Immediacy is a prominent demand in eCommerce, with 65% of U.S. consumers expecting retailers to deliver shipments within two to three days.

To fulfill that condition, brands need a capable logistics partner that can enhance customer satisfaction and business success.

However, determining what type is appropriate can be challenging, especially when choosing between third-party logistics (3PL) and fourth-party logistics (4PL). Each category of provider provides distinct services to accommodate various business needs, so it’s critical to make the right selection for your needs.

Keep reading as we explore 4PLs, how they compare to 3PLs, and the circumstances that make them the better option for your retail operations.

Emerging trends in the logistics industry

As the world continues to globalize and digitalize, you must be prepared to keep up with the shifts in the logistics industry.

4PL providers are uniquely positioned to adapt to these changes and support businesses in navigating this evolving landscape.

The growth of eCommerce

eCommerce has grown exponentially in recent years, and that trend is expected to maintain its trajectory. Worldwide, the industry increased its share of all retail sales from 15% in 2019 to 21% in 2021 and currently constitutes an estimated 22% of sales.

This expansion necessitates efficient logistics management to cater to the high volume of online orders and consumers’ expectation of fast, reliable delivery.

The role of technology

Developments in artificial intelligence (AI), machine learning, and big data are transforming and improving how businesses manage their logistics operations.

These technologies enable more accurate forecasting, optimized routes, real-time tracking, and increased efficiency in order fulfillment.

Sustainability in logistics

Sustainability is becoming a critical consideration in logistics. According to the Environmental Protection Agency (EPA), the transportation sector was the largest contributor to greenhouse gas emissions in 2020, accounting for 28% of total emissions. In response, businesses are increasingly aware of their environmental footprint and are seeking ways to adopt more environmentally friendly operations.

A key strategy to meet sustainability targets is to reduce freight miles. This is possible through route optimization, which can significantly decrease emissions and make a substantial impact on environmental conservation.

With their ability to optimize routes and consolidate shipments efficiently, 4PL providers can significantly help businesses cut carbon emissions.

Supply chain visibility

Visibility in the supply chain is another rising trend in the logistics sector. Businesses want to know where their goods are at all times and expect transparency from their logistics providers.

These industry developments catalyzed the increasing complexity of logistics management, in turn contributing to the growing need for businesses to partner with experienced and technologically advanced 4PL providers. They’re well equipped to keep up with these fluctuations and help businesses stay competitive.

What is first-party logistics?

Before digging into 3PLs and 4PLs, we need to understand first-party logistics (1PL).

First-party logistics refers to businesses managing their own logistical operations. They directly oversee warehousing, transportation, and the fulfillment of their products, which encompasses storing inventory, packing orders, and shipping them to customers.

This approach requires extensive resources, including manpower, time, storage facilities, and transportation infrastructure. As such, it may be feasible for small businesses with limited operations, but as companies grow and their distribution expands, the management complexities multiply. This often leads businesses to consider third-party and fourth-party logistics partners.

The challenges of 1PL

The appeal of managing logistical operations in-house is the direct control it provides. However, 1PL comes with a variety of challenges that may hinder your business’s ability to grow and evolve with market demands.

Cost and resources

The foremost obstacle is the substantial cost of running a logistics network. It involves heavy investment in infrastructure, which includes warehousing, a fleet of vehicles, supply chain software, and other necessary resources. Maintenance for this infrastructure can be a heavy financial burden as well, often requiring dedicated staff, routine servicing, and unforeseen repair costs.

Additionally, the operation of an efficient logistics network demands a highly specialized team with knowledge in supply chain management. Hiring, training, and retaining this talent thus adds to the overall cost.

Lack of scalability

An inherent limitation of a 1PL model is its lack of scalability.

When your business experiences a sudden surge in demand, it can be challenging to scale your operations quickly to meet this spike. Conversely, during slower periods, you may find your resources underutilized. That lack of flexibility can lead to inefficiencies and lost opportunities.

Compliance and liability issues

Adhering to the regulatory standards of logistics and supply chain management can be a complex task, and falling short will result in costly penalties.

