In business, acronyms—like AI, B2B, CEO, and EOD—are liberally sprinkled throughout our conversations and communications. As a product seller, there are three important acronyms you should be familiar with: 1PL, 3PL, and 4PL.
1PL, 3PL, and 4PL stand for First-Party Logistics, Third-Party Logistics, and Fourth-Party Logistics, respectively (perfect examples of why we fervently embrace acronyms). They are logistics solutions designed to help you confidently manage your often complicated inventory management and supply chain needs.
Regardless of which logistics solution you choose (and it may change as your business evolves), it will play an important role in your success as a product seller. That’s why we’re defining and exploring your options today.
With 1PL, businesses are their own logistics providers. This means they single handedly procure, store, manage, and ship their products utilizing in-house resources. Smaller organizations with limited or specialized offerings, start-ups, and even larger businesses that have developed their own logistics technology find 1PL to be a good fit.
Jumping past 2PL (a transport business that solely moves goods), we have 3PL. 3PL is a logistics model attractive to growing businesses that need scalability and operational support. Warehousing, order fulfillment, and shipping fall under their purview, relieving product sellers of what can be an expensive, time-consuming burden.
4PL is 3PL on steroids. In other words, product sellers hand over all their logistics requirements to a single external service provider, giving them full responsibility for getting products from the manufacturing stage to the customer. All warehouse, transportation, inventory, fulfillment, and shipping processes run through the 4PL as the single point of contact for the supply chain. Additionally, a 4PL can manage 3PL solution providers and offer expert inventory and forecasting input.
There are varying reasons you may choose a 1PL, 3PL, or 4PL provider. A useful rule of thumb is to consider the size of your business, order volume, and inventory complexity.
For example, if you’re a smaller direct-to-consumer (DTC) business with manageable order volumes and/or you require full control over your customer experience, 1PL would be the right choice. Keep in mind that a 1PL requires you to have the resources and experts on hand to manage every step of the process, and you’ll need to account for these somewhat substantial costs within your budget.
If your business is experiencing rapid growth or seasonal demand spikes, then you’ll benefit from a 3PL. With a 3PL, you can offload operational complexity while focusing on product development, marketing, or both. Additionally, by releasing the inventory burden to an external vendor, you’ll be able to reduce labor, cut costs associated with transportation, warehousing, and shipping, and increase scalability.
Finally, if you’re a larger enterprise with complex, multi-regional supply chains that need strategic optimization, then 4PL is a solid option. A 4PL provides full supply chain transparency and efficiency without you handling operations directly. The 4PL team has the expertise and technology to centralize your supply chain needs as well as offer customized solutions and strategic analysis to aid in overall business growth.
We’ve covered a few of the advantages and disadvantages of your different logistics options, but the following is a helpful rundown of each approach’s pros and cons.
Pros: Full control, direct customer interaction, cost-efficient for small volumes.
Cons: Scalability challenges, high infrastructure costs, limited expertise.
Pros: Scalable, cost-effective for higher volumes, access to logistics expertise.
Cons: Reduced control, variable costs based on provider and usage.
Pros: Comprehensive supply chain management, streamlined processes, strategic oversight.
Cons: Higher costs, reliance on external providers for end-to-end operations.
Evaluating your business’ logistics needs boils down to these six vital questions:
The answers to these questions along with the information provided above will help you determine whether 1PL, 3PL, or 4PL is the best answer for your logistics needs.
Cin7’s inventory management software (IMS) offers product sellers seamless 3PL and 4PL integrations, which delivers real-time inventory intelligence. Whether managing a single warehouse or multiple, you’ll know exactly what’s happening with your inventory, from inventory levels to order statuses to shipping performance.
For customer Lockabox®, having Cin7 as the linchpin between themselves and their logistics providers proved to be highly advantageous.
Lockabox® produces UK-based portable, lightweight lockable storage containers for medicine, food, and home safety items. They utilize Cin7’s built-in 3PL and 4PL integrations for automated order routing, faster, more accurate fulfillment, and profitable growth as well as rely on our IMS to reconcile discrepancies
As it turns out, an inventory discrepancy arose with one of their logistics partners. According to Rory Fitz-Gerald, Operations Specialist at Lockabox®, the logistics partner didn’t log a large shipment worth £30,000, but a weekly reconciliation through Cin7 quickly revealed the inconsistency.
“Cin7 is our failsafe system,” says Rory. “We were able to pin the 3PL to the wall and say ‘no, our stock numbers are correct—you have made the mistake.’ Having Cin7 alongside gives us the ability to keep accurate branch transfer data to catch human errors.”
Cin7 connects your business end-to-end, offering automated, efficient, and traceable inventory management that simplifies your business, increases your visibility across your organization, and ensures that your inventory—whether raw materials, work-in-progress goods, or finished goods—is where it needs to be, when it needs to be there.
Whether you’re using a 1PL, 3PL, or 4PL, Cin7 can streamline your logistics and inventory management requirements and quickly adapt to support your evolving business. Book a demo today to see why choosing Cin7 results in an impressive ROI.