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3PL vs 4PL: A Complete Comparison

Weighing in on the 3PL vs 4PL debate can be tough and confusing for many people. What do these terms mean? And which option is the right one...
Fulfillment And Distribution
October 24, 2019

Weighing in on the 3PL vs 4PL debate can be tough and confusing for many people. What do these terms mean? And which option is the right one for you and your needs? It’s understandable to give considerable thought to this decision. Making the wrong choice can turn out to be costly and have some significant consequences.

In short, a 3PL provider will directly handle the transportation and logistics of goods, while a 4PL company oversees the various 3PL’s that a business works with. Choosing to work with a 3PL or 4PL will come down to the unique situation and needs that a business has. 

In the article below, we provide a complete comparison of 3PL’s and 4PL’s. In our comparison, we give an in-depth look at both to help you decide which is best for your business.

What Do 3PL Companies Do?What Do 3PL Companies Do

3PL stands for Third Party Logistics, but what do these companies actually do? These companies take care of outsourced transportation and logistics operations for a client company. However, the client company always maintains control. 3PL companies differ in terms of the level and variety of services that they offer. The level of outsourcing can vary depending on the client’s needs and the services offered by the 3PL company. Many 3PL’s are asset based, which means that they directly manage some or all of the resources used to perform the services.

Using 3PL companies is one way in which businesses can start to tap into external expertise in the transportation industry that can benefit them. By doing this at each stage of the logistics process and ensuring the right things are being done in-house and the right things are being outsourced, businesses can strengthen their operations. Here are some of the things 3PL companies generally manage:

  1. Transportation
  2. Distribution
  3. Fulfillment Services 
  4. Warehousing/Inventory Management

What is a 4PL Logistics Company?What Is A 4PL Logistics Company

4PL or Fourth Party Logistics companies differ from 3PL options in how they provide the management of their services too. When working with a 4PL provider, the client doesn’t retain as much oversight over the outsourced operations and instead allow the services to be managed by the 4PL company. 4PL’s are commonly used when a client doesn’t have an employee on staff that oversees transportation and logistics operations.

The 4PL company, therefore, has to have comprehensive access to its clients business operations and inner workings. After all, they’re taking care of all the logistical needs as well as oversight and management. To do that adequately and successfully, they need access to the business’s activities and the potential for intense involvement in the business and how it operates. Without that, problems and confusions will undoubtedly arise. 

The enterprise’s entire supply chain might be managed by the 4PL. The best 4PL companies will offer strategic insight that the client can benefit from. In this sense, a 4PL provider can take on a more consultative approach than a 3PL although many 3PL’s can provide this aspect as well. In short, hiring a 4PL company is about outsourcing your entire logistics operations and everything they go with them. If that’s what your business needs, it might make sense to choose a 4PL company but we’ll talk more about the advantages and disadvantages of each option below so you can decide which is right for your business.

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3PL and 4PL Advantages and Disadvantages

There are lots of advantages associated with choosing a 3PL company. They offer the expertise that allows for better performance levels in departments such as transportation and logistics. They also tend to help businesses save money on those things, which is obviously very important. They can also offer vital strategic insights and improve levels of customer service at the same time. If you’re looking to create a more responsive supply chain model, that’s something 3PL companies can assist you with. 

Here are the key advantages that 3PL companies provide:

  • Improve on transportation and logistics
  • Save money 
  • Benefit from strategic insights
  • Improve customer experience by allowing for quicker delivery
  • A more responsive supply chain model

There are, of course, some 3PL company disadvantages we need to talk a bit about as well. With any kind of outsourcing, you’re going to lose control of some aspects of your business and that’s no different when it comes to hiring a 3PL to carry out work for you. And if the 3PL makes a mistake, your customers will blame your business. That’s something you’ll have to accept if you want to use a 3PL service. It’s also easy to grow dependent on these services, which isn’t always ideal. 

The possible disadvantages of working with a 3PL include:

  • Lose some internal control 
  • Errors made by the 3PL company will be attributed to your business rather than the 3PL provider
  • Growing dependency

4PL companies come with their own benefits too. Many 4PL companies tend to offer strong integrated technology solutions, which can be important for certain types of businesses and their supply chains. Simply knowing that everything is going to be taken care of for you and by one company can be reassuring too, not to mention less work for your team. It means you can focus on other things instead. 

