Typically the best partner a growing ecommerce brand can take on to handle inventory, order, warehouse, and transportation management is a 3PL. That partnership will bring you the cutting-edge automation, owned and operated warehouse operations, guaranteed SLAs, and high-touch support you need to scale sustainably. However, there are other types of partners out there that may court your eye, namely a 4PL. So what’s the difference between a 3PL and a 4PL, and which is better for your ecommerce brand? Let’s take a look.
What is a 3PL?
A third-party logistics provider like ShipMonk relieves the stress of in-house order fulfillment that begins to crush ecommerce brands as they grow. We provide warehouse/fulfillment center space that is fully owned and operated by our company. We have the cutting-edge automation and personnel to fulfill orders as swiftly and accurately as possible while eliminating supply chain stress by securing the best shipping speeds, rates, and tracking available. Overall, we help ecommerce brands of all sizes across all verticals manage their:
What is a 4PL?
A fourth-party logistics provider has 3PL capabilities, but an additional outside contractor oversees all supply chain operations. This party acts as the admin and point person for managing the ins and outs of your order fulfillment, as well as other partners you may work with like manufacturers, freight forwarders, and outsourced customer service teams.
The other major difference between a 4PL vs. a 3PL is that although a 4PL does manage the logistics of your order fulfillment, a 4PL doesn’t necessarily own the warehouse or fulfillment center space where order fulfillment takes place. This means that they may not own the fulfillment technology or picking and packing equipment either. So yes, there are positives of working with a 4PL (oversight, feedback, and progress reports that help prevent the big picture from consuming you). But the cost of those benefits is management that is more removed from your operation than a 3PL would be.
Comparing 3PLs vs. 4PLs
If you own an ecommerce business, you likely feel the need to be hands-on with your operation. While it is important to learn to delegate and focus on higher-priority tasks as you grow your brand, being able to have some hands-on involvement matters. When you work with a modern 3PL like ShipMonk, you have the opportunity to do that by harnessing our entrepreneur-in-mind, fully-integrated software. With a 4PL there is more separation. They have their own management team to fully run the admin of your operation.
Let’s further analyze this difference and other elements that truly matter when choosing a fulfillment partner.
Client Relations
3PLs have a closer relationship with clientele. ShipMonk, for instance, is all about customer-centric operations. We have dedicated account managers who set up clients for success, designated onsite support staff, and Happiness Engineers who work with clients to directly resolve issues. It’s a boots-on-the-ground approach that comes with an easy-to-reach customer service team in all our US facilities. 4PLs have a more transactional relationship with ecommerce brands and don’t necessarily have dedicated reps working personally with clients. They often outsource their support to overseas call centers, don’t have constant direct communication with warehouses, and the phone tag you may play leads to longer turnaround times for resolving issues.
Customer Communication
3PLs communicate with ecommerce merchants directly, which leads to faster resolution of queries and conflicts. That direct communication means everyone stays on the same page and on top of customer needs. Since 4PLs assume the role of all-around business intermediaries, that means customer requests, questions, and complaints are filtered through the 4PL first then make their way to the 3PL and then the warehouse, which can lead to inaccurate and delayed support case resolution.
Decision Making
When you work with a 3PL you can make more decisions about what’s best for your brand. For example, you can decide where to keep your inventory (ShipMonk has 12 global locations and can advise you which fulfillment center(s) best serve your customers). A 4PL will make those decisions for you. A 3PL like ShipMonk also offers customizable solutions while a 4PL is more cookie-cutter with its processes.
Management Styles
3PLs oversee fulfillment operations (warehousing, slotting, picking, packing, shipping, returns). 4PLs handle order fulfillment and manage your supply chain activities, i.e. dealing with manufacturers on your behalf.
Transparency
Most business owners want to know the ins and outs of their operation. 3PLs like ShipMonk provide clients with access to real-time, transparent data on shipping, inventory, order trends, etc. so you can optimize your demand forecasting and make better decisions for your brand. 4PLs have more of a “don’t worry; we’ll take care of it” mantra because they are rooted in taking over full admin capacity. Add to that, if you want to know the details of your financials at all times, unlike a 4PL, a 3PL like ShipMonk has transparent pricing and billing so you always know what you’re paying.
Warehouse/Fulfillment Center Space
4PLs tend to have more warehouse/fulfillment center space and more extensive fulfillment networks than 3PLs. However, you can take that two ways. On the one hand, this could potentially mean more inventory storage and geographically diverse inventory holding options. Then again, the grander the space the more clients there are in one facility, and as an ecommerce brand you may want to consider what it means to be a fish in a lake vs. a fish in an ocean, and what that means for the dedicated onsite attention your inventory and brand will receive. Also, as noted, 4PLs don’t necessarily own and operate every part of their warehouse/fulfillment centers whereas ShipMonk (an industry-leading 3PL) fully owns and operates its operations, which means your inventory is safer with us.3
Technology
Both 3PLs and 4PLs have a lot of technology in play. But since a 3PL is focused on supporting ecommerce growth and scalability while a 4PL is focused on supply chain management, 4PL technology isn’t tailored to brand needs the way 3PL technology may be. ShipMonk, for instance, in addition to our tech-enabled facilities, has proprietary software that was developed with the entrepreneur in mind. Our advanced, yet easy-to-use ecommerce platform includes 100+ integrations and allows you access to all aspects of fulfillment management and data.
Last, but Certainly Not Least ***Business Stability
There is a risk that ecommerce brands take when signing up with new and often-times VC-funded 4PL fulfillment companies that can go out of market quickly. 4PL providers that subsidize their lack of warehouse operations or are priced (at a loss) to win more business, are not sustainable for a long period of time. This is a root cause of 4PLs going out of business, as we’ve seen recently in the industry. Massive non-profitable, unhealthy 4PL operations like these leave merchants in a dangerous situation. For example, since 4PLs rely on a variety of different 3PLs to warehouse products and fulfill orders, if an individual 3PL in that network goes out of business and you have inventory there, the 4PL may not claim responsibility for what happens to it. This impacts a brand with lost sales, time, and disruption as they scramble to find another provider and rescue their inventory. Overall, the accountability and reliability just isn’t there for a 4PL the way it would be if you were partnering directly with a healthy, trusted, and experienced 3PL such as ShipMonk, which has strong SLAs and privately owned and operated operations.
A Logistics Choice That Lasts
For the sake of sustainable success, transparency, affordability, customer support, technology, and dedicated, reliable service to your ecommerce brand, the 3PL is more often than not the best type of logistics partnership for growing online businesses.
ShipMonk is one of the ecommerce industry’s leading 3PLs, and we’d love to help you secure your fulfillment ops in a way that makes sense for your brand. Contact us now to get started.
