3PL vs 4PL – What’s the difference? Have you ever wondered about centralizing the business activity? Think of a service that stores your products, manages supply chains, and fulfills orders. It seems like a fairy tale, but it is now 100% fact.

Nowadays, 3rd and 4th party logistics have delivered sellers with expected results. Your supply chain will be smooth and better. But which one should you choose in the 3PL vs 4PL? We have gathered to keep both logistics options in front and compare them. From working mechanisms to business flow, you’ll know each one.

Guess what? We have added the details on which options can be better for you and when. Let’s have a detailed discussion on the 3PL and 4PL.

 

1. 3PL Meaning and Introduction

1) What is 3PL?

3PL is another name for the third-party logistics services. It is an independent company that routes the process of shipping. Third-party logistic services include product storage and shipping to the end consumers.

They operate independently and may or may not have their logistic system. Some companies have direct relationships with the freight forwarders responsible for transporting goods.

 

2) How does a 3PL work?

3PL works as an independent company. However, it manages the products, stores them, and ships them. Here is what and how you can expect from the 3PL logistic services.

• Reception of products. In this process, a 3PL receives products from the suppliers. The aim is to store the products. They also confirm the accuracy of goods.
• Warehousing. It stores the products in different storage locations. Most 3rd party logistics have collaborations with warehouses. Some own the warehouses as well.
• Inventory management. 3PL tracks the levels of inventory in the warehouse. These might include the stocks left and shipped in the meantime. It also keeps a record of order movements.
• Order processing. A 3rd party logistic service also processes the orders. It makes the products ready to ship.
• Shipping. Either a third-party logistics owns the shipping network or arranges the transportation.
• Returns: It also handles the returns from the consumers and manages the products.
• Reporting: Finally, it evaluates all the aspects and reports to the sellers.

 

3) When do you prefer a 3rd party logistics service?

A 3PL can be suitable for most tasks but not all. Therefore, you should consider whether it is a good option or not. Here are a few indications regarding the 3PL service.

• When you have set up a business, it is in the early phase. Then, it would be best if considered under the 3PL.
• Sometimes, you want to control your supply chain and provide customer service. 3PL is again a suitable option in such a case.
• If you have a smaller budget with a low sales volume, 3PL can be a good option.

 

 

2. 4PL Meaning and Introduction

1) What is 4PL?

4PL, or fourth-party logistics, is a complete service offering shipping and strategy making. It can be a one-stop service for businesses, bringing down the warehousing, picking, and packing. They can also help you lay out a new strategy.

Most 4PLs work with the 3PL and fulfill your orders.

 

2) How does a 4PL work?

A 4PL service can offer the following solutions to a business.

 

• Strategy design. 4PL has experts who have years of experience in developing strategies.
• Selection of 3PL. The selection of 3PL is necessary for order fulfillment. Experts use their skills to select third-party logistics.
• Integration. Automate the orders and connect the store to smooth supply chain processes.
• Tech deployment. Advanced technology can feature better results. So, the deployment of tech is a necessary phenomenon.
• Supply Chain Optimization. The 4PL team develops new plans to strengthen the supply chain. And get optimal results.
• Analysis and reporting. Experts look into progress, targets, and goals achieved. They provide a detailed report on such aspects.

3) When do you prefer a 4PL service?

You have learned all about the 4PL, but when it is suitable. When should you consider a 4PL instead of 3PL? This question is of prime importance in every aspect.

Here are a few points regarding your journey with a fourth-party logistic service.

• You are a big company and don’t have time to run your supply chain.
• If you want quick progress, a 4PL can be a good deal.
• If you want to deploy advanced technology, choose 4PL as your crucial player.

 

 

3. 3PL Pros and Cons

Third-party logistics can be a blessing at some points. At other points, you can think of its replacement. Here are a few pros and cons to help you make your decision.

Pros

Third-party logistics has the following points in its favor.

● Scalability

Do you have plans on expanding your growing business? Forget the hassles as most 3PL companies cope with your increasing demands. Moreover, you can select them or replace them for business dealings.

