Logistics is among the many aspects of a company that require an efficient operation. Whether you’re a large company or a small business, a comprehensive logistics strategy is crucial in reaching organisational goals, such as optimising costs, boosting revenue, and improving customer experience.
Due to the pandemic, the way we shop, work, and study are forever changed. And although online shopping was popular even before the global health crisis, it was taken to another level and became the new norm.
With this change in trend came greater demands and higher expectations from customers. Quick delivery, free shipping, easy return and refund, and real-time tracking of order status, among others. Customers want a positive shipping and delivery experience—one that extends beyond free.
This is where a reliable 3PL or 4PL logistics partner comes into play. Knowing the difference among logistics providers and how each can impact your supply chain is important to making the right decision. Remember, the right logistics partner directly impacts customer experience and is critical to advancing as a business.
But first, what is 3PL and 4PL logistics? What is the difference between 3PL and 4PL? Decision-making can seem like a daunting task if you don’t know the basics, so we’re here to make it a bit easier.
What is 3PL Logistics?
Third-party logistics, better known as 3PL, is a strategy that allows you to outsource certain services. These services include warehousing, inventory management, freight forwarding, customs brokering, packaging, and delivery.
Although the 3PL provider is responsible for a great amount of often-tedious logistics tasks, you maintain the duty to oversee your entire supply chain. In simple words, 3PL providers serve as middlemen between the carriers and your business.
Often, 3PL providers have their own facilities or have already established a relationship with carriers. Small and medium businesses may benefit from 3PL, which can help achieve efficiency and growth.
Benefits of 3PL Logistics
- Cost-saving (in the long run). You outsource a great deal of logistics work, eliminating the need for warehouse space, technology, and workforce.
- Flexibility and scalability. You can utilise 3PL resources based on your current needs.
- Growth and expansion. Being able to establish your business in new markets without having to spend money on equipment, warehouse, and labour can drive growth and promote expansion.
Shortcomings of 3PL Logistics
- Less control. With 3PL, you have less control over your inventory, returns process, and ultimately, customer experience and satisfaction.
- Trust issues. 3PL providers are not created equal, and finding a reliable partner typically takes time. Bad service from your 3PL partner may reflect your company.
- Initial cost. Like many other investments, 3PL requires you to spend money at the beginning.
What is 4PL Logistics?
The key difference between 3PL and 4PL logistics is the level of control your provider has. Having said that, what is a 4PL provider?
4PL or fourth-party logistics provider is more advanced, offering more features and services than just inventory, warehousing, and freight forwarding.
A 4PL partner provides services related to all aspects of the supply chain, including finance, IT, network analysis, project management, and procurement. A 4PL is a comprehensive solution to complex supply chain requirements and oversees all supply chain operations.
A 4PL provider acts as the single point of contact for all your logistics and supply chain concerns. Large corporations, in particular, may benefit from 4PL logistics.
Benefits of 4PL Logistics
- Software and automation. With advanced IT and equipment, 4PL providers offer services that improve network communication and enhance real-time visibility.
- Single point-of-contact. All facets of the supply chain are managed by the provider, thereby eliminating confusion and errors and allowing you to focus on other important business matters.
- Significant direct cost-savings on the overall operational cost of your supply chain.
Shortcomings of 4PL Logistics
- Loss of control. You lose control over fulfilment processes, logistics operations, and customer experience.
- Dependency. Due to the activities crucial to the business being performed by a 4PL provider, a 4PL is considered a strategic partner instead of just a regular provider.
- Suitability. A 4PL may be more expensive and wide scope than 3PL, making it suitable only for big companies.
What to Consider When Choosing Between 3PL Freight Provider or 4PL Freight Provider
When it comes to 3PL and 4PL providers, there’s no one size fits all. What may have worked for one business may not work for you. However, that doesn’t mean you can just pick any provider that you stumble upon.
Below are some key factors on what to consider when choosing between 3PL freight provider or 4PL freight provider.
Cost reduction – In what area do you want to reduce cost?
- A 3PL logistics can minimise logistics costs, such as warehouse and required staff.
- A 4PL logistics can reduce the cost of operating your entire supply chain in various ways.
Focus – Are you satisfied with your supply chain’s efficiency?
- A 3PL provider focuses on boosting the efficiency of your day-to-day logistics operations.
- A 4PL provider focuses on optimising your entire supply chain and improving performance.
Control – How much control over your supply chain do you want?
- A 3PL takes over your inventory, shipping, and freight forwarding needs, providing you control of other aspects of your supply chain.
- A 4PL provider overlooks and has full control of your supply chain operation.
Ask yourself: should I work with a 3PL or 4PL? In the end, you need to identify and understand the transport needs of your business before choosing a logistics partner.
Contact Cario to Make the Freight Journey Easy
Choosing between 3PL and 4PL can be challenging and require extensive research, but it doesn’t have to remain that way. As Australia’s leading expert in the freight industry, Cario understands the importance of having the right freight provider to help businesses achieve their goals.
Cario is designed to help you with your freight and supply chain needs by identifying which logistics model you can benefit the most from—3PL or 4PL, and helping you achieve the outcomes you need.
Built with modern, powerful technology, Cario aims to be the single system that your business needs to execute supply chain operations. It simplifies the process of quoting, booking, and tracking freight while also providing real-time visibility of all freight costs and consignments.
Cario excels in the areas of automation, optimisation, transparency, and visibility—all of these are essential to improve efficiency, enhance customer experience, and promote business growth.
Cario recognises what is the difference between 3PL and 4PL. Whether you’re just starting a business, running a mid-sized company, or managing a large organisation, the Cario Freight System is here to help with both 3PL and 4PL logistics services.
Ready to take your logistics and supply chain operations to a whole new level? Contact Cario today to learn how you can set up a freight management system that suits the unique needs of your business.