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Monday, April 22, 2024

What’s a 4PL and How Are They Different From a 3PL

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Chemical shipping can be a complicated and involved process. For many companies, outsourcing their shipping efforts is the best way to create economic logistics programs while maintaining a focus on core competencies. But to enjoy the benefits of outsourcing, you must choose a partner who will meet your needs and maintain industry standards. One of the primary considerations in selecting the right provider will be whether they’re a third-party logistics (3PL) provider or a fourth-party (4PL) logistics provider.

Often confused, 3PL and 4PL providers share some characteristics but ultimately fulfill different logistics needs for their partners, which is why it’s essential to know the difference between the two before signing a contract.

A 3PL manages specific areas of the supply chain for a chemical shipper, for example, the chemical freight company that handles transportation. A 4PL has a much broader reach, overseeing these individual networks and managing the entire logistics operation. 4PLs handle comprehensive planning and execution for a client, determining what modes and networks need to be tapped for appropriate shipping, establishing who will manage these, and creating the processes and governance for each mode. Simply put, a 4PL manages your entire supply chain, while a 3PL focuses on logistics.

Let’s take a deeper dive into 3PLs and 4PLs and what sets them apart.

3PLs and 4PLs for Chemical Shippers

In chemical logistics, a 3PL and 4PL will face unique challenges, different from other shippers. The first major difference is the chemical containers themselves. Bulk ISO tanks are the worldwide standard for liquid chemicals across various networks and modes, coming in standard sizes and ensuring safety. To determine the optimal ISO tank size for any quantity of liquid chemical products, CLX uses a formula and procedures outlined in our ISO Tank Capacity Guide.

The second difference between traditional and chemical logistics is regulatory compliance with transporting, storing, and handling chemical products. Chemicals on the road can be a significant hazard, so the US and other countries have established safety regulations. These regulations change frequently, and it’s vital for chemical manufacturers to partner with a 3PL or 4PL that specializes in these regulations and responsibilities.

What is a 4PL?

As mentioned above, a 4PL offers end-to-end logistics management services for its clients. This includes managing multiple 3PL providers who handle transportation, warehousing, and distribution and serving as a central point of contact for clients. Essentially, they control the entire supply chain process from start to finish.

Characteristics of a 4PL

A Single Point of Contact

4PLs bridge the gap between you and various logistics providers, simplifying the management of multiple partners and allowing a seller to focus on other aspects of their business without worrying about logistical challenges.

A Solution-Oriented Approach

4PLs tailor supply chain solutions to your specific needs. This personalized approach ensures that your supply chain is designed for your industry and business, improving efficiency and effectiveness.

Supply Chain Visibility

By aggregating data from multiple 3PL providers, a 4PL can provide a unified view of your metrics, inventory, order status, shipment status, billing, and EDI across the supply chain network. This allows you to quickly respond to market demands and adjust to meet customer needs regardless of inventory status or location.

What’s the Difference Between a 4PL and a 3PL?

3PLs primarily handle day-to-day operations and own or manage the assets required for supply chain management, including trucks, warehouses, and distribution centers. They have established industry connections and resources that can reduce costs and enhance efficiency. 4PLs, on the other hand, optimize your supply chain and provide long-term strategies. They are non-asset based and focus on identifying your business’s ideal suppliers and vendors. 4PLs strive to reduce operational costs while improving performance by bundling services and optimizing procurement.

Advantages of a 3PL

One of the primary advantages of using a 3PL is cost savings. 3PL providers have the knowledge and resources to optimize logistics operations, lowering transportation, warehousing, and inventory management costs.

Working with a 3PL can provide several other advantages.

Scalability

As a company grows, its logistics requirements change. 3PL providers allow businesses to adjust their logistics operations to meet changing demands without investing in additional infrastructure.

Expertise

Logistics can be a complicated field. 3PL providers have the knowledge and experience to effectively manage logistics operations, allowing businesses to focus on their core competencies.

Savings

A 3PL provider will eliminate your need to invest in logistics technology, transportation, and staff. They can also manage billing, audits, training, staffing, and optimization.

