If you’re the proprietor of an eCommerce business, there is a very good chance you’ve come across terms like 3PL and 4PL order fulfilment. But what do these terms mean? What are the differences between the services and what impact does it have on your business to choose one type of eCommerce fulfilment over the other?
In this article, we discuss 3PL and 4PL order fulfilment and the benefits that each can provide to your eCommerce business.
3PL vs 4PL – your options for eCommerce fulfilment
As a growing online business, a time will most likely come when you have to consider outsourcing your fulfilment to maximise your rate of growth and you will be faced with choosing between a third-party logistics service provider (3PL) and a fourth-party logistics service provider (4PL).
Before deciding, you must understand how they differ. The main difference between these services is how they relate to you, the seller.
With 3PL services, there is a straightforward relationship between the provider and the online seller. The costs involved must be agreed upon beforehand between the provider and the merchant. The service provider will then strive to meet the seller’s expectations. This way, the partnership between the provider and the seller ensures a successful daily business operation.
On the other hand, with a 4PL service, most of the decisions regarding the supply chain are made by the provider. The relationship focuses on a long-term engagement, meaning the provider will use its networks to enable successful and efficient fulfilment. So, a 4PL service provider must be involved in the strategy creation, coordination, planning, and organisation of the supply chain – for this reason, 4PL services cost more than 3PL services do.
What is 3PL eCommerce fulfilment?
A 3PL service provider will enable you to outsource warehousing, distribution, and other fulfilment services. Dealing with a 3PL provider will lower your operating costs because they distribute staffing and storage costs among many customers. Additionally, their charges only cover the exact staff time and storage space required to process orders and store products.
In a third-party logistics service arrangement, you will retain all your management responsibilities and outsource logistics and transport operations to a third party.
The third party can also provide supplementary services like customised or standard packaging for value addition and enhanced customer experience. The services provided by 3PLs typically include:
- Managing returns
- Inventory management
What is 4PL eCommerce fulfilment?
As we’ve already discussed, a 4PL service provider makes independent decisions. The provider will take charge of the entire logistics involved in the entire supply chain.
A 4PL provider coordinates the logistics process and ensures its clients get the best deals. The 4PL company develops a long-term logistics strategy and coordinates many market participants involved in the supply chain.
The participants a 4PL company deals with include:
- Parcel delivery service providers
- Freight forwarders
- Information technology service providers
What does 4PL bring to the eCommerce table?
The focus of a 4PL service provider is to optimise the operations in the supply chain. For this reason, the provider will be in charge of your operations allowing you to focus more on the core business operations.
This will free your hands so you can have time to expand and grow your business, unlike the 3PLs that focus on the daily operations of supply chain management.
A 4PL company has a long-term relationship with the seller (you). This is because the company is involved in organising, coordinating, designing, and leading the supply chain. On the other hand, the relationship between a seller and a 3PL provider is more transactional.
Fourth-party logistics service companies are non-asset based. All they can own is intellectual capital and an IT infrastructure. They mainly provide expertise in logistics and focus on helping their customers find the best and most affordable vendors and suppliers.
On the other hand, 3PL companies own all or many of the assets required to run the supply chain, including warehouses, distribution centres, and trucks, among others.
4PL providers aim to reduce the operational costs of the supply chain. This improves performance and profitability. A 4PL company will help your company cut costs at every stage of the supply chain. They optimise procurement practices, reverse logistics, and lean manufacturing.
What does 3PL offer your eCommerce business?
The greatest advantage of 3PLs is that their resources, including transportation, space, and labour, are scalable.
This means that as your company grows, the provider will still be able to take care of your inventory needs to allow you to meet the growing demand and achieve peace of mind knowing that warehouse and inventory costs will never harm your bottom line.
Improved Customer Service
Today’s economy is driven by experience and must be as customer-facing as possible. 3PL companies ensure faster and more efficient order delivery by engaging qualified and experienced drivers, thereby improving customer experience.
Improved customer service can boost your revenue and increase the customer lifetime value (CLV).
When conducting global trade, a 3PL provider can help you overcome border obstacles. 3PLs are knowledgeable in government agencies, regulations, and local markets and are better placed to help you with all elements of cross-border shipping, such as documentation, customs clearance, etc., leaving you to focus only on your areas of core competence.
ParcelPlanet – your trusted partner for eCommerce fulfilment
If you are looking for an efficient way to fulfil your eCommerce orders and meet the demands of your customers, then your business can benefit hugely from partnering up with ParcelPlanet.
As a complete eCommerce fulfilment service provider, we help eCommerce businesses exceed their customer expectations through our full range of services such as next-day delivery and returns management.