A Beginners Guide to
3PL & 4PL Services
Deciding whether to outsource your supply chain to a logistics company is no easy task. Choosing the wrong solution can actually create more problems than it solves, costing you time, money, and resources.
In this guide we’ll explain the differences between 3PL/4PL solutions and outline how they can help you meet your goals and grow your business.
What is 3PL?
Third party logistics (3PL) solutions involves only outsourcing logistic activities and transportation to a logistics company, while maintaining oversight of their supply chain. While similar to 4PL, 3PL solutions only focus on logistics like inventory storage and management, order fulfillment (eCommerce/Dropshipping), and shipping/distribution. Under a 3PL model, the logistics company will not manage the entire supply chain.
Some of the services provided by a 3PL company include:
- Inventory Storage and Management
- Picking and Packing
- Freight Forwarding
- Customs Brokerage
- Quality Control Inspection
- Amazon FBA/Prep
Pros of 3PL
- Outsourcing logistics allows you to focus on other aspects of business.
- Save time & money by utilizing the 3PL’s expertise & resources.
- Can easily scale space, transportation, and labor depending on your inventory needs.
Cons of 3PL
- Less control over inventory.
- Can be costly if order volume is low.
- Limited control over order fulfillment and ultimately customer experience.
What is 4PL?
Fourth party logistics (4PL) solutions involve outsourcing all logistic activities and entire supply chain management to a logistics company. 4PL companies act more like trusted advisors allowing for a complete view of the supply chain at anytime. This allows 4PL companies to provide insight, recommendations, and strategic value-added services based on your business goals. For example, a clothing company decides to outsource their logistics, warehousing, packaging, and fulfillment to a 4PL company. The 4PL company assumes control of supply chain operations, allowing the clothing company to focus on other parts of their business, like Sales & Marketing.
Some of the services provided by a 4PL company include:
- Value-Added Services: such as kitting, bundling, repacking, dropshipping, & Amazon FBA prep
- Logistics Strategy
- Freight Sourcing/Fulfillment Strategy
- Inventory Planning & Management Assistance
- Inbound, Outbound, & Reverse Logistics Management
Pros of 4PL
- Provides a lean and cost-effective supply chain managed by experienced professionals
- Single point of contact for all involved in supply chain
- Utilizes technology & software to allow complete visibility of your supply chain. Communicate PO’s, invoices, & tracking with ease
Cons of 4PL
- Less control over logistics & operations activities including fulfillment.
- Can be costly investment for small business & start-ups.
Which is best for you? 3PL or 4PL?
If your business is having trouble keeping up with a complex supply chain or struggling to meet customer expectations, you may benefit from 3PL/4PL solution. However, it’s important to understand some key differences between the two before choosing which solution is right for you:
- 4PL manages your entire supply chain, while a 3PL focuses on just the logistics.
- 4PL works on optimizing the supply chain, while a 3PL focuses on day-to-day operations
- 4PL is better for mid-to-large established businesses, while a 3PL works better for small-to-mid businesses looking to grow
- 4PL usually don’t own assets, instead they work with a 3PL to utilize their resources.
- 4PL acts as single point of contact for entire supply chain, while a 3PL may be one of many, depending on which activities are still managed in house.
Ultimately the right choice comes down to the complexity of your supply chain and business’s needs. Small-to-mid sized business looking to grow, or are responding to increasing supply chain demands, will benefit from the support, cost-savings, and flexibility offered by a 3PL solution. While a 4PL solution may be better for mid-to-large established businesses looking to optimize their existing supply chain.
What C2W Distribution Can Do For You
Whichever solution you choose for your business, C2W Distribution can help. We offer both 3PL & 4PL solutions to meet your warehouse, fulfillment, and shipping requirements. By leveraging our state-of-the-art equipment and technology, we’re able to fulfill your business needs while making your supply chain more efficient, reducing costs, and improving customer satisfaction. Leave the logistics to us, while you focus on your core competencies.
Interested in learning more? Contact us today to see what we can do for your supply chain.