3PL vs 4PL: Which is Right for My Business?
by John Bevacqua
From the battle with supply chain disruptions and creating new omnichannel fulfillment strategies to benefitting from the evolution of 3PLs, 4PLs, and cutting-edge technologies, 2022 onward could be one of the most important years ever for businesses, brands and distributors looking to play a pivotal role in how consumers receive goods.
With our 3PLs being the heartbeat of the supply chain, their success will help expand new markets, grow emerging brands, and continue to inspire the rapid growth of today’s economy.
3PLs and 4PLs are third or fourth party logistics companies. However I’ll now coin the phrase as 3PF’s because they actually center around fulfillment warehouses. They are the key stakeholders and advocates for their clients and customers when it comes to mitigating or navigating supply chain risks.
So what are the main differences between a 3PL and 4PL?
We can get the picture by going to 1PL. In this scenario a company makes a product, assembles it, warehouses it, takes the orders, packages it and delivers it. In the 2PL the company hires another party to deliver it. The 3PL changes things significantly – the company makes a product and turns it over to the Fulfillment company to warehouse it, receive the orders, package (and sometimes assemble) the product, and fulfill the order by shipping it to the customer.
A 3PL typically owns or runs their own warehouses and focuses on transactional and day-day operations. A 4PL will outsource to a network of 3PLs or fulfillment centers for all those services. A 3PL can own or contract out transportation resources, where the 4PL outsources all and focuses on optimizing the entire supply chain.
To take advantage of an all-in-one supply chain provider that can provide a total outsourced package that meets the complete client requirements, sometimes a 3PL may partner with an additional company to expand their service offering thus creating a 4PL service instead of making an additional CapX investment. In this case a 3PL becomes a 4PL for that client.
Therefore, a word of caution when trying to choose the right organization as your long term 3PL or 4PL. Be very careful, as it’s sometimes a daunting and expensive task that requires industry knowledge to guide you to one that will best fit your company’s requirements.
At AMS, we strive to make sure we are the perfect match for every potential client before we even start the onboarding process. With over 20 years in business and hundreds of years in employee experience, AMS has the industry knowledge to help you make the right decision for your company.
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About the Author: John Bevacqua is the creator of the “Freight Freak” monthly blog, and former VP of Logistics at AMS Fulfillment. He currently serves, in semi-retirement, as Logistics Advisor.