As a 1PL, your business takes on this responsibility and risk. You’re also liable for any damages or losses that occur during storage and transportation.

Limited technology and innovation

In-house operations may not have access to the same level of technology and innovation as third-party and fourth-party logistics providers.

These services often invest heavily in technology to improve efficiency and offer more robust services, such as advanced tracking systems, AI-driven forecasting tools, and state-of-the-art warehouse automation solutions.

Focus shift

Managing logistics internally can divert your focus away from core business operations. Instead of strategizing on product development, marketing, and sales, a significant portion of your resources goes toward overseeing logistical processes.

What is a 3PL?

A 3PL is an outsourced provider that manages all or a significant portion of an organization’s logistical requirements. It handles warehousing, transportation, packing, and, sometimes, order fulfillment.

3PLs are pivotal in physical product flows: They store goods, pack them when orders arrive, and ensure they reach customers promptly. This enables businesses to focus on their core activities, such as product development and marketing.

What is a 4PL?

A 4PL is the next level above a 3PL. This type of provider executes logistical operations like a 3PL but also strategizes and manages the entire supply chain.

The roles and responsibilities of a 4PL extend beyond the operational aspect to more strategic functions. These include supply chain consultation, network analysis and design, warehousing and distribution strategy, and technology implementation.

In essence, a 4PL becomes the single point of contact for all supply chain operations.

Check out MyFBAPrep’s full suite of services designed to upgrade your supply chain logistics.

Differences between a 3PL and a 4PL

3PLs and 4PLs oversee warehousing, packing, and shipping in the order fulfillment process. However, a 4PL coordinates the whole process from a broader view, integrating multiple 3PLs, carriers, and freight forwarders under a single contract.

For instance, a 4PL will dive deeper into optimization strategies. They provide analysis, forecasting, and strategic planning to optimize the supply chain.

They also tend to play a more direct role in customer communications and services. A 4PL can manage customer inquiries and complaints, process returns, and handle other consumer-related issues.

Meanwhile, a 3PL focuses on the operational efficiency of specific tasks. They’re generally geared toward delivering products effectively.

Ready to explore further? Read our detailed guide on The best fulfillment companies: The best 3PLs and 4PLs for eCommerce and retail brands.

A detailed breakdown of the 4PL process

A 4PL manages the entire logistics process, from coordinating transportation to overseeing shipping and last-mile delivery management and everything in between.

Transportation coordination

Coordinating transportation is one of the most critical of a 4PL’s duties. It entails selecting the most cost-effective and efficient modes of transport, managing multiple shipment providers, and overseeing the end-to-end execution of those logistics.

Their goal is to move your goods from point A to point B in a way that optimizes costs, cuts delivery times, and maximizes customer satisfaction.

Warehousing procedures

A 4PL also manages the receipt, storage, and dispatch of goods. They implement advanced warehousing practices such as cross-docking, just-in-time inventory management, and dropshipping for systematic organization. By optimizing warehousing procedures, a 4PL ensures inventory is stored safely, managed efficiently, and moved swiftly.

Inventory management strategies

Effective inventory management is crucial to avoid stockouts and overstocking. A 4PL employs advanced forecasting techniques and real-time inventory tracking to maintain optimal inventory levels. They also dive deep into data analytics to predict demand patterns, plan for seasonality, and account for market trends.

Shipping and last-mile delivery management

The final aspect of a 4PL’s responsibilities is overseeing shipping and managing that crucial last-mile delivery. The “last mile” is often the most challenging logistical step. It requires precision, speed, and excellent communication to ensure customer satisfaction.

A 4PL coordinates with various last-mile delivery partners and offers solutions such as real-time tracking, flexible delivery options, and seamless return processes. The provider ensures products reach the end customer within the promised time frame and without sacrificing delivery quality, resulting in a positive consumer experience.

4PLs go beyond the execution of logistics. They adopt a strategic and holistic approach to supply chain management — one that considers all encompassing elements, uses advanced analytics for decision-making, and keeps customer satisfaction at the forefront.

