3PL vs. 4PL: How Much Should You Outsource?

In recent years the rise of e-commerce fulfillment and longer, more complex supply chains have led shippers to outsource more of their supply chain operations to third-party logistics (3PL) providers.

Generally speaking, 3PLs arrange and execute physical end-to-end transportation and logistics for goods in transit and in storage, across the shipment life cycle. The decision to use them is simple; 3PLs have the specialized, real-world experience and deep relationships to a) navigate the complexities of routes, modes, schedules and pricing to ensure reliable, affordable service; and b) know whom to call and what levers to pull when a shipment goes sideways. 

That adds up to valuable time the shipper can re-dedicate to internal operations, strategy and planning for the core business. It does not, however, make for a “set it and forget it” supply chain. First, the supply chain is still a subset of a larger, end-to-end value chain that extends beyond shipment transportation and logistics, to encompass the entire order cycle from procure to pay. Secondly, supply chains are increasingly data- and technology-driven, drawing in new outside partners, platforms and portals that refine market signals and optimize processes. The data only has value if someone is monitoring network activity, interpreting the data and responding with real-time operational decisions. 

The result: Many shippers who expected a 3PL to free them to do their day jobs have instead found themselves drowning in more visibility, agility and collaboration than they can handle. Would outsourcing orchestration of the entire supply chain — including partner and technology integration, monitoring and planning — to a fourth-party provider (4PL) make things better, or just surrender control when disruption hits and engagement is critical. 

Eric Rempel, chief innovation officer with Chicago-based physical 3PL and supply chain software solutions developer Redwood Logistics, has a few helpful thoughts. Read 3PL vs. 4PL: How Much Should You Outsource? To find out more.

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