Whether going up or down, believe in the supremacy of the 3PL. It meets your order demands and puts its efforts into your success.

● Efficient Order Fulfillment

The sole focus of third-party logistics is on order management. For instance, you receive an order and request the fulfillment. Shipping service will visit the warehouse. Get the exact product. And ensure a timely delivery to your consumers.

That is how you can better coordinate with the company. Improve your consumer expectations and become the number one choice for them. If you have some suppliers, 3PL can also arrange delivery of products from your suppliers.

● Tracking Facilities

Shipping is not sufficient. Instead, most consumers want a peace of mind. Guess how can you provide it? Nurture them with the tracking facilities. They will know where the orders have reached and when they can receive them.

A 3PL provides all the tracking facilities. (Ensure you are working with a company that supports real-time tracking.) It helps consumers have faith in your facilities and go ahead.

 

● Reduced Costs

There is no need to pay for the additional cost of tech or strategy. A 3PL has quite an efficient technology. Supports the interaction and automates the order. What else do you even want?

With such a facility, you get reduced rates and enjoy higher profit margins for all your orders. Moreover, fast delivery keeps up your consumer morale. Polish your business and stand out among consumers with such first-class service.

 

● International reach

Most sellers, especially on Amazon or Aliexpdsss, are selling products globally. You don’t have to worry about the shipping facilities. A 3PL keeps the promises for international shipping. They help get customs clearance and save you time.

In cross-border shipments, you are safe from the hidden charges as well. Rely on the 3PL for the international deliveries.

Cons

Have you made up your mind for the 3PL? Wait a minute before you rush. Here are a few decision-making points for you.

● Lack of control over products

If you think products are under your control, it will never happen with 3PL. From supplier to warehouse, the shipping service manages all your orders. Even after you receive an order, the team can pick, pack, and ship orders to your products.

In between the supply chain, you can provide consumer service. That is all! If you want control, get your warehouse or hire the warehouse. Ship products by collaboration with shipping companies.

● Risks of damage and late deliveries

Since the whole supply chain is dependent on warehousing and shipping, this is a risk. If you work with an inefficient 3PL, there might be late deliveries. Sometimes, damaged products might reach the consumers.

It might not damage the reputation of a 3PL but yours. Consumer retention rate drops significantly. You can predict a decrease in overall orders as well.

● It can be costly in some cases.

Is your business in the first stage of development? Various issues can erupt at such a point. The first one is the lower turnover of the inventory. If you have stored 100 products in the warehouse and ten sales, it costs you a warehousing fee. Also, you have to pay for the 3PL service fee.

Not always, but in such cases, costs double and raise your financial burden. You have to think creatively at such a point and find positive solutions.

 

 

4. 4PL Pros and Cons

4PL can be advantageous in some cases and disadvantageous in others. Let’s discuss all the cases one by one to make better decisions.

Pros

4PL can be a good choice if you have many consumers and an established business image. Here are a few pros of a 4PL.

● Strategic expertise

Proper strategy uplifts a business. It helps increase the consumer count and improve the business. Now, think for a moment. Do you have that?

If you do not have an effective strategy, leave it to the 4PL service. It already has industry experts who know the 3PL services and warehouses. Focus on your business growth and double your progress with a powerful strategy.

● Seamless supply chain operations

Leave the supply chain to the 4PL experts. They will develop plans, manage your consumers, and offer customer service.

Once you receive an order, their technology will automatically synchronize. They pack products in branded packaging. Ship it to your consumers and leave no stone unturned. A smooth supply chain not only ensures quick growth but also expands your business. Improve your customer experience. Increase their retention rate at your business point.

● Advanced technology

Amazon, Tesla, or OpenAI. Do you know why they are so famous? Their technical expertise is next-level. Even Alibaba is shipping orders thousands of miles away.

Order automation and shipping are 100% crucial for business growth. If you want to grow your business, you can expect the same by deploying the 4PL advanced technology options.

● Better for all types of business

Whether small or large businesses, 4PL is equally effective. At such a point, you need to recognize:

• Sales volume
• Brand image
• Customer experience and the number of orders received.

