Have you considered distributing your product yourself? This can come with plenty of benefits, including enhanced control and better customer management.
However, to achieve these benefits, you need experienced logistics professionals like 3PL and 4PL on your side.
What does 3PL vs 4PL mean? Take a look at this brief guide to learn more about 3PL vs 4PL.
Service Level
The main difference between a 3PL and a 4PL lies in the nature of the services they offer. Primarily, a 3PL is an outsourced logistics provider, while a 4PL serves as an outsourced supply chain organization.
A 3PL can work with businesses to improve service levels. A 4PL, on the other hand, is more narrowly focused on integrated services that link customers’ end-to-end supply chains. These services can include:
- inventory management
- storage
- transportation
- package fulfillment
- order management
- customs compliance
4PLs are typically considered third-party integrators that coordinate and manage multiple service providers to offer seamless logistics services. As such, the service levels offered by a 4PL can be far more dynamic and comprehensive than a 3PL.
Responsibility
3PL is responsible for the organization and execution of all logistic operations. This includes facilitating the direct movement of goods and making sure everything is done:
- correctly
- on time
- for the best cost
On the other hand, 4PL tends to be more strategic. 4PLs take responsibility for the overall supply chain, looking at the big picture instead of just focusing on individual transactions.
They look at the entire process, from storage, inventory management, and order processing, to shipping and delivery. 4PLs design and build the whole network while also creating innovative solutions for real-world logistical operations.
Outsourcing
3PL services, also known as 3PL (third-party logistics), are contracted by a company to organize supply-chain activities, including:
- packing
- shipping
- tracking
4PL services are provided by a company to manage and coordinate third – and fourth-party logistics services to achieve the customer’s logistics objectives. In addition to organizing and managing supply-chain activities, 4PL providers act as a single point of contact to enhance communication. This helps to ensure efficiency when dealing with multiple service providers.
Cost-Effectiveness
The difference between 3PL and 4PL is the capability of a 4PL, with its higher technology and resources, to provide integrated logistics management that can be tailored to a company’s specific needs. This is often viewed as the most cost-effective solution. This is because 4PLs have access to a larger pool of resources to drive down the cost of logistics to customers.
Additionally, 4PLs bring a level of expertise to the client’s operations. This of which is often lacking in 3PLs which adds extra value for money in the form of:
- operational insights
- technological innovations
- partnerships with leading industry players
The larger scale and advanced technology capabilities of 4PLs give them the capability to provide sophisticated supply chain analysis and to create visibility throughout the supply chain. This allows a company to measure and track the cost of services rendered more effectively by the Logistics Company.
Level of Importance
The level of importance of either a 3PL or a 4PL can vary greatly. This depends on the requirements of an organization. 3PL provides warehousing and transportation services. 4PL brings together and oversees multiple logistics services to provide an integrated service solution.
4PL is less about fulfilling services and creating an integrated and managed third-party logistics supplier pool, and more about creating sustainable competitive advantage through a greater level of optimization and control across all touch points. 4PL can be incredibly important to an organization that is looking to gain a strategic advantage in terms of the following:
- scalability
- cost efficiency
- risk management
3PL can still play a role in the supply chain, but 4PL is taking over as the most important and impactful level of importance when it comes to shipping, logistics, and overall effective supply chain management.
Technology
3PL is a traditional form of supply chain management, where the company provides its own infrastructure and services in-house to move goods from one place to another. 3PL companies tend to emphasize asset control and are generally more cost-effective. However, they lack the flexibility to outsource or allocate resources according to their needs.
4PL is a relatively new approach that employs the use of technology for end-to-end supply chain management. 4PL brings in the use of digital solutions and technology to facilitate collaboration and coordination between multiple players in the supply chain.
This allows a higher degree of scalability, automation, and, most importantly, improved visibility into the flow of goods. 4PL leverages the use of IOT, Big Data, and Robotics to move goods faster and in a more cost-effective manner.
Risk Management
3PL and 4PL involve the process of moving goods and can both be used in risk management. In terms of risk management, 4PL providers usually have a more holistic approach to planning and executing the supply chain process. This can result in better evaluation of risk factors and better management of risks.
Learn About the Differences Between 3PL vs 4PL
The decision on whether to utilize a 3PL or 4PL logistics provider is a highly personal one, as each business and freight solution is unique. Each organization should assess the needs and budget of their business before selecting a Logistics Partner.
Speak to either a 3pl vs 4pl to explore your options and find the best-fit logistics solutions for a smoother supply chain in the future.
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