford this service, even if they have high-growth orders.
- Possibility to control returns and customer dissatisfaction.
- Businesses and customers will be less at risk if there is high decentralization.
- Reliable, efficient, and tried-and-trued logistics model.
The service provider does not own the products or goods being shipped. Instead, 3PL companies act as intermediaries between retailers and manufacturers. A 3PL provider may be the best option for your business if your supply chain becomes too complicated or grows too quickly for you to manage internally.
ADS
ADS
Subscribe to our newsletter
Get updates on the latest posts and more from High-pe straight to your inbox.
Disadvantages of 3PL
- Less inventory control
- Low order quantities can make it expensive
- Only for small or medium-sized businesses.
- Although there is limited control over customer experience, fulfilment and satisfaction, but it is more than 4PL.
What is 4PL?
With 4PL, the business not only outsources the administration of its logistical operations to a third party, but also the execution and implementation of those activities. Fourth-party logistics service providers oversee the complete supply chain for their clients.
Due to the fact that the client oversees both the execution and evaluation of the logistics process, the fourth-party role requires that the service provider become intimately involved in the client’s business operations. The majority of the collaboration agreements between 4PLs and their clients are based on long-term objectives rather than cost-driven short-term objectives, and they contain risks and advantages that are shared by both parties.
Advantages of 4PL
- They offer a professional and unique operational support.
- Any business can outsource its logistics needs effectively
- They provide a single point for all parties in the supply chain.
- This gives you a greater sense of ownership and control over the business, so it feels seamless.
- This streamlines and makes it more cost-effective to supply the goods, which results in higher profit margins.
- 3PL outsourcing allows manufacturers to concentrate on their product and business owners, and not on logistics. This allows them to sell, develop, and serve customers.
Companies can reduce inefficiencies in their supply chains and allow them to focus on their products, sales, and company management, rather than the complexity of their supply chain, returns, and any other step.
Disadvantages of 4PL
- From start to finish, there is minimal control over fulfillment and logistics.
- These aren’t the best options for start-ups and may be prohibitively expensive for small businesses.
- If numbers are low, you can expect an increase in overall cost.
- Not a personalised service.
3PL VS 4PL: Key Difference
You need to understand the key differences between 3PL VS 4PL. According to experts, the traditional 3PLs have difficulty keeping up with the rate of ecommerce growth. Speed, adaptability, a variety of warehouse options, and reverse logistics skills are essential for eCommerce fulfilment.
In general, 4PL capabilities are more advanced and adaptable than conventional 3PL. A 4PL’s primary differences are as follows:
- Storage capacity and delivery footprint: A 4PL offers more services than 3PL. A wide range of warehouses and 3PLs are typically part of a 4PL’s network. They can offer greater regional coverage, more diverse shipping, and storage options. For instance, a 4PL network might include warehouses that are experts in Seller Fulfilled Prime, lot tracking, and big and bulky storage, all inside the same network.
- Financial & Operational Scalability. Merchants just pay for the resources they use when they need them while using “on-demand” 4PLs. Contracts and service agreements are very flexible making them a highly scalable solution. With 3PLs, merchants typically have to follow by long-term contracts with more strict requirements for the amount of daily orders and storage space granted.
- Professional assistance. Leading 4PLs today will provide client support that goes beyond the basics. They give business owners strategic recommendations on inventory, distribution, and management. As opposed to this, a standard 3PL’s help is typically restricted to dealing with routine questions and operational problems.
- Integrated Technology. In order to give merchants visibility into order receipt, fulfilment, and delivery statuses across all of their facilities, 4PLs frequently use a cloud-based Warehouse Management Solution (WMS). For automated reporting, a WMS should also link with e-commerce systems like Shopify or WooCommerce and ERPs like Oracle or SAP. Rarely do 3PLs offer this kind of technological component.
Conclusion of 3PL VS 4PL
While a 4PL can offer you many advantages, your choice of logistics model is largely determined by:
- Your existing business model.
- The projected growth and size of the company.
- How much you can afford.
- Current infrastructure and where you’re located.
- Volume of sales
- Numerous SKUs and product line numbers
- Your products’ value
- It doesn’t matter if your product is a special item.
- There are many other factors.
The choice of logistics model is ultimately up to your business. You can decide whether 4PL or 3PL services work best for you.
3PL companies can provide you with a stress-free, low-cost service that will keep you and your customers satisfied. It can be hard to find a reliable 3PL.
FAQs
What are the 4 types of Logistics Services?
It can be confusing to understand the terms used for different logistics companies, services or consultants.
It is easiest to comprehend the four types of logistics services by remembering that the number increases.
- 1PL (first-party logistic) providers transport goods and products from one place to the next.
- A 2PL (second-party logistic) provider owns the transport means and distributes products to their customers.
- Third-party logistics provider (3PL) manages fulfillment from warehousing through shipping.
- The 4PL (fourth party logistics) provider manages the 3PL on behalf of the customer and other aspects in the supply chain.
What does 3PL stands for?
3PL stands for Third-party logistics and is a supply chain management strategy in which a business relies on an external agent to handle its warehousing, distribution, and fulfilment operations. According to market conditions, third-party logistics companies often concentrate on providing integrated transportation and warehousing services that may be scaled and adapted to fit clients’ needs.
What does 4PL stands for?
4PL stands for Fourth Party Logistics. With 4PL, the business not only outsources the administration of its logistical operations to a third party, but also the execution and implementation of those activities. Fourth-party logistics service providers oversee the complete supply chain for their clients.
What Services does 4PL offer?
A 4PL arranges and manages the entire supply chain, including the relationship with a 3PL. Fourth-party logistics service providers oversee the complete supply chain for their clients.