If you are a small business with large orders, 4PL can be a time-saving choice. But ensure you have plenty of budget to invest in hiring the service. Such services can be expensive for small to medium businesses. If you are an enterprise, manage your orders with a 4PL service efficiently.

● Excellent communication

Communication depends more on the expertise of the 4PL team. Undoubtedly team compromise the experts, yet some lack good communication skills.

You can expect professional tackling of issues. Minimize customer issues and resolve all the problems on time. It is beneficial for your business. Improve the consumer rush and become their favorite business.

 

Cons

 

4PL isn’t a choice for every business. It is because of various cons and controls on the inventory. Here are a few discussed in detail here.

 

● Costly

In the 4PL, you don’t only get the fulfillment. Instead, the team provides your insights on growth. Invests time in designing the best strategy. Moreover, 4PL companies retain the experts who handle all your deals, including customer support.

For such comprehensive services, you are charged big. It can empty up your pockets unless you have a good sales volume and budget to pay their fees.

● Dependent relationship

4PL is your main organizer. From product to shipment, all is under their control. If you are an expert, it is bad news. Even if you want to learn and gain experience, that is not going to happen. You are dependent on the 4PL team and watch how they apply their expertise.

In such a relationship, you can be more fearful of the products.

● Lack of inventory control

As we already highlighted the dependency, you don’t get inventory control. Products get shipped to your consumers without your supervision. Such restrictions can be a big issue for beginners. So, consider the 4PL when you already have a lot of experience. If you are busy enough and have a high sales volume, you can also consider the 4PL.

 

5. Difference Between the 3PL and 4PL?

3PL and 4PL can be an attractive topic. But when deciding on the better one, you might change your decision. We have listed various ways both options differ and help choose the better one.

Take a look!

● Order fulfillment

Order fulfillment refers to the complete process of shipping. From storing products to shipping, lock all options in the box. Let’s check which is better at it.

3PL is about the order fulfillment for the different sellers. A 3rd party logistics company will manage your products in warehouses. Receive shipping requests and finally ship the products. In most cases, you can expect reshelving for your returned products.

Fourth-party logistics is more than the order fulfillment. Along with order fulfillment, you can expect better plans for your following selling process. It also provides solutions to all the issues midway through the supply chain.

● Supply chain optimization

The supply chain is a set of elements involved in the business. For example, you ship products from your suppliers to consumers. All the facets, such as shipping, storage, picking, packing, and finally, delivery. These are the simple yet crucial parts of a supply chain.

Third-party logistics focuses on supply chain optimization. However, it does not implement direct strategies to improve order returns or sales. You can expect better supply chain performance with a 3PL.

Fourth-party logistics has the experts who improvise plans. Offer support to handle consumer problems. And provide a grip over the supply chain operation. You can feel a seamless experience for your supply chain.

 

● Area of focus

What do you want to get for your business? Think about it before you settle the debate between the areas of focus. Some companies need consistent performance, yet they have the tech experts. Others might need to get consistent performance while improving tech.

Third-party logistics have to focus more on the functionality of the supply chain. It has no concerns about whether or how to improve the supply chain operations.

Fourth-party logistics not only concentrates on the supply chain operations but also devises new rules. Riddles out the puzzles and improves the supply chain operations. It can be an additional thing for the companies to deliver the best consumer experience.

 

● Cost and control

Order fulfillment is a separate thing compared to strategy development. What if you get both in one company? That seems incredible, yet you must pay more for their time and service. It is what you can predict at such a point.

3PL offers fulfillment services. The number of orders, delivery speed, and contract terms define the costs. For a growing business, it can be an affordable option. Even if you own a small business, it is still favorable for your business.

4PL offers more than order fulfillment. It deploys paid software. It hires tech experts and provides more than you can get from a 3PL. Therefore, the costs of a 4PL service are more than a 3PL. For small business owners, it may be an expensive option. But for the enterprises and big businesses, it can offer reliable services.

 

● Assets

Assets refer to the availability of the tools at the logistical setups. Not all companies have equal setups and tools. But we will compare them here.

