If you are a business owner who is looking to improve your company’s logistics by partnering with a fulfillment provider, you have likely encountered the terms ‘3PL’ and ‘4PL.’ It is important to understand the differences between the two types of outsourcing and logistics services so that you can choose the right provider for your enterprise. In this article, you will learn about 3PL and 4PL providers, the key differences between the two, and how to decide what makes the most sense for your business.
What is a 3PL?
3PL stands for third-party logistics providers who manage logistics processes for businesses. 3PLs perform services such as inventory management, warehousing, and fulfillment. 3PLs are able to customize and scale services to meet customers’ strategic needs to transport, store, and fulfill materials or products. Business owners who partner with 3PLs are able to increase their productivity and drive business growth by automating their retail order fulfillment processes.
What are the advantages of 3PL?
- 3PLs provide businesses with valuable experience gained from working with diverse clients across different industries.
- Many 3PLS can offer proprietary tools and technology solutions, like transportation and warehouse management systems, that are highly beneficial to but otherwise unaffordable for businesses.
- Working with a 3PL can allow businesses to lower their logistics costs.
What is a 4PL?
4PL stands for fourth-party logistics providers, who are sometimes referred to as lead logistics providers (LLPs). 4PLs take on many of the same roles and responsibilities as 3PLs, while also managing and delegating aspects of the supply chain. 4PL must oversee the transportation of goods, shipment of orders to end customers, and management of multiple 3PLs. When there are multiple 3PLs within a 4PL’s network, they operate independently and utilize distinct operational systems. Each individual 3PL manages its own security and customer service processes.
What are the advantages of a 4PL?
- 4PLs are well-suited to manage complex business growth objectives like transitioning from a supply chain model to decentralized distribution or forward deployment.
- 4PLs manage relationships with various logistics experts on behalf of the business.
- A 4PL can provide businesses with supply chain insights and initiate improvements.
3PL vs 4PL Key Differences
Let’s compare 3PL vs 4PL so that you can make a more informed decision when choosing a logistics provider for your business.
In a 3PL model, the business maintains managerial oversight. In a 4PL model, the business more trusts the managerial oversight to the 4PL provider.
A 3PL focuses on tasks associated with order fulfillment, including warehousing, picking and packing orders, and shipping packages. A 4PL oversees all of the tasks associated with order fulfillment in addition to managing the whole supply chain. A 4PL handles fulfillment, technology, and transportation. In the 4PL model, the business works directly with the logistics provider to resolve order fulfillment issues as they arise.
Supply Chain Optimization
In the 3PL model, the business can work directly with the provider to develop strategies to optimize fulfillment. In the 4PL model, the logistics provider handles all of the supply chain optimizations.
In the 3PL model, the provider and business are in direct contact. Businesses typically have a dedicated account manager and customer service team who understands each account. In the 4PL model, all of the communication between the business and the 3PLs is filtered through the 4PL. The 4PL acts as the middleman in the communication process.
How To Decide Between 3PL and 4PL Services
If the supply chain surrounding your business is growing increasingly complex and you are struggling to meet customer expectations, an innovative 3PL or 4PL solution may be exactly what you need. But is a 3PL or 4PL better for your business?
If you want to maintain managerial control, work closely with a dedicated account manager and customer service team, collaboratively strategize to improve supply chain operations, and only outsource some of your business, a 3PL may be the best choice for your business.
If you want to outsource logistics oversight, all aspects of order fulfillment, and supply chain operations and you prefer working with a middleman, a 4PL may be the best choice for your business.
No matter what you choose, First Star Logistics is here for you. We are a unique, asset-based global logistics provider with over 60 years of industry-leading experience. We understand that the lifeblood of many businesses is the predictable flow of their products and services. Not only must our customers’ shipments be delivered promptly and accurately, but we must be there for the customer to attend to every shipping detail for them so that they can focus on other aspects of their business without the worries of where their shipment is and when it will arrive. To take the next step with a trusted logistics provider, contact First Star Logistics today.