Outsourcing Your Fulfillment: 3PL or 4PL
Researching and deciding on a fulfillment provider can get tricky. Especially with all these technical terms, you come across such as 3PL and 4PL, it can get easy to confuse one thing for another. To make sure you find the right logistics service for you and your business, it’s important you understand the clear difference between the two.
While both third-party logistics (3PL) and fourth-party logistics (4PL) can help you grow your business more efficiently by providing supply chain management and handling fulfillment for you, they still have their own set of advantages and strong points. To help you better understand and decide on the right fulfillment partner for you, we’ve listed what services you get from each and what type of business they’re both suited for.
What is a 3PL?
It is a supply chain model that generally involves 3 parties: carrier, business, and logistics provider. In this case, your logistics provider handles your fulfillment operations from warehousing, packing orders, and shipping them out to your customers.
Advantages of a 3PL
- Save on shipping costs. 3PLs have access to preferential rates that individual shippers don’t. Partnered with domestic and international last-mile carriers and working with them on behalf of multiple customers, 3PLs are able to negotiate pricing based on volume.
- Flexible and on-demand services. As your business experiences peak and non-peak sales seasons throughout the year, a 3PL can help you manage these demand fluctuations better by only charging you for the warehouse space and shipping that you actually need during certain periods.
- Expand your customer reach. 3PLs give you the option of expanding internationally without any major expenses and costs on hiring your own warehousing or staff in other countries.
- Mitigate risk. With the growing volume of online shopping orders, shipping delays can be inevitable. When unexpected circumstances come up, a 3PL is in charge of finding alternate methods and ways to fulfill your orders and avoid delays
Working with a 3PL is best suited for your business if...
1. You are running out of inventory space
Whether it’s your home or your office, boxes of your products can easily take up so much space. On-demand warehousing helps you stay organized and manage your inventory better and more strategically. You can also adjust your needed warehouse space depending on your needs throughout peak and non-peak seasons without worrying about limitations.
2. You’re shipping over 250 orders monthly
If your increasing order volume is becoming too much to handle even on your own or with your team, it’s time to outsource fulfillment. However, outsourcing fulfillment doesn’t really require a minimum number of orders being processed and shipped out a month. Every hour you spend picking, packing, and shipping orders yourself is an hour taken away from the time you could spend on boosting sales, developing new products, or creating new marketing strategies. If you feel like you would rather focus on other parts of your business, then it’s already a valid reason to start working with a 3PL like LOCAD who has plans tailored for startups and small businesses with no minimum order requirement.
3. You want to have more shipping & delivery options
Whether you want to explore offering 1-day expedited delivery or free shipping to your customers, working with a 3PL provider can make this financially feasible and affordable for businesses of any size.
What is a 4PL?
Going a step further than the 3PL, a 4PL manages every moving part of your entire supply chain —from transporting your goods to arranging last-mile delivery to your customers. This includes supervising warehouse operations and overseeing transportation providers, and operating other parts of your supply and logistics chain. Simply put, a 4PL manages the relationship with a 3PL provider to make sure the operational and fulfillment back-end of your business runs smoothly.
Advantages of a 4PL
- Hassle-free transportation of your products: A 4PL can coordinate the pick-up of your finished goods from your manufacturer or factory and immediately send them to your selected warehouse locations for secure storage and shipment preparation.
- Strategic outsourcing for logistics: A 4PL builds and creates a lean and cost-effective supply chain for you by outsourcing all your logistics needs for you. Once they learn about you and your business's specific needs, they can determine the most appropriate and suitable logistics partners for warehousing, inventory management, and last-mile delivery.
- Tailored and professional operational support: Led by a team of fulfillment experts with years of experience, a 4PL can give you expert tips and advice about maximizing logistics to grow your business.
- Seamless international logistics: When it comes to international shipping, 4PLs can assist you with dealing with customs, duties, and other regulations mandated by the border. That way, reaching out to more customers internationally becomes a worry-free option for business growth.
Working with a 4PL is best suited for your business if…
- You want a single point of contact for your entire supply chain & fulfillment operations: By only having one point of contact, you’re able to save time and stress from coordinating with different logistic providers with different operational hours.
- You’re keen on selling your products internationally: For businesses set on global expansion and growth, working with a 4PL can grant you access to an international fulfillment network driven by warehouses and last-mile carriers headquartered all over the world.
- You want to integrate supply chain technologies: With 4PL’s own integrated technology platform, you can easily check how your logistics operations are doing on a unified interface. Instead of struggling to put together your own systems, outsourcing a 4PL is the best option as they have their own proprietary technology purpose-built to manage and automate the entire back-end side of your business.
Whether you want to outsource a 3PL or 4PL, LOCAD can tailor fulfillment plans and services best suited to what you and your business need. More than just a logistics provider, we’re here to help you grow your business as your fulfillment network orchestrator.
To learn more about how LOCAD can help scale your business growth, you can request a FREE quote today.
Still undecided? Our team of fulfillment experts are happy to help you assess your needs and determine the right logistics provider for you.