A 3rd party logistics company owns all the transportation tools. You can get the 3PL warehouse locations to build your confidence. Get their trucks and fulfillment center locations in the city. That means expect all the assets at a third-party logistics solution.

On the contrary, a 4PL may or may not have all the facilities. Undoubtedly, they have the experts to handle your order management. Sometimes, they outsource the shipping to 3PL and manage them. However, they own the software and technical tools.

● Customer communication

Do you want to keep your consumer communication on your end? If you have some excellent experts, that is better. In other cases, you can better tackle the customer issues yourself.

A 3PL does not offer customer support. That means you can connect yourself directly to consumers. Listen to their concerns. Provide effective solutions on time.

In contrast, a 4PL most often handles your customer service, too. If the team is efficient, you can anticipate better. Otherwise, the loss is on your side if consumer solutions are not timely.

 

● Technological aspects

Technology can be an excellent addition to any rising business. It helps automate the orders. Plus, companies can skyrocket their consumers’ experience with all the technical facilities.

A 3PL has the basic technology. You can connect your seller stores with them and automate your orders. With warehouse management systems, know the stocks available too.

Compared to 3PL, 4PL is ahead of its time. With advanced technology, mingle up your ideas and design new strategies. Nurture new choices for your business and skyrocket your growth.

 

 

● Which one is a better option?

 

After the whole analysis of 3PL vs 4PL, one thing is for sure. You are still confused about which one is better. We can make it simple to choose. Wondering how? Look at the following scenarios to modify your approach.

• If you’re starting

If you have just started your business, 3PL can be expensive. It is because of low order volume and not much inventory to manage. Try to bring in your own warehouses and storage systems. You can hire the shipping services and ship products. Later, you can choose the 3PL as the business grows.

• If you are growing

In the case of an already growing business, you can invest in third-party logistics. But ensure you have plenty of orders and enough sales volumes to earn sufficient profit margins.

• If you are already an enterprise

Enterprises and established sellers have thousands of orders to tackle. Moreover, they need better strategies to improve their sales volumes. Such companies should consider the 4PL for their business.

 

6. FAQs

1) Is Amazon a 3PL or 4PL?

Amazon Logistics is a 3rd party logistic service. You can consider it a 4PL once it manages A to Z business activities for you.

2) Is 4PL a freight forwarder?

No. A 4PL is more about the experts who pledge to handle:

• Inventory management
• Order fulfillment
• Arrangement of business activities
• Insights over the progress.

Third-party logistics is a freight forwarder. But a 4PL is more than that, offering all services at a single point.

3) Is 3PL better for a beginner company?

If you have started your business, 3PL can be a better option. You can manage your orders while 3rd party logistics handles your products. That will create an immense force to grow your business faster and save your budget significantly.

4) What are the five types of logistics services?

Logistics service structure is necessary to understand. It has five pillars, each with significance at a specific point.

• 1PL is all about shipping products to either consumers, sellers, or a warehouse. Give the address, and they ship!
• 2PL ships products to consumers and fulfills orders.
• 3PL has warehouses and tackles storage and shipping. It can serve as an excellent point to start.
• 4PL manages 3PL and other supply chain aspects.
• 5PL is an all-in-one solution offering all services for the orders to the sellers.

5) When is 4PL better than the 3PL logistics?

3PL isn’t better every time. Instead, 4PL can be a costly yet justified option in the following cases.

• You have plenty of budget to hire a 4PL service.
• Plans on boosting the business growth with the help of experts might need 4PL.
• You don’t have time to manage your business.
• When you have a well-established company

Conclusion

Diving into the logistic network is crucial to growing your business. Accuracy of orders affects consumers’ experience. That is what you are already trying to improve! A 100% consumer experience is a hypothetical scenario, but you can make it happen! Find out the best logistic services like JustChinaIt.

JustChinaIt can handle your supply chain. An integrated network of experts handles warehousing. Provides custom packaging. Delivers products on time. Race at 300 mph speed and beat the competitors right away!