3pl and 4pl Logistics - 3PL VS 4PL

What is 3PL Logistics?

3PLs are companies that provide specific logistics services to help businesses transport their goods. The advantages of outsourcing your logistics to a third party are that you can select the provider that best suits your specific business needs. 3PLs are a great choice for companies that have a lot of goods in the same market, or if they want to cover a wide geographic area. If you want to transport goods to, from, or within multiple cities or countries, then a 3PL could be the best option for you.

1. Types of 3PL Services:

The most common types of 3PL services include:

A) WAREHOUSING AND DISTRIBUTION:

The 3PL partner stores your goods until they are ordered and distributed to customers. They might even have their own distribution facilities like warehouses.

B) TRANSPORTATION:

If you have a product that can be shipped by the manufacturer, then a 3PL partner can help you get the goods from one place to another.

C) CUSTOMS BROKERAGE:

If your business does a lot of importing and exporting, then a customs broker can help you with the hassle-free customs clearance of your goods.

Simply put, the 3PL logistics service involves having the manufacturer maintain oversight of their supply chain but outsources both the transportation and logistics to a 3PL provider.

2. Key Services in 3PL Logistics:

• Inventory storage.
• Proper inventory management.
• Customs brokerage.
• Freight forwarding.
• Contract management.
• Picking and packing of goods.
• Cross-docking.
• IT solutions.

3. Characteristics of 3PL:

As you can easily understand, a 3PL logistics provider will not only receive but also handle, store, and deliver your goods. On most occasions, they will do these services in the name of your business.

In order to comply with the services, the third-party logistics company needs to provide a warehouse, do the packing, and even some of the inventory management of your products and stock. However, these functions are limited to what was agreed and to the needs of your own business.

4. The 3PL Logistics Providers:

There are lots of 3PL service providers, but the most popular ones are those that offer IT-enabled services. IT-enabled 3PLs are companies that use sophisticated software to help their clients manage their entire supply chain. If a client of an IT-enabled 3PL has orders waiting to be shipped, the software can tell her exactly when the order is ready to be shipped and which 3PL partner to use for transportation. If the client has a product in stock, the software can tell the client when he can expect that product to arrive from the distribution center. IT-enabled 4PLs are the same as IT-enabled 3PLs, but they make use of advanced technology to help clients manage their entire logistics operation. For example, a transportation manager at an IT-enabled 4PL company could offer real-time information about when a client’s trucks are running late, which could help the client avoid unnecessary expenses.

If you are willing to master the logistics field, we will suggest you AIMS’ international certificate in logistics and the level 4 diploma in logistics and supply chain management.

5. What are the Advantages of 3rd Party Logistics?

A) COST SAVINGS:

Do you know how it can be hard to keep track of every single piece of inventory in your company? And how hard it is to make sure that the equipment your employees use is always maintained, serviced, and not broken? A third-party logistics provider can help you with that! Not only can a logistics provider help you track your inventory, but they can also help you manage your maintenance and service schedules.

B) INCREASED PRODUCTIVITY:

When your employees aren’t constantly taking time off to fix equipment, they have time to actually do their jobs. That means you have more time to grow your business and less time spending money on repairs and restocking inventory.

What Is 4PL Logistics?

Unlike third-party providers, 4PL logistics providers, oversee the organization as well as the management of a whole supply chain for both manufacturers and wholesalers. Just to give you a more practical idea, in a 4PL model, the manufacturer of a product outsources not only the logistics but also the packaging, warehousing, and even the delivery of the product. As you can see, if you choose this option, the 4PL company will take control of all the logistical operations for manufacturing companies, and even the reverse logistics as it could be found in A Guide to Reverse Logistics: How It Works.

Many 4PL companies also use advanced technology to improve their services and make them more efficient. For example, a 4PL company might use radio frequency identification (RFID) tags to help manage inventory and GPS technology to make sure drivers are following a route that results in the shortest distance between origin and destination.

1. Why is 4PL important?

As the technology and demand for e-commerce increases, the need for efficient, effective, and reliable logistics services is growing too. The most popular types of 4PL services are those that use advanced technology to improve efficiency and make sure that clients are getting the most out of their services, such as GPS and RFID to track and manage inventory. IT-enabled 4PLs can also make use of Artificial Intelligence (AI) to help clients manage their operations more effectively. For example, a logistic AI provider could help a company manage its inventory and make better decisions about how and when to order more products.

