3PL Vs 4PL: Detailed Guide

It can be difficult to decide whether you need a 3PL or 4PL service provider to enhance your business operations. Making the wrong decision can cost you millions, and can negatively impact your customer service.

If you are running an organization, you need to hire a logistics service provider, right?

First of all, you should be aware that neither 3PL or 4PL is better or worse but, when it comes to differentiating between them, we should consider many things. Understanding the difference between them and their unique advantages is crucial to maximizing the efficiency and cost-effectiveness of your supply chain.

Take a look here to know how 3P Vs. 4PL work and the main differences between them.

What Is 3PL?

3PL or Third-Party Logistics refers to the outsourcing of e-commerce logistics processes to a third-party service provider. The services they outsource include inventory management, warehousing, and order fulfillment.

A 3PL company aims to store your inventory for you and also picks & packs, ships your products. 3PL Montreal is a major link between the manufacturing process and customer satisfaction. When your fulfillment process runs smoothly, it makes your customers happy and helps your business to grow. It is right to say that excellent fulfillment is the key to the success of an eCommerce company. This is the reason why the 3PL business model is used most commonly as an outsourced logistics company.

What Is 4PL?

A 4PL is a Fourth-Party Logistics service provider which is an upgraded version of 3PL. It took 3PL to the next level by effectively managing resources, technology, and infrastructure.

A 4PL service provider manages and guides external 3PLs to develop and provide supply chain solutions for minor businesses.

Acting like 4PL, the logistics service provider becomes a true partner of the client and works to develop a profitable supply chain. A 4PL company routinely guides every function of the customer’s supply chain and acts as a single touchpoint for all businesses.

What Are The Differences?

The main difference between a 3PL and a 4PL is the level of responsibility and control. In many cases, it becomes difficult for the companies to choose between 3PL and 4PL logistics to optimize their supply chain. Though, going through this complete guide will help you out with this concern.

3PL or 4PL? Which one is better? And this is the latest topic being discussed between companies for their logistics concerns. We must know that a 4PL handles the totality of a supply chain while 3PL mainly deals with the logistics management process.

Some of the points that differentiate 3PL from 4PL include:

1. Standing in a warehouse full of goods is terrifying. To optimize the storage process in the warehouse, it is very important to analyze how much storage space is used in the warehouse. A warehouse management system is designed to locate items with the sell-by date. It will also lower your inventory holding cost by tracking all packing and shipping points and by giving information about when the product assembly is received.

2. 3PL mainly focuses on daily operations, whereas 4PL focuses on optimization and integration of processes.

3. 4PL generally owns assets like trucks and warehouses, while 3PL does not.

4. 3PL services cost less than 4PL services, as 4PL provides extensive services and manages more activities.

We must be aware of the pros and cons associated with 3PL and 4PL before deciding which one is good to choose. By knowing these, you can figure out which one among them proved to be the best for your business. Here are some pros and cons of using 3PL and 4PL services

Pros & Cons of 3PL

Pros of 3PL

  1. It saves time and money.
  2. It is great for local and international distributions.
  3. It is affordable for small businesses with fast-growing orders.
  4. Furthermore, it also can have control over returns.
  5. Its logistics model is responsive.
  6. It can scale space, and labor according to the inventory needs.

Cons of 3PL

  1. Its control over inventory is less.
  2. It can be expensive if the orders are low.
  3. It is suitable only for small-to-medium businesses generally.
  4. It has less control over order fulfillment and customer service experience.

Pros & Cons of 4PL

Pros of 4PL

  1. It provides advanced and professional operational support.
  2. It effectively outsources all logistics needs of a given business.
  3. It provides a single point of contact for all parties involved in the supply chain.
  4. It gives more sources of ownership and control over the business.
  5. It improves profit margin by creating a cost-effective supply chain.
  6. It allows manufacturers to focus on their products by outsourcing all the logistics to third-party professionals.

Cons of 4PL

  1. It also has minimal control over logistics processes.
  2. It may be costlier for some small businesses and startups.

Since 3PL and 4PL offer many benefits, your choice of logistics model depends on what works best for your business. The TradeSystem rises to the challenge of understanding the customers’ needs. Our 3PL Montreal services provide customized solutions to help you succeed. To learn more about our 3PL or 4PL outsourcing services, contact us today or visit our website!