It can be challenging to choose between 3PL and 4PL. Both have advantages and disadvantages, and your choice can significantly impact your supply chain’s costs and efficiency.
There are several things to consider when deciding between 3PL and 4PL. Here’s a breakdown of what 3PL and 4PL companies do, their advantages, their disadvantages and how your choice can affect your supply chain
What Is 3PL?
Third-party logistics or 3PL is a business model where companies outsource their shipping logistics. Instead of organizing your transportation and storage of goods, the 3PL utilizes its already-existing supply lines and established relationships with carriers.
Order the Right Packaging Materials for Shipping to Protect Your Goods and Products During DeliveryFor smaller companies, a 3PL can help reduce costs and make your supply chain more efficient. For companies looking to expand, external expertise can help make your transition easier.
Advantages of 3PL
Third-party logistics companies are experts in optimizing supply chains. They can help you choose the most cost-efficient packing materials for shipping. As industry experts, they have direct connections with transport or storage companies and can arrange the most cost- and time-efficient shipping routes for you.
Instead of reinventing the wheel, you can save time and money using existing models and shipping systems. A 3PL company can alter your current shipping model to be more effective, taking advantage of established routes, shipping modes and drayage services.
- Completes International Paperwork for You
Part of a 3PL company’s job is to handle paperwork and ensure your company is up to date with tariffs, insurance and customs documents. They also deal with the Bill of Lading, an often long and complicated document necessary to unload once your shipment has reached its port. By letting the experts deal with the paperwork, you can turn your focus inward toward your company.
Disadvantages of 3PL
Contracting with a 3PL company means you lose some control over your business’s shipping and storage aspects. Although this can decrease costs, it also means letting another company take control of part of your business.
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- Customer Service Problems
Your 3PL partner interacts with your customers, sometimes more than you. You need to ensure their interactions are in line with your company image and mission statement.
If you aren’t shipping enough to pay for the 3PL company, costs can rise quickly. Their knowledge of how to pack a box for shipping efficiently won’t always outweigh the cost of hiring them.
What Is 4PL?
Unlike 3PL companies, a 4PL provider is responsible for overseeing and managing your company’s supply chain. In addition to supervising any contracted 3PL companies, a 4PL provider can also handle organization and inventory tracking.
They’re responsible for handling everything from finding your custom cardboard boxes to analyzing your shipping costs.
Advantages of 4PL
- Benefit from Their Expertise
Fourth-party logistics companies are experts in managing everything to do with the supply chain. Avoid making expensive mistakes by following their expert advice.
Instead of working with many small companies, you receive all communication about supply chains from your 4PL. For large companies, a single point of contact simplifies your workload and makes it possible for you to focus on other aspects of your business.
A 4PL company offers a simple solution to a complicated question. You can rely on them to deal with the challenges associated with optimizing your supply chain, instead of getting involved with problems that arise yourself.
Disadvantages of 4PL
Unlike a 3PL company, a 4PL company takes complete control of the organization and optimization of your supply chain. Some companies worry about giving up that much control to an outside company.
The high costs associated with a 4PL make working with one cost-effective only for large companies. Although they might benefit from the expertise, smaller companies are unlikely to be able to afford the extra costs.
- Difficult to Change Companies
Because a 4PL provider is so intertwined with your company’s inner workings, it can be challenging to change companies or return to working only with 3PL companies. There is a handover period that could cause delays in your shipping.
3PL vs. 4PL: A Summary
The collaboration and competition between 4PL and 3PL services can make choosing between the two seem confusing, but there are clear benefits and drawbacks to each. Deciding between working with a 3PL or 4PL company is highly dependent on your company’s profile.
For many, the deciding factor is the cost. For smaller companies, hiring a 4PL doesn’t make financial sense. It’s best to determine if a 3PL company can help you operate more efficiently, and to only work with a 4PL company once you have expanded.
Larger companies should ask themselves if giving up control over the organization of optimization of their shipping chains is worth simplifying their supply chain. Using a 4PL company means you can focus on your products, making them as high a quality as possible.
The Bottom Line
Choose a logistics company that can help your company meet its economic and growth goals. For efficient packaging choices that can lower costs, including hazardous materials, let Air Sea Containers help. Call us at (866) 596-9448.
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