As demand for faster and more reliable shipping grows, more companies are forced to look for the best ways to get their goods delivered to their destinations in the most efficient ways possible.
This has brought about the rising need for 3PL (third-party logistics) and 4PL (fourth-party logistics).
Now, these are both great options for businesses. They offer efficient, cost-effective ways to deliver goods across each state. But they’re not “perfect.”
3PL may work for one business, but that doesn’t mean it will also work for yours. So how do you choose between 3PL and 4PL? Which one is best for your business?
What is a 3PL?
3PL or third-party logistics provides services such as inventory storage, inventory management, freight forwarding, contract management, picking and packing, and IT solutions. A 3PL provider specializes in services that involve storing or shipping cargo.
For example, you sell silk-printed shirts. You handle the creative work by making the designs, you find the paints, and you handle the silk printing. But you don’t want to process orders and manage the deliveries.
A 3PL provider can handle that for you. They’ll serve as your fulfillment center for your orders and carrier. Some 3PL providers can also handle order fulfillment and haul freight.
Advantages of a 3PL
Efficiency
Logistics professionals allow you to focus more on the important functions of your business. You can focus on core functions by outsourcing your shipping needs instead of worrying about your logistics.
Cost-effectiveness
With your freight, warehousing, and logistics staffing all taken care of, you can save money for future investments to grow your business.
Flexibility
Another great upside to 3PL is the flexibility with supply and distribution resources. For instance, if you are expecting a slow sales month, you don’t need to risk paying for extra inventory space. 3PL providers can easily adjust your needs.
Scalability
Inventory and delivery services are often the biggest concerns for companies experiencing a sudden surge of orders. With 3PL services, that no longer poses a problem, as the company can quickly meet your inventory and freight needs.
Customer satisfaction
Outsourcing your freight services means that packages are delivered in a timely manner, improving customer experience.
Disadvantages of a 3PL
- Incompatibilities with larger businesses
- Limited control over customer interactions
- Little control over order fulfillment
- Limited inventory control
- Vulnerability to external factors (taxes, additional services, weather, etc.) that may cause your costs to skyrocket
What is a 4PL?
4PL or fourth-party logistics is similar to the 3PL service, where they handle parts of the supply chain operations of a business. However, 4PL services cover a wider range of functions. This type of service covers the entire supply chain management and logistics services.
Let’s say you offer a print-on-demand type of business online. You can give up most of the work to 4PL companies. From order processing, fulfillment, warehousing, and freight, a 4PL service provider can handle them and more.
Some great examples of 4PL providers are GoShip, ShipHero, and Shopify.
Advantages of a 4PL
Optimization of your supply chain
From collaborating with your product suppliers to processing and fulfilling orders, 4PL providers can fully take over those roles for you.
Data visibility
Through sophisticated software and data analysis tools, your 4PL provider can provide all the data you need to improve your business.
Increased efficiency
Because everything in your supply chain is automated, you can simply pour your focus and energy into core functions to grow your business.
Cost-effectiveness
You can eliminate overhead costs and wasteful processes by outsourcing your supply chain management and freight needs.
Disadvantages of a 4PL
- Incompatible with start-ups and small businesses
- Limited control over your entire supply chain
- You need to sign a contract for a long-term agreement
- 4PLs can be costly depending on the services you need
Which One Should You Use?
Both 3PL and 4PL bring their respective pros for businesses across the world. So, choosing between the two can be challenging.
But there are some conditions that you can use as a reference if and when you have to choose between a 3PL or 4PL service provider:
3PL
You’re getting overwhelmed
As your business grows, so will the volume of orders you need to fulfill. Small businesses can struggle to catch up to this and get overwhelmed. 3PLs can be a great way to take the load off your shoulders.
You’re getting multiple customer complaints
More orders also mean more customer service. It is easy to send out the wrong orders or even unintentionally ignore a complaint about damages. Outsourcing that aspect using a 3PL can help you avoid increasing the number of dissatisfied customers as you grow your business.
Your inventory costs are increasing
Obsolete inventory can cause your costs to increase significantly. 3PLs can provide you with the analytics and visibility you need to manage the inventory you have in your warehouse.
Your logistics needs are increasing
A surge in orders means that your logistics needs are growing too. Having your own in-house logistics team may not be financially viable, but 3PLs can help answer that need without blowing your company budget.
4 PL
You need help managing your vendors
Managing multiple vendors can eat time away from more important matters directly related to scaling your business. 4PLs can work with your vendors in your stead.
You need help tracking analytics and insights
Data-driven analytics are powerful tools companies of all sizes can use to see where their business excels and where they need to improve. 4PLs use only the best tools and trackers to help gather this data, which makes them a great ally in achieving your business goals.
You have outgrown your 3PL partners
There are many benefits to using 3PL providers. They can be a key factor in growing your business. But 3PL providers can only get you so far. As soon as you have more demand, it would be a better investment to work with companies that can handle bigger demands and help you automate your entire supply-chain process.
Once you recognize each of your business’s needs, the choice between 3PL and 4PL will be a breeze.
Let GoShip Help You with Logistics
Investing in the right logistics partner is one of the key ways you can increase your client retention. A reliable and consistent company can ensure that your cargo is delivered and shipped within your specified dates.
Book with the best LTL shipping companies through GoShip.com. Let us help you handle all your logistics and supply chain management. Take advantage of real-time tracking and top-quality customer service.
Take our 24/7 online LTL freight quote calculator now!