Choosing the right logistics model for your business

When deciding between a 3PL and a 4PL, consider your business’s size and complexity, supply chain needs, and future growth aspirations.

Here are the crucial factors to keep in mind when making this decision:

• Your business size and scope: If your business operations are limited and your logistics needs are relatively straightforward, a 3PL might be all you need.

However, if you operate on a larger scale or have more complex logistics needs — such as managing multiple carriers or handling international shipments — you may benefit from a 4PL’s comprehensive management and strategic capabilities.

• Your internal resources and expertise: If your company has a knowledgeable in-house logistics team capable of managing relationships with multiple service providers, working with a 3PL could suffice.

On the other hand, if you lack internal logistics expertise or prefer to focus your resources on core business activities, a 4PL would be a better option, as it takes the burden of logistics management off your shoulders.

• Your growth ambitions: A 3PL works well if you plan to keep the status quo. But, if you intend to expand into new markets, diversify your product offerings, or scale up your operations, a 4PL — with its strategic approach and capacity to manage complex, multi-faceted supply chains — would be more suitable.
• Your need for visibility and control: A 3PL typically provides visibility and control over individual logistical activities, such as warehousing or transportation. However, if you require end-to-end visibility and control over your entire supply chain, from suppliers to end customers, a 4PL would be the wiser choice due to its integrative role and use of advanced supply chain technologies.

While both 3PLs and 4PLs have their merits, your business’s specific needs, capabilities, and future plans will dictate which type of provider you require. Thoroughly assess the above factors to choose the logistical model that best aligns with your business strategy.

Why retailers trust MyFBAPrep as a 4PL

Retailers across the globe trust 4PL providers like MyFBAPrep because of the numerous benefits and features we offer. These include end-to-end supply chain management, convenience, cost-effectiveness, and technological advancements.

Streamlined operations

With MyFBAPrep, retailers gain a partner who excels at streamlining their logistics.

By integrating and managing all activities and functions under a single umbrella, we simplify logistical processes and reduce administrative tasks so our clients can focus more on their core business activities.

Cost efficiency

Efficient logistics management can yield significant cost savings, which is one of MyFBAPrep’s foremost offerings.

We help sellers reduce overall logistical expenses by leveraging economies of scale and optimizing various fulfillment processes. Plus, our holistic management approach ensures costs are controlled at every step of the supply chain.

Advanced technology

MyFBAPrep employs advanced technology to improve the efficiency and visibility of the supply chain.

With the aid of cloud-based technology and artificial intelligence, we offer real-time tracking, predictive analytics, and other cutting-edge features that enable retailers to maintain better control over their supply chain, react quickly to changes, and make data-driven decisions.

Customized solutions

Understanding that no two businesses are alike, MyFBAPrep offers customized solutions tailored to each partner’s needs.

Whether managing multi-channel distribution, handling cross-border shipments, or dealing with seasonal demand fluctuations, MyFBAPrep’s flexibility allows us to adapt our services to cater to every client’s specific requirements.

Global network and expertise

Thanks to an extensive global network and deep industry knowledge, MyFBAPrep can handle the complexities of international logistics, making us an ideal partner for sellers looking to expand globally.

Our expertise spans regulatory compliance, customs clearance, international shipping protocols, and more, ensuring a smooth and hassle-free international supply chain operation for clients.

MyFBAPrep serves as a one-stop solution for retailers’ logistical needs. With a focus on efficiency, cost reduction, technology, customization, and global expertise, we provide the tools and support necessary for sellers to thrive in today’s competitive marketplace.

Wrapping up — The crucial choice between a 3PL vs 4PL

Whether to partner with a 3PL or a 4PL depends on your business’s unique needs and scaling ambitions. As you grow, you may find it’s more beneficial to transition from a 3PL to a 4PL so they can manage the increasing complexity of your logistics.

As a 4PL, MyFBAPrep will support your business’s growth by providing strategic oversight, seamlessly integrating various logistical services, and becoming the single point of contact for your fulfillment needs. Learn more about how we can elevate your business one shipment at a time.