To sum up, the advantages of working with a 4PL are:

  • Possible single interface for many transportation and logistics services 
  • Single point of contact for all transportation and logistics operations
  • A comprehensive solution to complex supply chain needs

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There are some disadvantages of using 4PL companies to take care of your logistical needs for you though. For a start, you’ll be required to give up nearly all control of your logistics operations. Some companies have a bias towards other companies and suppliers that might be based on things other than performance levels of efficiency, so that’s something to watch out for. Transitioning back to in-house logistics can be tough once you start using a 4PL company too. Using a 4PL provider to manage 3PL services comes at an increased cost as well. Since you’re essentially using a 4PL as an alternative to having an in-house employee be responsible for this task, you have to be prepared for this cost.

In short, the disadvantages of working with a 4PL can include:

  • Giving up significant control over transportation and logistics operations
  • Potential biases not based on performance, outcomes or efficiency
  • Difficult transition if removing 4PL provider
  • Increased costs

With all that being said, if 3PL’s and 4PL’s are of a high enough quality, their benefits should significantly outweigh any negatives. When searching for either one, be sure to address the potential disadvantages and ask how the provider will counteract them. 

3PL and 4PL Examples3PL and 4PL Examples

To better understand 3PL and 4PL, it’s important to look at examples of how these different types of companies help their clients in a variety of sectors and industries. Here are some examples of key industries and how they can be impacted and helped by 3PL and 4PL companies.

Retail/E-commerce

More than ever, thanks to companies like Amazon and other giants, people expect fast delivery, and often next day delivery. For retailers and ecommerce businesses, meeting those demands and fulfilling those expectations can be difficult. 3PL’s can help businesses meet those needs by offering quick delivery services. They can provide next-day and same-day delivery services while keeping a business’s costs in check. 

Because of the way in which 4PL companies take care of the entire supply chain for their clients, they’re also able to meet customer demand and reduce missed opportunities. Same-day and next-day replenishment and delivery of products are made possible too. This enables clients to save time and keep operations and logistics running smoothly. A retailer or ecommerce business might consider using a 4PL provider if they are spending a significant amount of time working with multiple 3PL’s.

Both options are capable of improving the delivery process for businesses as the needs and expectations of their customer shift. As any retailer will tell you, keeping up with what customers expect is vitally important and it shouldn’t be overlooked or ignored. Your business will benefit from the improved customer service and satisfaction.

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Medical

Medical devices need to be shipped from manufacturers to doctors and hospitals in a wide variety of locations and often at short notice. It’s important that these devices are shipped quickly and are tracked throughout the transportation process. Without that, there’ll be a chance of devices ending up in the wrong hands. Doing this is complex but the expertise of 3PL companies will make it possible.

Last minute orders of medical devices pose particular problems and challenges that need to be overcome by companies. This is why many of them turn to 4PL companies. They have the experience to suitably deal with chain-of-custody issues and turnaround times and schedules that are extremely tight. Therefore, although both 3PL and 4PL logistics companies can help with the delivery and transportation of medical devices, some clients might require the additional oversight of a 4PL

Food

Food transportation always requires good logistics and that should involve 3PL companies. Perishable items are tricky to fit into a suitable supply chain and expertise is required to ensure their transportation is safe, secure and successful. Specialized 4PLs can also help to provide comprehensive logistical and transportation services to businesses.

The broad and comprehensive supply chains provided by 4PL companies can be of great benefit to companies looking to improve their approach to food product logistics and transportation. 

When choosing a company to outsource too, look for a company with a broad supply chain and the ability to ensure your food logistics and transportation are taken care of safely and securely, whether you choose a 3PL or 4PL company.

Industrial

Industrial companies have varying needs depending on their niches, so whether a 3PL or 4PL company is right for your business will entirely depend on what kind of company you run. Businesses that have less time and don’t mind giving up control over more of their logistics operations can benefit hugely from 4PL companies and the complete logistics services they offer their clients.

For industrial companies, various kinds of reporting can be necessary. Of course, this can vary depending on what kind of business you run, but it’s something that should be taken into account when deciding which kind of logistics company you should hire. 3PL and 4PL logistics providers can provide services that allow for vital reporting on top of the basic logistics and transportation work they do. Take that into account when choosing a company to hire.

