The COVID-19 pandemic has forever altered shopping behaviors and how consumers’ online shopping habits. Reports show that more than half of consumers now shop online more frequently than they did before the pandemic, accelerating eCommerce a decade.
For brands to succeed, they need to meet customers where they are; online. Suppose you’ve seen your brand scale online. In that case, you may be searching for a new outside partner to help with your supply chain, weighing the differences between a third-party logistics (3PL) provider and a fourth-party logistics (4PL) provider.
We’re here to help you learn about each of these logistics models.
What is 3PL?
A third-party logistics model manages and supervises part or all of the supply chain, from distribution, warehousing, and fulfillment. A 3PL can handle everything, including:
- Picking and packing
- Inventory forecasting
- Order fulfillment
- Freight forwarding
The advantages of using a 3PL provider allow you to focus on other critical aspects of your business like product development, sales, marketing, and overall growth. In contrast, the 3PL provider handles their transportation and logistics needs. What other benefits does choose a 3PL provider offer?
- 3PL providers can leverage lower, more competitive shipping rates
- The ability to scale services up and down as needed in a cost-effective manner
- Offering better customer experiences, including expedited shipping,
- A chance to expand and reach broader markets
- Lowered risk of shipping delays and other unforeseen circumstances
- Cost savings in the warehouse through inventory management, forecasting, and more optimized inventory levels
What is 4PL?
How does fourth-party logistics vary from 3PL? A 4PL provider also referred to as a lead logistics provider or an LLP, takes all the same services offered by a 3PL provider and ramps up their offerings by managing resources, technology, infrastructure, and even handling external 3PLs to build fully-formed supply chain solutions. A 4PL provider is a single point of contact for logistics, warehouse management, consulting, and planning.
Besides the services offered by a 3PL provider, 4PL services include:
- Logistics strategy
- Analytics of spending on transportation, analysis, capacity utilization, and carrier performance
- Consulting and planning
- Inventory planning
- Weighing various logistics models
- Coordinating a broader retail supplier base
- Managing reverse logistics, returns, and refurbishment
Essentially, a fourth-party logistics provider is an independent party that’s accountable for integrating and assembling resources, technology, and services within their organization and with external services and organizations from a single interface, all aspects of the supply chain.
A 4PL provider helps by taking over the entire logistics process for your business and offers consultation to help you achieve strategic goals in tandem with their ongoing operational support services. They can help you avoid costly mistakes, develop a successful recurring revenue business strategy, and find ways to improve your business processes from end-to-end.
The Key Differences Between 3PL and 4PL
When examining the significant differences between 3PL and 4PL providers, there’s no clear-cut definition of the differences between them. In general, a 4PL offers more services than a 3PL. What is one of the services you might expect from a 4PL? Reverse logistics. Many 3PLs don’t have the resources to handle reverse logistics.
eCommerce businesses or subscription services where returns are necessary and consistent turn to 4PLs. Some—but not all—3PLs can handle reverse logistics.
What are some of the overall differences?
Online retailers will choose 3PL for transportation, warehousing, and distribution. At the same time, they may select a 4PL to fully manage all supply chain operations, including carriers, warehouses, and reverse logistics, among other consulting services, for full end-to-end support.
Which One Should You Choose?
Which type of logistics provider is right for you—the third-party logistics provider or the fourth-party provider? It depends on what level of service you require.
Are you looking to pick and choose from a select menu of services? You can select different 3PLs to handle each step in your supply and logistics chain for warehousing, shipping and transportation, and distribution. This is also a strong choice for smaller companies who need support but aren’t ready to invest in more hands-on support from a 4PL provider.
If you are looking for more internal management and a single interface in dealing with multiple service providers across the entire supply chain, as well as ongoing support from a trusted advisor and a complete reverse logistics service, the most robust option for you is a 4PL.
Do you need a logistics provider that understands your industry, such as healthcare or subscription boxes? What about a provider that can scale if your business experiences large seasonal swings? These are all critical questions to ask before you choose a 3PL or 4PL provider.
Some 3PLs offer more than others and will provide more analytics support than others, managing things like your customer to understand better how you’re performing and pinpoint growth opportunities. It truly all depends on what you’re looking for.
How Expak Can Help
Not all supply chain solutions are the same. With modern, technology-first solutions, ongoing analytics, and individualized customer service at scale, Expak’s modern solutions offer all the services you need to provide exceptional customer care to retain customers for a long, long time. We’re small enough to care, yet large enough to scale with your business. We’ll continue making improvements in technology and customize to your needs, rather than asking you to bend to meet our systems.
You need a smart solution that will free you up to focus on building the business you’ve always imagined.