Supply chain management is the biggest make-or-break aspect of running any e-commerce business. So, if you want to be competitive, you need to have a streamlined SCM and consider choosing the best partner.
While many businesses are aware of 3PL or third-party logistics, they aren’t mindful of 4PL or fourth-party Logistics. So what is 4PL, and how is it different from 3PL? Which one should you, as an e-commerce seller, choose?
To answer these questions, this article has discussed 3PL vs 4PL in depth. So, without further ado, let’s begin.
What is a 3PL?
Most 3PL companies are specialists in managing logistics for an e-commerce business, such as sellers setting up shop on Shopify. These 3PL partners are responsible for procuring, packing, managing, and dispatching their orders. In other cases, they can be an agent between you and the dispatcher, like DHL. Following are a few responsibilities that fall under a 3PL company.
- They manage and coordinate with stakeholders to ensure products are procured and delivered to the right customer at the right time.
- Efficiency and cost savings are their clients’ biggest concerns, and they are actively working to improve by scouting such opportunities.
- They are masters at proper communication and provide a streamlined dashboard for the seller to participate in the whole process.
What is a 4PL?
A 4PL partner goes above and beyond what a 3PL company does and provides them with end-to-end solutions such as:
- Overseeing a 3PL company
- Makes sure the entire logistic and supply chain process is working smoothly
- Checking if the operations are optimized
- Make and integrate technologies that can give you an overview of the whole process right down to each minute detail
3PL vs 4Pl: What are the Differences?
If you are a business, you must know the difference between 3PL vs 4PL. You don’t want to confuse what are the differences and get muddled between what they do. Here is a comparison table that shows some of these objectives each 3PL vs 4PL needs to focus on:
| Process/Task | 3PLs | 4PLs |
| Fulfilling Orders | They are responsible for just the physical handling of goods. | Responsible for the entire logistics process, even monitoring, managing, and coordinating 3PLs. |
| Optimization of Supply Chain | Optimization of Supply Chain | You may need to develop comprehensive strategies for the supply chain. |
| Communications | Any 3PL will only look out for their tasks. | A 4PL company is the focal point of communication for all the stakeholders involved in supply chain activities. |
| Focus Area | They are looking after procuring, storing, packing, delivery, and fulfillment. | Prime companies if you want end-to-end solutions for any part of your supply chain. |
| Resources | Most 3PL companies will have their own warehouses and delivery or pickup trucks. | Even though they can have physical assets, their core power is their capability to manage the process strategically. |
| Relationships | Efficient execution, transactional, agreed-upon tasks. | Long-time partnerships, client-oriented, 3PL managers. |
How Does the 4PL Process Differ from 3PL?
While the table above provides an overview of 3PL vs 4PL, it is worth reading to understand each process more in detail.
The Working Process of a 3PL Company
- Inventory Input: The company procures inventory from the manufacturer and enters the inventory after checking.
- Warehouse Management: They then streamline the inventory management so that the packers and dispatchers efficiently find and work their part.
- Inventory Management: They need to track the available inventory, the ins and outs of the inventory stock, and enter and maintain each order coming in and going out.
- Processing Order: Processing orders, whether digitally or physically, is paramount so that shipping can begin as early as possible.
- Shipping: Make sure the carrier or their trucks know when to pick up what packages and drop where and at what time.
- Returns and Rejections: Be ready to accept and process returns, issue tickets for refunds, keep these orders in the warehouse, or send them back to the manufacturer.
The Working Process of a 4PL Company
- Developing the Strategy: Each time the logistic requirements change, 4PL optimizes the supply chain by tailoring the strategy.
- Source Selection: You need to be able to select the best sources to make all the operations as efficient as possible.
- Synchronize and Oversee: A 4PL ensures these aspects are taken care of on all the logistical activities, regardless of the number of sources.
- Implementing Tech Assets: Making the system as efficient as possible, which includes real-time visibility and deploying them to get better analytics.
- Optimizing Supply Chain: Create a feedback loop that helps improve all logistics processes. Then, identify which aspects are causing bottlenecks and rectify them.
- KPIs: Improving key performance indicators (KPIs) can yield data-driven results and insights, which are essential in making good, calculated decisions.
- Innovate by Collaboration: Improve working relationships with stakeholders, especially logistic partners, so that dedication is key. This collaboration helps create innovation in the supply chain.
Which One Should I Choose? 3PL or 4PL?
There are a few factors that need to be considered when choosing which 3PL vs 4PL is best for your business. Understanding these factors will help you achieve efficiency in your supply chain. Please read these carefully to gain the best knowledge and choose one of these for your business.
The Size of Your Business
The bigger the business, the more complex it becomes to manage. So, the smaller the business, the better it is to partner with a 3PL company.
If your business has grown to the enterprise level, it is better to choose a 4PL as they offer more comprehensive management.
The Amount of Control You Want
With a 3PL company, you have more control and will be directly involved in managing the supply chain.
When you consider a 4PL partner, you choose them because you want to delegate all the logistical activities and operations to them.
The Scalability of Your Business
You choose a 3PL partner if your business is growing rapidly and you need assistance, but it is not at the enterprise level.
A 4PL company is better when you want solutions and comprehensive management for your supply chain. This management can be for a single 3PL or multiple ones at the same time.
The Costs Incurred
Consider your budget at every level of growth for your business. As a small business, a 3Pl is better suited for you to minimize overheads.
If your business has grown so much that it is difficult to manage now, then you need 4PL. Unfortunately, they come with a premium cost because they are experts at what they do without requiring your input.
Technology Integration
One reason why 3PL vs 4PL tips in the scale of 4PL is that they have more impact with their integration optimization when it comes to supply chain management. Furthermore, the control that they provide their customers is also non-negligible. So go for them if you want a more robust system when it comes to tech integration.
Geo Reach
Many 3PLs have upped their game due to competition and increased reliance on technology, so there isn’t much difference now when it comes to Geo reach. With global warehousing being easily accessible and integrated, you can choose both and still easily benefit.
The Best 3PL Fulfillment Provider for SMEs
If you are looking for the best fulfillment provider when we discuss 3PL vs 4PL, NextSmartShip is the recommendation. They started as a marketing firm catering to China and the world, and now they have become an experienced logistic powerhouse for small and medium businesses.
With the price of 3PL, they now provide a lot more services, making them a sweet combination of 3PL vs 4PL. Their prime services include e-commerce and crowdfunding fulfillment, FBA Prep, and tons of shipping channels and partners with their global reach.
So, if you want the best automated fulfillment and the best cost, get the latest expert quotation today and see the difference.
Conclusion
We discussed in detail here 3PL vs 4PL, which does which, and which to choose for your business. The major difference is that 4PL provides a lot more services but comes at a hefty premium that many small and medium-sized companies and enterprises cannot afford. So why not go with an experienced 3PL company that does more at an affordable price that others cannot compete with?
Please contact an expert from NextSmartShip today to get the best recommendation and solution for your business, and let it start!
