25 Nov 3PL Vs. 4PL Guide
The two terms ‘3PL’ and ‘4PL’ relate, but there are some differences. Each operational model has its own advantage over the other. Therefore, as a merchant, you have to understand both before deciding on the best option to utilize. This post evaluates the significant differences between the two terms, so read till the end to decide on the one that will best suit your business.
What is a 4PL?
The term 4PL stands for fourth-party logistics providers. Another name used to refer to 4PL is lead logistics providers (LLPs). 4PL is a logistics company that performs the functions of third-party logistics and performs additional functions such as having more responsibility and accountability in the process.
A 4PL manages parts of the supply such as transportation of goods, shipping orders to buyers, and managing multiple 3PLs. Please note that each 3PL managed by a 4PL operates independently and sets its own security and customer service standards.
Differences between a 3PL vs. a 4PL
For a 3PL, it will focus more on order fulfillment by conducting activities such as packing and picking orders, shipping orders, and warehousing. However, a 4PL has a more prominent role which entails managing the entire supply chain. A 4PL mainly conducts activities such as fulfillment, technology, and transportation. Usually, merchants work directly with a 4PL when there are any issues with the supply chain.
Supply chain optimization
For a 3PL, the merchants can partner with it to optimize fulfillment. A 3PL company can usually partner with merchants to decide which fulfillment center locations they can store inventory based on the location of their customers. Please note that this is not possible for a merchant working with a 4PL.
A 3PL uses a warehouse management system (WMS) to manage these fulfillment center locations. The 3PL can grant the merchant access to the data, so the merchant can make better decisions. Also, the 3PL has access to real-time inventory levels, which merchants can use to track and view from a single dashboard.
Please note that if the merchant uses a 4PL as the main point of contact, the merchant may experience delays in resolving some issues. The 4PL first has to gather the information needed from the different 3PLs.
However, if the merchant deals directly with a 3PL, it is easier for the merchant to solve the issues at hand faster. With a 3PL partner, the merchant can access a better customer service team (some 3PLs can even offer a dedicated account manager). As a result, the merchant enjoys a seamless service.
It doesn’t matter what size of your company is; you may opt between these two options. A 4PL performs more tasks, but most people prefer a 3PL because it is easier to work with and offers better services in terms of communication and resolving issues within the supply chain.
If you choose the right 3PL partner, you can enjoy an optimized supply chain that helps you make better business decisions.