Many manufacturers and shippers had been using 3PL with satisfaction for years before 4PL became the new disruptor in supply chain management. 4PL’s quick rise has left many logistics professionals wondering: what’s the difference between 3PL and 4PL providers?
In a nutshell, the difference between 3PL and 4PL is one of tactics vs. strategy.
3PL’s approach is tactical because 3PL providers use at least some of their internal resources to move your products. Strategy is not the focal point; moving your product from Point A to Point B is.
However, 4PL providers go a step further by providing a strategic approach that seamlessly coordinates several different best-fit suppliers to form one comprehensive, customized supply chain solution. The result is a new supply chain model that streamlines processes, eliminates waste, and increases efficiencies to boost profits.
With this innovative approach, 4PL providers create additional value in several ways that positively impact the way you ship products to your customers:
- More than one supplier option: With 3PL, you’re locked in to using your service provider’s own services. There’s little expectation that your provider will grow as your business does. 4PL solutions are based on the provider’s strong relationships with a wide range of outsourced suppliers, fulfilling each link of the supply chain. The result is your company having several supplier options to choose from, instead of just one.
- Increased niche expertise: 3PL providers can struggle to be experts in all transportation, warehousing, and distribution functions. 4PL providers source market-leading suppliers and coordinates them to work together, so you get niche experts working as a seamless whole.
- You only get best-fit suppliers: 3PL suppliers work for your 3PL provider. They may be a great fit for their employer, but not necessarily for you. 4PL suppliers are carefully screened and matched with you based on a number of factors, including being a best fit for your particular needs.
- Faster process enhancements: Since 3PL providers solely use their own resources to manage your supply chain, making changes can difficult and time-consuming. A 4PL solution can pivot and be refined easily to match your seasonality, so your resources will always match your demand.
- Easier handling of returns: Returning a product under 3PL means processing responsibilities fall on the manufacturer. 4PL systems can be designed with reverse logistics capabilities at several different facilities.
- Tech-based, not asset-based: The bandwidth of a 3PL provider is heavily limited by their warehouse space, fleet size, and other assets. Will your 3PL supplier really buy a new truck based on your changing needs? 4PL is tech-enabled, using cutting-edge software to integrate suppliers who already have the assets you need in place.
- Scalable to match your seasonality: Need an additional supplier to help out during your busy season? It’s easy to work one into a 4PL solution, and then pivot back again during slower times.
- More cost-effective: Unlike 3PL, 4PL providers purchase services from suppliers in large amounts at bulk prices. This special pricing gets passed on to you, saving you thousands of dollars every year.
- Better sense of partnership: If a solution isn’t profitable for your 3PL provider, they likely won’t implement it. 4PL providers recognize that finding better solutions for you will increase the viability of your business, which is what a true partner in your success does.
Although switching to 4PL might seem like a daunting initiative at first, you’ll still retain many of the benefits you previously had with 3PL, such as:
- One relationship to maintain: You can continue to engage with only one contact – your 4PL service provider – and not have to worry about maintaining relationships with several different suppliers
- You can focus on your business: With supply chain responsibilities continuing to be outsourced, you can still focus on growing your business
- No new hiring required: Under 4PL, you can maintain and re-allocate, if not reduce, the staffing levels you had before
- Reduced assets: Like 3PL, you’re using the supplier’s assets such as vehicles, forklifts, floor space, and more, which saves you from having to purchase and maintain them yourself.
- Fully managed process: Every aspect of warehouse management, transport, and delivery is still handled for you
4PL has revolutionized the way companies manage their supply chains, which makes them a better choice than 3PL as they allow for significant business growth and save thousands in supply chain costs every year. This makes 4PL providers the more strategic choice for long-term efficiency and success.
If you’re interested in learning how Cedric Millar can significantly improve your supply chain and significantly reduce your costs, we’d love to chat with you. Just contact us at 1-888-998-1009 or via email at info@cedricmillar.com anytime for a no-obligation discussion.
