4th Party Logistics: Your Guide to Understanding and Finding Reliable 4PLs for Fulfillment!

Eliza Seymour

May 30, 2023

4th Party Logistics: Your Guide to Understanding and Finding Reliable 4PLs for Fulfillment!

In today's fast-paced and highly competitive business landscape, companies are constantly seeking innovative solutions to streamline their supply chain operations. One such solution that has gained significant prominence is 4th Party Logistics, or 4PL.

What are 4PLs?

4th Party Logistics providers, commonly known as 4PLs, are strategic partners that offer comprehensive supply chain management services. Unlike traditional logistics providers, 4PLs act as integrators, overseeing and coordinating all aspects of a company's supply chain operations.

Their role extends beyond the physical movement of goods and involves managing multiple 3PLs, vendors, and other service providers to optimize the supply chain process.

Difference between 3PL and 4PL

While 3rd Party Logistics (3PL) providers primarily focus on specific logistics functions such as warehousing, transportation, and distribution, 4PLs take a more holistic approach.

They act as an extension of a company's internal logistics function and assume the responsibility of overseeing and optimizing the entire supply chain process. A 4PL provider serves as a single point of contact, leveraging their expertise and network to ensure seamless coordination among various stakeholders.

Benefits of 4PLs

Streamlined Supply Chain

By entrusting the management of your supply chain to a 4PL, you can achieve greater efficiency and cost savings. 4PLs leverage their expertise and industry insights to optimize transportation routes, minimize inventory carrying costs, and identify bottlenecks in the supply chain.

Focus on Core Competencies

Partnering with a 4PL allows businesses to focus on their core competencies while leaving the complexities of supply chain management to the experts. This enables companies to allocate more resources and attention to their product development, marketing, and customer service.

Scalability and Flexibility

4PLs offer scalable solutions that can adapt to the changing needs of your business. Whether you experience seasonal fluctuations or anticipate rapid growth, a reliable 4PL can adjust the supply chain operations accordingly, ensuring smooth operations and customer satisfaction.

Enhanced Visibility and Analytics

4PLs leverage advanced technologies and analytics tools to provide real-time visibility into your supply chain. This visibility enables better decision-making, proactive issue resolution, and the ability to identify areas for improvement.

How Much Do 4PL Providers Charge?

4PL providers typically employ a variety of pricing models to meet the unique needs of their clients. The cost structure can vary based on factors such as the scope of services, the complexity of the supply chain, and the level of customization required. Some of the common pricing models used by 4PL providers are:

Performance-Based Pricing

Some 4PL providers offer performance-based pricing, where the cost is directly tied to predefined key performance indicators (KPIs) and metrics. This model ensures that the provider's compensation is directly linked to the success and efficiency of the supply chain. Performance-based pricing incentivizes the 4PL to continuously improve operations and deliver tangible results for their clients.

Transactional Fees

In this model, the 4PL charges fees based on the number of transactions or activities carried out in the supply chain. This can include fees for order processing, warehousing, transportation, and other specific activities. The advantage of transactional fees is that they provide transparency and allow clients to have a clear understanding of the cost structure associated with each transaction.

Fixed Pricing

Some 4PL providers offer fixed pricing models, where clients pay a set monthly or annual fee for a predetermined scope of services. This model provides predictability and stability in terms of budgeting and allows clients to have a clear understanding of their costs without worrying about fluctuations based on transaction volumes or performance metrics.

Value-Based Pricing

In value-based pricing models, the cost is determined by the perceived value of the services provided by the 4PL. This model takes into account the strategic impact and value that the 4PL brings to the client's business. The pricing is based on the overall benefits and return on investment (ROI) that the client receives from the partnership.

How to find a 4PL?

The simple answer? Talk to supply chain consultants. They’ll take over the tasks listed below and possibly more, saving you time and resources you can otherwise choose to spend yourself on:

  • Defining your logistics requirements.
  • Conducting market research to identify potential 4PL providers (the Exchange can help!)
  • Evaluating credibility, expertise, and industry experience.
  • Considering tech stacks of plausible 4PL providers.
  • Assessing networks, resources, and scalability.
  • Checking the financial stability of the providers.
  • Requesting detailed proposals and conducting interviews.
  • Checking references from existing or past clients.
  • Evaluating costs and value beyond pricing.
  • Making a decision based on alignment, track record, and comprehensive solutions.

Supply chain consultants are connected across webs of business networks, helping clients find a diverse range of services and partnerships to conduct business with.

Not only are they aware of and known in the market, but they’re also loyal to the client, giving even a startup the leverage of experience, repertoire and negotiation power.

In a nutshell, consultants such as the ones you’ll find at Izba will ensure you find the best services at the lowest cost where it’s their job to figure out how. 

Before You Decide

A decision such as hiring a 4PL should be considered carefully. You can find several options but meeting a good match depends on more than just luck and research. Prior experience and understanding of factors to consider when choosing a 3PL and a 4PL can be decisive.

Make sure you’re making the right call after careful consultation. You can count on Izba to be available for all queries and questions!