Choosing the right fulfilment provider requires lots of research. There’s a lot to consider, such as pricing, location, and capacity. While looking into fulfilment providers, it’s likely that you’ll come across two types of fulfilment services: 3PL and 4PL.
3PLs and 4PLs are at the same time similar and different. While both provide eCommerce logistics services, 3PL providers are far more affordable and accessible for most eCommerce businesses. 4PLs are rarer, offering a service better suited to enterprise businesses.
Today, we’ll break down the key differences between 3PL and 4PL providers, helping you to get a better understanding of which kind of logistics service is best for your requirements.
In this article
What is a 3PL?
A 3PL, or third-party fulfilment service, is a company that specialises in providing fulfilment solutions to eCommerce businesses, or retailers who do a portion of their business online. Most 3PLs have a variety of services to offer their clients, and will work with them before the onboarding process begins to help them decide which services they’ll get the most out of.
Typically, a 3PL will handle all aspects of the order fulfilment process. This includes inventory tracking, warehousing and storage, picking and packing, shipping, and returns management. 3PLs have highly optimised operations that allow them to process orders more efficiently than if you were to do it in-house.
Additionally, tech-enabled 3PLs (like James and James) also provide inventory management software to make managing your inventory easy. This, along with advice from in-house fulfilment experts, will help you ensure you’re getting the most value out of your 3PL, and can help you to make smart business decisions that will affect the growth and profitability of your eCommerce business.
What is a 4PL?
A 4PL not only manages a 3PL on behalf of your business, but also manages areas of the supply chain outside of the fulfilment process. A 4PL takes a holistic approach to supply chain management, working to improve and optimise all aspects of your supply chain from suppliers to first-mile delivery, inventory and warehouse management (Note: 3PLs give you the tools and support to manage inventory, but won’t do it for you), logistic strategies, procurement, and more.
Benefits of a 3PL
A 3PL provider offers an affordable, efficient logistics solution to small, medium, and large businesses. If you’re moving significant volumes of goods, it can be difficult to find the time and resources to fulfil orders in-house. Without an optimised fulfilment process, eCommerce businesses struggle to keep up with volume and provide fantastic customer service experiences. Using a 3PL can help you keep up with the pace of growth whilst continuing to offer outstanding customer service.
Similarly, a 3PL allows eCommerce businesses to spend the time and energy previously used on order fulfilment into other areas of the business. A successful eCommerce business not only needs to fulfil orders; they need to acquire new customers, source new products, develop new partnerships, engage with their customers, and so much more. Outsourcing to a 3PL provider can help you give other areas of your business more love.
Another key advantage of outsourcing to a 3PL is data management. Data can be difficult to manage, especially if you’re selling across multiple channels. A tech enabled 3PL can help with your omnichannel fulfilment strategy, presenting you with all the necessary information to make informed decisions through one, user-friendly platform.
Benefits of a 4PL
Many of the benefits of a 3PLs can also apply to a 4PL, so we won’t repeat them here. A 4PL will act as the middleman between your eCommerce business and your 3PL, while also looking after various other components of the eCommerce supply chain.
Working with a 4PL offers a truly hands-off approach. A 4PL essentially acts as an outsourced department of your business, with a one-hundred-percent focus on increasing the efficiency of your supply chain, top to bottom.
If you’re looking to expand your operations to every single corner of the world, a 4PL can help you get there. A good 4PL has the resources, knowledge, and contacts to help you solidify a solid global supply chain and market presence.
3PL vs 4PL: key differences
Perhaps the biggest difference between 3PL and 4PL services is that when you outsource to a 3PL, you will be working with the 3PL directly. When you outsource to a 4PL, an employee from the 4PL will communicate directly with the 3PL on your behalf.
Under a 4PL, you’ll have less control over the fulfilment process, as 4PLs will make most decisions on your behalf. Here are some other key differences between a 4PL and a 3PL:
With a 3PL, you’ll have direct contact with their customer service team, so you can be assured that you’re in the loop with everything that’s going on in the fulfilment process. With a 4PL, you’ll usually need to contact a 4PL representative for them to make contact with the 3PL on your behalf, which can be inconvenient at times. This is especially true during times of urgency, or if you need to communicate messages to your customers.
The fulfilment process
3PLs are highly optimised services that are solely focused on providing quick and reliable fulfilment services to both your business and your customers. They have specialised facilities, equipment, workers, and technology, to ensure that customers orders can be picked, packed, and delivered accurately and on time.
A 4PL will work with a 3PL on your behalf to achieve the above, but order fulfilment won’t be their sole focus. Other areas of the supply chain are just as important to them, and as such, time and resources will be split between multiple areas.
By using a tech enabled 3PL, you will have full control over inventory management, the carriers you use, the locations you send your stock to (within your chosen 3PLs network), campaign planning, and much more. Nobody understands your business as well as you, so having ultimate control over your operations can give you peace of mind.
When outsourcing to a 4PL, you relinquish much of that control. While a 4PL, of course, has its benefits, you may find yourself distanced from the decision making process, as you won’t be working with your 3PL day-to-day.
Should I Use a 3PL or a 4PL?
It’s always best to consider your current circumstances when deciding whether to use a 3PL or a 4PL. If you’re a start-up business or you run a small business alongside your full-time job, neither a 3PL or a 4PL will probably be appropriate.
Only outsource fulfilment when you’re genuinely committed to growing your business, and when you’re already fulfilling over one-hundred orders per month. This will make sure you’re getting the most value out of a fulfilment partner, and not spending cash when it could be better spent elsewhere.
If you’re a medium-sized or large eCommerce business, a 3PL could be a great choice for you. Many of our clients have come to us when they’ve begun to experience rapid growth, or they’re in the pursuit of growing their business. A 3PL offers a good balance between creating a reliable service for your customers, affordability, and giving you autonomy to do what’s best for your business.
4PLs are best suited for large business approaching or already at enterprise level. That’s because they can take much of the supply chain management work away from you, and they’ll be able to continuously optimise the various links within your chain. Even at this level, a 3PL can be beneficial to those enterprises that prefer to retain an element of control in their operations.
Considering outsourcing to a 3PL? Get in touch with James and James Fulfilment
James and James are an award-winning 3PL provider with an international network of fulfilment centres. We combine fast, accurate fulfilment with industry-leading eCommerce software to provide our clients with an unbeatable 3PL service.
For more information about our fulfilment process, award-winning technology, and outstanding client support, please do not hesitate to get in touch.