Trying to pick between 3PL vs. 4PL logistics partners? Or just want some background on both to help you build your business? We’ve got you covered.
The accelerated shift to online working, living and shopping has had a huge impact on businesses all over the world. In Australia, we’ve seen the effects of a strained supply chain in our supermarkets, but in reality almost every business who sells products has a story to tell.
Online sales in Australia recorded a 31.8% year-on-year growth during the 2020/21 FY, according to Australia Post. From July 2020 to July 2021, Australia’s online shopping grew almost 32%, nearly equal to the 33.2% increase of the previous fiscal year. These numbers are only continuing to rise in 2022.
For businesses selling a lot of product online, freight is the new battleground. And it’s a low-margin one. Customers expect free delivery, free returns and flexible returns windows, and the consequences of not meeting the mark are steep.
To provide that professional shipping experience, add in some accountability and still maintain visibility over the process, many businesses look to outsource their logistics to a third-party logistics provider (3PL) or fourth-party logistics provider (4PL).
If you’re currently weighing up 3PL vs. 4PL, it’s important that you get that decision right – picking the right freight partner is the difference between having happy customers and happy competitors.
We know it’s not an easy decision, and we work extensively with both 3PL and 4PL logistics businesses, so we’ve distilled what we know into this article. First, let’s take a look at each in some detail.
What is 3PL logistics?
A third-party logistics partner takes over a section of your supply chain and takes responsibility for your inventory and shipping. 3PL logistics partners have their own resources and infrastructure – for example, a warehouse full of staff – which a business can outsource to if they don’t have the means or desire to do it themselves.
Your 3PL partner will often have their own relationships and rate cards with carriers, which they’ll use to send your products wherever they need to go.
As well as storing, picking and sending inventory, some 3PL providers can also look after customs brokering, freight forwarding, contracts and more – making them a hybrid 3PL/4PL.
Benefits of 3PL logistics
- No need to have your own warehouse
- Outsourcing a large chunk of work
- The provider takes responsibility
Challenges of 3PL logistics
- Some carriers don’t work with brokers
- Your customer experience relies on picking a good partner
- You don’t have as much control over the returns process
What is 4PL logistics?
A fourth-party or 4PL logistics provider is less about physical infrastructure and more about relationships and business strategy.
They connect you with carriers, using their existing relationships to secure you rates that you wouldn’t otherwise have access to.
They can also look at your supply chain from a strategic perspective, as well as how it connects with the rest of the business. A good 4PL partner will suggest ways for you to align departments, tighten the belt and improve customer experience at every step.
You’d typically engage a 4PL logistics partner if your freight operation is starting to overwhelm your business (perhaps because of sudden growth), you have some bloat across your supply chain, or you’re just feeling like you’re not getting the best rates and service from your carriers.
Benefits of 4PL logistics
- Established relationships and buying power with carriers
- Invoice auditing, operations and data management taken care of
- Outsourcing a task that requires considerable resources and expertise
- It’s like having a consultant engage with your business to drive positive change
Challenges of 4PL logistics
- Some carriers don’t work with brokers
- Freight broker margins vary over time and depend on how much you’re shipping
What to consider when deciding 3PL or 4PL
There’s no black and white way to make a decision on what kind of partner to outsource your logistics to. Every business has different freight needs and business strategies.
So while we can’t give you a straight-up recommendation, we can give you a list of the questions you need to ask yourself when choosing between 3PL vs. 4PL logistics:
- Is logistics a core competency of your business, or do you want it to be?
- Do you have a warehouse (and is it staffed)?
- Are you willing to negotiate with carriers?
- Do you have a team to manage freight internally?
- How much control do you want over the customer experience?
- Are you happy with the efficiency of your supply chain?
3pl vs 4pl: which should you choose?
Here’s an easy table to help you pick the right logistics partner.
|Order fulfilment||✅ ✅ ✅||❎|
|Warehousing||✅ ✅ ✅||❎|
|Inventory control||✅ ✅ ✅||✅ ✅|
|Carrier rates||✅ ✅||✅ ✅ ✅|
|Supply chain optimization||❎||✅ ✅|
|Customer communications||✅ ✅||✅|
|Returns management||✅ ✅||✅|
|Business strategy||❎||✅ ✅|
Struggling to find a 3PL or 4PL logistics partner?
MachShip isn’t a 3PL or 4PL logistics business – we’re a freight management platform which serves wholesalers, retailers, 3PLs and 4PLs.
We’re proudly independent of logistics businesses, transport carriers and freight onsellers – however, we do have great relationships with many.
Our centralised freight management solution removes the need to transact using multiple carrier portals and provides consistency across operations. Wholesalers, retailers, 3PLs and 4PLs love us because we make their job easier and save them money.
So if you’d like an introduction to a good 3PL or 4PL logistics partner, please get in touch. We’re happy to make a connection with a provider that suits your needs.
How MachShip works with 3PLs and 4PLs
If you ship a lot of freight, you’re likely dealing with a mess of rate cards, carrier portals and consignments as you try to balance your huge workload with trying to get the best price and speed.
Comparing carriers can mean logging into one portal, writing down their price, and then logging into another carrier portal to compare.
MachShip consolidates your entire shipping function, and hundreds of Australian carriers, into one browser window. You can compare prices, create consignments, track packages and then reconcile invoices in just a few clicks. We also integrate with the rest of your systems to ensure a smooth and seamless flow of data around your business. Your customer service department especially will thank you for using MachShip!
Here’s how it works in a little more detail.
BYO Carrier Accounts
You and your 3PL or 4PL logistics partner will have their own carrier accounts and rate cards. Those plug straight into MachShip and are all visible and comparable in one window, for both you and your partner.
You and your logistics partner can manage one-way-same-way despatch processes across all carriers. MachShip allows you to easily price, consign and manifest with carrier systems in real-time.
MachShip provides full visibility of all tracking events for your logistics partner, your internal teams and your customers. We use a common language across all carriers so it doesn’t matter who’s delivering the freight – everyone sees the same thing.
MachShip’s integrations automate end-to-end processes across pricing, consigning, manifesting and tracking. This makes your logistics partner’s life easier, but it also helps you create a smoother, faster experience for your customers. And that’s what it’s all about at the end of the day.
Ready to ship smarter?
Take the first step to easier freight management with MachShip. Onboarding is simple, and you’ll start seeing the benefits immediately. We integrate with most 4PL and 3PL logistics partners, and all widely-used ecommerce platforms.
Book a demo now with one of our cloud logistic consultants to find out if MachShip can save you time and money.