Moving the goods without losing the margin · Warehouse or orchestration
3PL versus 4PL
A 3PL stores and ships your goods. A 4PL coordinates multiple providers. The difference is control and visibility.
Key facts
| 3PL | Operates a warehouse, receives inventory, picks, packs and ships orders |
|---|---|
| 4PL | Coordinates multiple logistics providers and owns the process and visibility layer |
| Cost | 3PL charges storage, handling and shipping; 4PL charges a management fee on top of provider costs |
| Control | 3PL gives operational control; 4PL gives orchestration and data across providers |
| When | 3PL when fulfilment is the bottleneck; 4PL when multiple regions and providers need coordination |
| Official source | The provider contract, service levels and rate card |
Warehouse or orchestration
A 3PL is an operational partner: they receive, store, pick and ship. The contract is about service levels, accuracy, cut-off times and storage rates. A 4PL is a coordination layer: they may not own a warehouse, but they manage the providers, the data and the exceptions.
Most sellers need a 3PL before a 4PL. A 4PL adds value when the seller has multiple warehouses, carriers and regions, and the coordination cost exceeds the management fee. Before that, a good 3PL and a clean data feed are usually enough.
The contract is the product
Ask for the service levels in writing: receiving accuracy, order accuracy, cut-off, dispatch time and the process for a stock discrepancy. Ask how the provider handles peak season, returns and damaged units. A low storage rate with a poor receiving process is expensive.
Keep the inventory data in a system you control. A provider that holds the only copy of the stock record has too much leverage. Reconcile the provider's stock against your own ledger monthly.
Frequently asked questions
When should I move from self-fulfilment to a 3PL?
When order volume, cut-off pressure or storage space makes in-house fulfilment unreliable, or when the cost per order is higher than the provider's handling fee.
Does a 4PL replace my 3PLs?
It usually coordinates them rather than replacing them. Some 4PLs also operate assets.
What should I measure in a 3PL?
Receiving accuracy, order accuracy, dispatch time, inventory accuracy, damage rate and the cost per order.
Who owns the inventory data?
You should. Require a data feed and reconcile it against your own ledger, regardless of the provider.
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