3PL vs. 4PL: What’s Better For Your Company?

Acronyms, like 3PL, in business are constant, and unless you are in that particular industry, you may not know what they truly mean. Many companies that use logistic services are not entirely aware of the differences between 3PL and 4PL. Whether your company recently grew large enough to warrant the need for more transportation options or you are new to the business, it is essential to weigh the benefits of a 3PL vs. a 4PL. So, if you’re searching for a third party logistics provider (3PL) for the first time, it’s important to understand what they are and how they work before choosing one to help with your logistics challenges.

So what is a 3PL?

Typically, 3PL providers are an extension into a company’s warehousing and transportation procedures. But really, 3PLs offer logistics services to support specific aspects of shipping operations, which could mean all of the shipping operations for smaller companies.

Third party logistics companies have a distinct advantage of scalability to meet your specific needs best. The amount of help the 3PL gives is always dependant on how much you, the company, needs at any given moment. Since 3PLs are so flexible, they are able to provide a single service or deliver a bundle of services extending across multiple points of your supply chain. This is one reason why 3PLs are able to create value in ways that enhance your operational, financial, and end customer performance.

3PLs, like East Coast Transport, work with carriers, have the ability to consolidate “less than container load” (LCL) or “less than truckload” (LTL) freight loads. They are able to keep track of freight payment and insurance documents and work even with private fleets. One of the most significant benefits of working with a 3PL is lowering your transportation costs while driving efficiencies and developing solutions for complex supply chain challenges. Moreover, with connectivity to various phases of supply chain operations, 3PL providers are often able to provide real-time visibility to your inventory as it is in motion.

Because of the Digital Transformation occurring in all industries, a 3PL typically uses information technology to manage perishable goods freight climates, e-commerce shipments, customer relationships, transportation, and warehouse operations. Tools like electronic data interchange (EDI), and cloud-based systems are the most popular tools trusted by 3PLs. No matter which tool used, the goal is to provide increased visibility to supply chain processes as well as shipments in transit.

3PL vs. 4PL

Third party logistics and fourth party logistics (4PL) are both considered purchased professional services helping businesses plan and execute logistics services. If the two have similar functions, what is the real difference between a third party and fourth party logistics? A 4PL typically focuses on design, execution, and oversight of business processes within the companies’ business’ supply chain, sometimes even collaborating with multiple 3PLs (transportation and warehouse 3PLs), asset based carriers, and warehouses utilized by the business. 3PLs are an underlying service provider and tend to focus on discrete functions of supply chain operations.

Then What is 4PL?

A 4PL, fourth party logistics, is used when a company prefers to have an integrator that brings together resources, capabilities, and technologies to streamline the design and execution of a company’s supply chain.

Choosing a 4PL means they will supervise your transportation and warehouse 3PLs along with any asset-based carriers and warehouses you use. This oversight helps ensure your goods are moved efficiently throughout the entire supply chain. Generally, 4PLs target the complete supply chain process and act as a single point of contact for all involved parties. Essentially, the company is completely outsourcing their logistics department when they choose a 4PL.

Advantages of 3PL

A third party logistics provider, like East Coast Transport, offers many benefits for a company. Supply chain logistics is complicated; fulfillment, warehousing, and shipping have significant challenges. 3PL organizations are experts in supply chain logistics and offer their experience and connections to streamline processes for their clients.

Additionally, 3PLs can give insight into issues that can come up when shipping internationally. These issues include proper documentation, customs, duties, and differing shipping regulations. Working with a third party logistics organization can also relieve the stress of trying to comply with international shipping protocols.

Save time and money

Using a 3PL can potentially eliminate the need to invest in warehouse space, technology, transportation, and employees to carry out logistics processes, allowing for more focus on your core competencies. Organizations can also save time by receiving the expertise needed to carry out supply chain logistics efficiently. They also make companies proactively aware of supply chain pitfalls that could be costly and risky. 3PLs optimize inventory levels and save on inventory holding costs by providing industry forecasting.

3PL Offer Scale and Flexibility

When a company uses a 3PL, they can scale space, labor, and transportation according to current inventory. Additionally, 3PLs are often able to ease the transition between seasonal periods and industry fluctuation. Scalability is crucial for seasonal companies with significant increases in freight.

A 3PL foster growth for companies expanding into new markets. Typically, 3PLs are always looking for ways to improve aspects of supply chains and therefore have the tools and technologies necessary to make adjustments. Management software can analyze and monitor supply chain procedures to eliminate inefficiencies. Using 3PL services are likely to result in continuous improvements made to your logistics process.

What to consider when selecting a 3PL provider

There are countless third-party logistics providers to choose from, and selecting the correct one for your business is essential. It is important to remember that, when you work with a 3PL, you are adding an extension to your logistics department and making them a part of your strategy.

An excellent and dependable third-party logistics provider offer expertise, help streamline supply chains, and save time and money. Trusting 3PL experts, like the ECT experts, with your shipping logistics makes a difference in the way your business functions and allows you to focus on increasing your overall value to customers.

What really matters? The right 3PL understands your supply chain strategy needs and how to meet your unique demands. Learn why East Coast Transport provides top quality 3PL solutions to overcome the individual challenges of your industry.