A business’s success requires effective logistics and warehousing management. With increasingly complex supply chains, most companies are turning to third (3PL) or fourth (4PL) party logistics providers to ease the pain of operations. Each of these models has its own benefits and serves a different purpose, which makes it difficult to choose the right model for your business.

We will break down the key differences between 3PL and 4PL warehousing, benefits of both, and how to figure out which model is best for your business.

Overview of 3PL and 4PL

Third party logistics (3PL) is an activity carried out by a party that is not the original manufacturer to provide some or all of the supply chain functions (such as warehousing, transportation, packaging, and inventory management).

Third party logistics providers (3PL) deal with specialized supply chain tasks – transportation, warehousing and order fulfillment. They are an extension of your own business, performing tasks as you require and you retain control over the overall supply chain strategy.

Core Functions of 3PL:

• Warehousing and the management of inventory.
• Freight forwarding and transportation.
• Picking, packing and order fulfillment.
• Returns management.

If you want to hand over certain logistics tasks to a 3PL provider, but still want to retain overall control of your supply chain, they are ideal.

What is 4PL (Fourth Party Logistics)?

Fourth party logistics providers manage the business’s entire supply chain. Through its single point of contact, 4PL providers manage multiple 3PL providers, technology systems, and other resources to provide seamless logistics solutions.

Core Functions of 4PL:

• Supply chain management in totality.
• Logistics processes oversight.
• Working in tandem with multiple 3PL providers.
• Technology and analytics integration for optimization.

Businesses looking for a fully outsourced logistics solution including strategy and execution are best served by 4PL.

Benefits of Each Model

Benefits of 3PL Warehousing

• Cost Savings: Outsourcing certain logistics tasks reduces the need for in house infrastructure and expertise.
• Scalability: 3PL providers can easily adapt and scale when demand changes at a fast pace, which is perfect for seasonal businesses or those on high growth trajectory.
• Expertise: They also bring a wealth of knowledge and experience in logistics operations which will help businesses avoid costly mistakes.
• Technology Integration: One of the ways many 3PL providers are able to improve efficiency is through use of advanced systems like Warehouse Management Systems (WMS).

Benefits of 4PL Warehousing

• End-to-End Management: 4PL providers control the entire supply chain, making it more coordinated and less complex.
• Strategic Focus: By outsourcing logistics to 4PL, businesses get to concentrate on other main activities such as product development and customer relationship.
• Enhanced Visibility: 4PL providers typically utilize integrated platforms with real time insights to supply chain performance.
• Efficiency Gains: 4PL manages several 3PL providers and optimizes their processes and activities to eliminate inefficiencies and redundancies.

The question is, when do you choose one over the other?

When to Choose 3PL:

• Small to Medium Businesses (SMBs): For businesses with low logistics needs, 3PL is a cost effective solution.
• Specific Requirements: A 3PL provider is great for discrete tasks such as warehousing or transportation, if you need some help with these things.
• Operational Control: With 3PL, businesses are able to oversee their supply chain strategy from a distance.
• Flexibility Needs: The scalability of 3PL is beneficial for businesses with fluctuating inventory, or seasonal demand.

When to Choose 4PL:

• Large Enterprises: The strategic oversight of 4PL providers is a benefit to companies with complex, global supply chains.
• Outsourcing Strategy: 4PL is the ultimate solution if you are willing to delegate all the logistics management.
• Integrated Approach: 4PL is used by businesses that have multiple 3PL providers or technology platforms in order to streamline operations.
• Focus on Growth: 4PL makes internal resources available to focus on growth and innovation.

Depending on your size of business, operational complexity, and long term goals, you can choose 3PL or 4PL.

Real-Life Applications

Example 1: A E-commerce Business with Seasonal Demand

A 3PL provider is chosen by an e-commerce retailer that would experience spikes in orders during seasons. The business is able to handle high demand during peak seasons while ensuring that they do not commit to permanent infrastructure for something that they may not need by 3PL’s scalability.

Example 2: A manufacturer of goods who makes goods in many different countries

For example, a 4PL service would be a good option for a multinational manufacturer whose supply chain is complex and that covers more than one country. A 4PL provider will handle logistics across regions, manage various 3PL providers and make sure international regulations are followed by the manufacturer, enabling the manufacturer to concentrate on production.

Example 3: Growing D2C Brand

If a direct to consumer (D2C) brand wants to scale, it could start working with a 3PL to handle inventory and fulfillment. As the business grows and expands into new markets, the 4PL model may be a good transition for the sake of centralizing logistics management and gaining strategic insights.

Kusshal Loggistics Services Can Help You!

With its vertical expertise in 3PL and 4PL, Kusshal Loggistics is uniquely placed to help the businesses that are exploring 3PL and 4PL options. Their services provide for a wide range of industries and meet the flexibility and expertise necessary for modern supply chain management.

3PL Expertise:

• Warehousing & Ancillary Services: Kusshal Loggistics offers scalable warehousing solutions such as inventory management, order fulfilment and packaging services.
• Transportation Services: Kusshal’s fleet of vehicles is GPS enabled, which enables us to provide reliable and timely delivery.
• Technology Integration: Advanced WMS and tracking systems are used to improve operational efficiency and inventory visibility.

4PL Capabilities:

• End-to-End Supply Chain Management: Alternatively, Kusshal Loggistics can function as a strategic partner that manages multiple 3PL providers and facilitates flawless coordination.
• Optimization and Analytics: Kusshal uses technology and data insights to help businesses find inefficiencies and improve supply chain performance.
• Tailored Solutions: They are a reliable partner for large scale logistics management due to their customizable services that fit into the exact needs of complex supply chains.

When considering 3PL versus 4PL, what determines the best fit for your needs is your specific requirements, but working with a partner like Kusshal Loggistics means you get the resources and expertise you need to succeed.

Conclusion

One important choice for your business is whether to use 3PL or 4PL warehousing, and this decision is based on your business’s size, complexity and your goals. 3PL is a specialized service of logistics services with emphasis on execution, while 4PL is a holistic solution which understands strategy as well as oversight. Knowing the advantages and disadvantages of each model will assist you in matching your logistics solution with the greater objectives of your business.

Whether you need 3PL support for specific tasks or 4PL partner for end to end supply chain management, Kusshal Loggistics has the solution to accelerate your efficiency and growth. Kusshal Loggistics has the expertise, technology and dedication to deliver that can help your business leverage the intricacies of modern logistics with confidence.