2. How IT-Enabled 4PL Services Work?

At its core, any kind of logistics service relies on the transfer of goods from one place to another. All logistics companies use different types of technology to increase the efficiency of their logistics operations, and as the best 4PL providers use technology to help manage their clients’ operations more effectively, they are referred to as IT-enabled 4PLs. IT-enabled logistics services can be separated into two categories: inventory management and transportation management, and both of these categories are closely related to IT.

A) INVENTORY MANAGEMENT:

Companies use technology to track and manage the inventory that they have on hand.

B) TRANSPORTATION MANAGEMENT:

Companies use technology to track and manage the transportation of their goods.

3. Key Services In 4PL Logistics:

• Freight sourcing strategies.
• Logistics strategy.
• Consultancy.
• Analysis of transportation expenses.
• Analysis of carrier performance.
• Effective management of third-party logistics.
• Business planning.
• Project management.
• Proper management of inbound, outbound, and reverse logistics.
• Proper coordination of a wide supplier base in various geographic locations.
• Change of management.
• Network analysis and designs.
• Analysis of capacity utilization.
• Proper inventory planning and management.

4. Characteristics of 4PL:

As you probably already figured out, a fourth-party logistics model includes everything a third-party logistics service includes and even more. The more is related to managing the overall supply chain, legal paperwork, and even managerial decisions.

Ultimately, the 4Pl logistics will be using their own resources to make sure that the supply chain needs of your business are met but you don’t have any control over them.

3PL VS 4PL:

Although 3PL and 4PL are often used interchangeably, there is a key difference between them. 4PL is a type of logistics service that combines aspects of 3PL and 5PL. 4PL is a hybrid of 3PL and 5PL services, where the product is managed from remote locations and the driver’s mobile phone is used to communicate.

There are many similarities and also a few key differences between 3PL and 4PL. To find out which kind of logistics service is best for your company, it’s important to understand the differences between them.

A) SERVICES OFFERED:

While 3PL companies offer a wide range of logistical services, 4PLs tend to specialize in one or two important functions.

B) CLIENT BASE:

3PLs work with a wide variety of clients, while 4PLs tend to work with larger, more well-established companies.

C) TECHNOLOGY:

Though both 3PLs and 4PLs make use of technology, 3PL companies tend to implement it more fully than 4PLs.

D) HUMAN VS MACHINE:

3PL companies employ both human beings and technology, while 4PLs rely mostly on technology and use human beings to handle the most challenging tasks.

So, to find the model that you should pick, let us take a look at 3PL VS 4PL. The main difference between 3pl and 4pl is the fact that while a fourth party logistics handles the entirety of a supply chain, a third party logistics is mainly concerned with handling just the logistical process. So, to make a decision for your business needs, you need to compare 3pl vs 4pl. Some of the aspects to keep in mind include:

• Fourth-party logistics are usually best suited for larger businesses and third-party logistics for smaller businesses.
• Fourth-party logistics mainly focuses on the optimization and integration levels while third-party logistics focuses on daily operations.
• Fourth-party logistics use their own warehouses and trucks and third-party logistics don’t need these assets.
• Fourth-party providers take care of the entire process and the business has no control over what happens.

Should You Outsource Your Logistics?

While outsourcing your logistics services is a great way to increase productivity, it’s important to remember that it also comes with a price tag. There’s a trade-off between outsourcing your logistics and keeping them in-house, and some companies have found that outsourcing actually results in a cost reduction. You need to carefully consider the timing of outsourcing your logistics. If you are able to afford to keep them in-house, you will benefit from the resource savings and the morale boost that come from keeping your team in one place. However, if you want to reduce your costs, outsourcing your logistics is definitely a good option. If you are able to determine when your company will need to switch to a different type of logistics, outsourcing your logistics can be a good option. It is best to outsource your logistics when your business is in the growth stage, as you will be able to benefit from the cost savings that come with outsourcing your logistics.

Conclusion:

In short, a 3PL or 4PL provider can help you manage all your logistics needs. You can choose between a 3PL or 4PL that uses technology to provide you with the best services possible, including trackable inventory, GPS tracking, and real-time information about your shipments. If you are ready to make an investment in your company’s future, then you should definitely consider contracting a 3PL