All about 4PLs
August 29, 2022
Leveraging Data for Decision Making
August 31, 2022
4PLs
vs
3PLs
All about 4PLs vs 3PLs.
This is a continuation post. On the main post, that you can read here, the definition and explanation of what a 4PL was provided, along with more relevant information, we highly encourage you to read it first to better grasp what we’ll be discussing on this post.
What Is 4PL?
Fourth-party logistics is a model in which manufacturers outsource both the organization and management of their supply chain to an external provider. 4PL offers a higher level of effective supply chain management to customers, which allows manufacturers to completely outsource their logistics process to external professionals for better management.
a company can choose to tailor their own approach based on a deeper analysis of the story behind the data...
Advantages of 4PL.
- Wider Management of Operations: Shipping, distribution, warehousing, physical sites, and information flow are all managed by the provider.
- Information Technology: Software and automation are processes included in 4PL services to improve communication across the network. Providers can offer valuable information technology and software that increases visibility on a real-time basis.
- Solution-Oriented Methods: 4PL providers aim to design the solution first to meet the business’ requirements. They have expertise of end-to-end operations that relate to warehousing, distribution, freight, and information technology, and provide the best solutions for the client.
Disadvantages of 4PL
- Less control over fulfillment and logistics processes.
- Possibility of being cost-prohibitive for start-up organizations and small businesses
What is a 3PL?
Third-party logistics involves a manufacturer maintaining oversight of their supply chain but outsourcing transportation and logistics operations to a 3PL provider. This model is similar to 4PL in many ways, but 3PL providers focus on logistics such as inventory storage, inventory management, customs brokerage, freight forwarding, contract management, picking and packing, crossdocking, and IT solutions. Unlike a 4PL, 3PL providers will not oversee the entire supply chain and organization.
Advantages of 3PL.
- Resource Network: A 3PL provider has a large resource network that provides advantages for in-house supply chains. They will manage all the logistics for a business from beginning to end. With their relationships and discounts, they can save you money on overhead and provide you with faster service.
- Save Time and Money: A 3PL provider will eliminate your need to invest in warehouse space, technology, transportation, and staff to execute the logistics process. They can also manage billing, audits, training, staffing, and optimization.
- Scalability and Flexibility: 3PL providers can also scale space, transportation, and labour according to your inventory needs.
Disadvantages of 3PL
- Less inventory control.
- Costly expense if customer orders are low.
- Suitable for small-to-medium businesses, but not large ones
- Limited control over the customer experience and fulfillment.
Main Differences between 4PL and 3PL
The main difference between a 3PL provider and a 4PL provider is that a 4PL handles the entire supply chain, while a 3PL focuses on logistics. Each one provides its own advantages depending on your situation, so understanding what you get with each provider will help you make the right decisions for your company.
Key differences between the two options
- 4PL providers are better for medium-to-large businesses, while 3PL providers are more suitable for small-to-medium businesses.
- 4PL providers function at the optimization and integration level while 3PL providers focus more on daily operations.
- 4PL providers may own assets like trucks and warehouses while 3PL providers generally don’t typically own these assets.
- 4PL companies can effectively coordinate the activities of 3PL providers.
- 4PL providers provide the highest level of logistics services for a great value while 3PL providers are more focused on one-off transactions.
- 4PL providers maintain a single point of contact for every business’ supply chain while with 3PL providers, businesses often need to manage certain aspects of the supply process internally.
Final thoughts.
While this information is useful, it’s worth noting that it’s not absolute, meaning, a company can choose to tailor their own approach based on a deeper analysis of the story behind what the data is showing. For example, maybe in your company you want to keep control of certain aspects, or you don’t need all the services this and the previous post described, and that’s OK. We understand that your company is unique and that’s what drives us to offer tailored services that are designed to make your business be as profitable as it can be.
Conclusion
Understanding where your company sits in terms of size and growth potential is critical to make a data based decision on what the best course of action is to achieve the highest possible level of profitability.
To learn more about leveraging data for decision making, which is a service we provide in the consultation products we offer, click here to read the blog post about it.
See also
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