Advantages of using a 4PL

A 4PL provider greatly simplifies logistics management and provides significant advantages, including:

Increased Efficiency

4PL providers can identify areas for improvement and streamline operations for more efficient and cost-effective solutions.

Greater Supply Chain Visibility

Businesses can benefit from greater supply chain visibility with 4PL providers, as 4PLs offer real-time inventory tracking, shipments, and other logistics activities.

Solution-Oriented Methods

4PL providers aim to design solutions tailored to meet specific business requirements, drawing upon their expertise in end-to-end operations related to warehousing, distribution, freight, and information technology to provide the best possible outcomes for clients.

Technology

As part of their services, 4PL providers offer software and automation processes to enhance communication across the network, providing valuable information technology solutions that deliver real-time visibility.

The 4PL Process

The chemical freight market faces increasing pressure to shorten cycle times, improve customer service, and manage operational costs. To address these challenges, an agile 4PL process can provide customizable logistics solutions to meet the specific needs of chemical shippers.

The 4PL process can be broken down into four key stages:

Data Collection/Current State

This involves benchmarking, analyzing available freight data, gaining operational requirements, and defining contracts to predict rate competitiveness and offer comparable market service requirements.

Development

In this stage, a procurement strategy is developed with support from logistics experts. Freight bids are run, awarded, and optimized based on unique needs.

Implementation

A transportation management system is set up to provide real-time visibility into the entire global and domestic supply chain. This includes optimized planning and execution across the network, shipment tracking, delivery confirmation, and report generation.

Measure Success and Optimize

Key data points are analyzed to promote a sustainable, next-generation supply chain. Billing is managed, final dues are provided, shipments are closed, carrier payment is ensured, and regular operational reviews are conducted. Top of Form

The 3PL Process

To effectively benefit from best practices in the 3PL process, it’s crucial to identify what works, develop a plan, put it into action, and stick to it. The following four tactics can be helpful:

Choosing Appropriate Technology

despite the many technological logistics tools, not all are suitable for chemical shippers, but using technology designed specifically for chemical logistics is essential.

Establish a Structured Engagement Strategy

To promote effective communication and understanding with the 3PL, it is crucial to establish a structured engagement strategy.

Develop an Information Management Program

An active information management program is essential for tracking Key Performance Indicators (KPIs). Advanced programs may also include scorecard programs to track KPIs for the organization and carriers to make data-backed decisions.

Use a Customized Engagement Strategy

Chemical shipments require a more personalized approach than non-toxic goods. A canned solution may not be sufficient, so a flexible and customized engagement strategy is vital.

3PL or 4PL? Which is Best for Your Business

The decision between a 3PL and 4PL can be difficult. If you only need to outsource a part of your logistics services, a 3PL may work. But if you want a tailored, all-encompassing logistics solution, a 4PL is your best bet. CLX Logistics’ 4PL Managed Transportation provides bespoke services tailored to your unique needs. Here are some of the benefits you can expect from our 4PL services:

A Single Point of Contact

A single point of contact for seamless coordination across modes and regions, complete visibility across your supply chain, standardized processes, and on-demand support.

Improve Supply Chain Efficiency, Flexibility & Responsiveness

Improved supply chain efficiency, flexibility, and responsiveness, with access to an industry-leading transportation network and expertise that allows you to cherry-pick the best choices from multiple modes and carriers.

Improved ROI

Improved ROI with access to a whole new network of smaller 3PLs that reduce costs and generate value at every step, faster and cheaper procurement and bidding, and advanced TMS technology for real-time visibility, planning, and execution capabilities across road, rail, and ocean.

Advanced TMS Technology

A flexible offering tailored to your company and your unique needs, including freight rate benchmarks and bids for all transportation modes, carrier procurement, negotiation, and contracting.

Choosing the Right 4PL

You can maximize your transportation spend and drive new cost-saving initiatives throughout your supply chain by choosing the right global 4PL. CLX Logistics offers an a-la-carte approach to managed transportation services that lets you utilize our expertise and capacity, with access to our seasoned team of HAZMAT-certified logistics professionals and advanced technology platforms and analytics.

Ready to reduce your shipping costs, streamline supply chain management, and simplify chemical shipping logistics? Let’s chat.

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