And what's right for your business?
Choosing how to manage your company’s logistics is one of the most important decisions you can make as you grow. When your company is new, you may need to choose between fulfilling orders yourself, perhaps out of your own basement, garage, or back office. But once your company grows beyond a small crew, it’s likely time to explore outsourcing your fulfillment. Which brings us to what are the different types of fulfillment, and what’s the difference between 3PL vs. 4PL? And finally, what’s the best option for your growing business?
What Is a 3PL vs. 4PL?
As an entrepreneur, you begin with a great product (the first party) that appeals to your customers (the second party). As you grow and become more successful, you deal with greater logistics. That’s where the third party comes in.
Using a 3PL or third-party logistics allows you to outsource the logistics and transportation to an outside provider. Your company will maintain oversight of the supply chain and have transparency with all aspects of the operations. With the right partner, you may benefit by saving on packaging and postage, transportation, warehousing, technology, procurement, and more while handing off something that may have become a hassle to an expert team. This can remove much of the burden, so you can focus on what you do best: connecting with customers and growing your business.
A 4PL, also known as a lead logistics provider or LLP, takes charge of managing multiple business units. They typically provide logistic services for manufacturers or enterprises and organize and run the entire supply chain, including supply chain strategy, resources, technology, and infrastructure. They’re often the only point of contact between a company and customers and directly manage any other 3PL providers.
With a 3PL, you have full transparency of the fulfillment process as you manage the supply chain. But you have the support and expertise you need to better manage logistics and fulfillment, such as pick and pack, warehousing, shipping, and more.
With a 4PL, you release the reins, so to speak, and allow a 4PL to work on your behalf and manage the entire supply chain, often working with their own preferred 3PLs. There are, of course, benefits and drawbacks for each type. And, depending on the size of your company and the amount of control you prefer, you may choose one over the other.
Key Differences Between a 3PL vs. 4PL
Daily logistics operations
Managing the entire supply chain and focusing on integration by coordinating various 3PLs
Growing small- to medium-sized businesses, which includes 90% of Fortune 500 businesses
Large to enterprise businesses looking to reduce costs and optimize efficiencies
Offers their own facilities, equipment, and courier relationship to improve time to home, costs, technologies, and efficiencies
Manages logistic processes but tends to also use outside 3PLs as they often don’t have their own facilities and equipment
Pros and Cons of 3PL vs. 4PL
Because of their focus on order fulfillment and logistics, 3PLs often focus on small and medium-sized businesses working hard to grow sustainably. They not only provide infrastructure to store products and transport goods, but they also offer expertise and advanced technologies that companies can use to cut costs and improve delivery and customer support.
Support includes warehouse management, data analytics, demand forecasting, digital dashboards to provide real-time tracking and inventory, and with QuickBox, a dedicated account manager who understands you and your business, your goals, and how you define success to help you navigate and optimize the complex logistics process.
- System integration to optimize customer logistics
- Customization for customer communication, so your brand stands out and you can focus on relationships
- Scalability to manage seasonal fluctuations, growth spurts, recalls, and other disruptions
- Joy in unboxing to build brand identity with every box
- Sustainability by decreasing waste and excess expense
Large or enterprise businesses may need to use multiple 3PLs to service their customers in every state. To help improve coordination and communication between the 3PLs, they may choose to turn to a 4PL provider to control the wide range of activities within the supply chain. This provides a single point of contact and data consolidation for the large company. It also, however, may affect visibility for the different parties that make up the supply chain—from packaging suppliers to shippers to end customers. This is why some businesses choose to stay with a centralized 3PL that operates multiple of their own locations.
Depending on where your company is in its growth trajectory, you may be packing and shipping each product you produce. You may scale even more with a small 3PL that provides more affordable shipping and tracking with minimal additional services.
Once you’ve outgrown a smaller 3PL and your company has moved from small to medium (in terms of packages shipped), a larger 3PL like QuickBox can help you scale even further as you continue to grow and thrive.
Wherever you are as a growing business, it’s important to understand the options and choose your logistics partners carefully to ensure your products arrive as expected into your customer’s hands.
Ready to optimize your fulfillment? Contact us today to see how 3PL fulfillment can support your growing business.