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Costs of Using a 3PL and 4PLCosts of Using A 3PL and 4PL

Part of your decision-making process should take into account the costs of hiring the services of an external logistics company. Of course, the quality of the services offerED and how they’re able to meet the specific needs and requirements of your business should be above low costs. However, the financial considerations that come into play can’t be ignored.

3PL services tend to be more cost-effective and affordable for most businesses. This will depend on the services being used and the specific company being hired because prices do vary. 4PL companies offer more comprehensive and extensive services as they provide the oversight and management side of things as well, which isn’t the case with 3PL companies.

This makes 3PL options more appealing from a financial standpoint for many businesses. They are the more affordable and cost-effective option, so if you’re not looking to give up control of management and oversight anyway, it makes sense to choose a 3PL company.

3PL and 4PL Software

Another really important thing for your business to consider when choosing a 3PL or 4PL business to work with is how they use technology and software. All businesses have an existing approach to software and technology in place, and you might not want the logistics company you start working with to dismantle all of that. It can make it harder for your business to achieve consistency and momentum going forward when you’re having to switch software because of external necessities. On the other hand, a logistics provider that matches your technology needs and preferences can further enhance the relationship.

Below are some questions that you can ask regarding technology to ensure a good fit with your business:

  1. What kind of technology and/or software will the 3PL or 4PL provide for me to use?
  2. Does my team need training on the technology? If so, will the 3PL or 4PL be able to provide the training?
  3. Is the technology compatible with what I’m already using?
  4. If the technology isn’t effective, do they have an alternative that can be used?

Integration is the word that matters most of all here. You should focus on finding a company that can integrate its approach to software, IT and technology with your existing setup. When that happens, it’s much easier for your business and saves time. It’s something that more and more businesses are now taking into account when it comes to hiring 3PL and 4PL companies.

Freight Management

Freight management is the process of ensuring deliveries are made safely, on time and in a logistically coherent and successful way. It should be cost effective and efficient and you’ll need to ensure the company you hire to help you with your approach to logistics is able to tick all of those boxes. Good freight management ensures efficiency and consistency in your logistics operations.

Smooth coordination between the people handling the freight and those carrying and shipping it is an important part of this. 3PL companies can link up these various parts to ensure that the process is carried out smoothly and efficiently at all times. 4PL companies can do this as well but only if they work with the right people and make decisions based on performance and abilities rather than inherent biases of existing contracts.

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Choosing a 3PL or 4PL

Choosing a 3PL or 4PL company to work with is obviously a key part of this whole process. You want to make sure that you’re working with a logistics company that you can feel comfortable putting your trust in. Look at the services they offer and the things they don’t offer to ensure they can do all the things you need them to going forward. From there, you’ll be able to find a service that’s suitable for you and in line with your expectations.

Take cost, freight management and levels of control and oversight into consideration too. These are things that will vary from company to company, but they’re all important when it comes to entrusting your logistics operations to an external company. As mentioned above, you should also look for a company that offers an integrative approach to technology and how your business uses it.

Should I Work With a 3PL or 4PL?

Whether you choose to work with a 3PL or 4PL really depends on your needs. As we discussed earlier in this guide, the level of control and oversight that’s in place will matter most of all. If you’re happy signing off control of oversight and logistics management to another company, a 4PL option might be suitable for you. But if you want to outsource certain things while retaining oversight over the process, it makes much more sense to hire a 3PL company.

3PL companies can offer a wide range of services and strategic insights that make a truly positive difference to your company. They also represent a much more affordable and cost effective approach to logistics. And many of them provide suitable software and tech solutions that can be integrated into your business smoothly and without problems. For modern businesses with existing software preferences and approaches in place, this is crucial.

Need Help With Logistics?

If you’re looking for help with logistics and you think a 3PL company is right for you, you should turn to the very best. R+L Global Logistics provides 3PL logistics services that customers can rely on. With more than three decades of experience in the field, you’ll have no trouble putting your faith in our solutions and expertise in the world of logistics. We understand a wide variety of shipping scenarios from subscription boxes to beauty products and can work through challenges to deliver for you.

This is a cost-effective and appropriate solution to your logistics challenges. If you want help improving your approach to logistics but you don’t want to give up oversight control and management, R+L Global Logistics is the 3PL company for you. Don’t hesitate to get in touch if you’d like to learn more about the services we offer and how they can benefit you. Click the Get a Quote button below or give us a call at (866) 989-3082 to get started.

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