Third-Party Logistics vs. Fourth-Party Logistics
There are many different terms and abbreviations used in the supply chain industry. These terms can be overwhelming, especially if you are branching into a new area of the industry. Two of the most common terms you might hear are “third-party logistics” and “fourth-party logistics”, but what do these terms really mean? What is the difference between 3PL vs. 4PL? Keep on reading as we explain 3PL vs. 4PL, and the different levels and advantages of logistics partners.
What Are the Different Levels of Logistics Partners?
First-party logistics (1PL) is defined by an enterprise that distributes goods or products from one location to another. An example of this is a local farm that transports fresh milk directly to a grocery store for sale.
Second-party logistics (2PL) is a business that owns assets, like planes or vehicle, to transport products from location A to location B. The same local farm can hire a 2PL provider to transport their milk from their farm to the grocery store.
A third-party logistics (3PL) model is defined by an enterprise that overseas management, but outsources certain operations of transportation and logistics to a provider. This provider may subcontract out all or some of the process. A 3PL provider may also offer additional services, such as crating, boxing, and packaging, to add value to the relationship. The local farmer may hire a 3PL provider to package the milk in cartons and send them from the farm to the store.
Fourth-party logistics (4PL) is when a business outsources the responsibilities of their supply chain, as well as the management of logistics activities. They offer more strategic insight and management over the entire supply chain of the business. The 4PL provider essentially outsources the entire logistics operations. In our example, a 4PL provider may oversee the communication with the farmer to produce the right amount of milk depending on the demand at the grocery store.
Finally, a fifth-party logistics (5PL) provider offers innovative logistic solutions and develops a supply chain network. Their goal is to increase value and efficiency all throughout the supply chain by using technology such as blockchain, robotics, Bluetooth beacons combination, and radio frequency identification devices (RFIDs).
As you can see, as the business moves from the 1PL model to the 5PL model, more of the logistics management is put in the hands of the provider, rather than the business itself. The most common models used today are 3PL and 4PL services, and here’s what you need to know about each of them.
Advantages of a 3PL Provider
- Resource Network: A 3PL provider has a large resource network that provides advantages for in-house supply chains. Using their network, they will execute each step of the supply chain in the most efficient and cost-effective way. They can leverage relationships and volume discounts, which can lead to lower overhead and faster service.
- Save Time and Money: A 3PL provider will eliminate your need to invest in warehouse space, technology, transportation, and staff to execute the logistics process. You also won’t have to worry about paperwork, billing, audits, training, staffing, and optimization.
- Scalability and Flexibility: Another benefit is the provider’s ability to scale space, transportation, and labour according to your inventory needs.
Advantages of a 4PL Provider
- Network Efficiency Analysis: There are many aspects that make up a supply chain network. These include shipping, distribution, warehousing, physical sites, and information flow. A 4PL provider can help businesses manage these processes.
- Information Technology: Workflow includes a variety of business rules and software that can lead to automated actions to eliminate the need to communicate. A 4PL provider can offer valuable information technology and software that increases visibility on a real-time basis.
- Solution-Oriented Approach: Another advantage of working with a 4PL provider is that they aim to design the solution first, with respect to the business’ requirements. They have expertise of end-to-end operations that relate to warehousing, distribution, freight, and information technology, and provide the best fit solutions for the client.
The Difference between 3PL and 4PL
The difference between 3PL services and 4PL services is not in the way they operate, but the extent of services they provide. As you can see from the examples mentioned above, a 3PL provider focuses more on arranging freight carriers and warehousing by dealing directly with the service providers. A 4PL provider arranges these same services but goes the extra mile for its clients by employing companies such as 3PL providers. They manage these 3PL companies and others to provide the business with a complete supply chain.
Benefits of Lean Supply Solutions’ 4PL Service
If you run a medium- to large-sized business, or if your business has been growing rapidly, it may be time for you to choose the right logistics provider to help you. The two most common options are 3PL providers and 4PL providers, but if you want all the possible benefits, 4PL services are what you need.
Lean Supply Solutions will integrate your supply chain for you. We will assemble and manage the resources, capabilities, and technologies of your organization with the assistance of external service providers, so that you have expertise to manage your resources. Our services include contract logistics, e-commerce fulfillment services, inventory planning and management, supply chain management and optimization, pick-and-pack services, freight and warehousing, reverse logistics management, and more.
When you’re ready to make the call, Lean Supply Solutions is ready to help you. We rise to the challenge of meeting our clients’ needs. To learn more about outsourcing to our 3PL logistics services or to ask any questions, contact us today.
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Reasons Why Logistics Is So Important in Supply Chains
Having a plan for logistics in supply chain management is extremely important to your success as a business, as well as to your customer satisfaction. There are many factors involved in creating an effective logistics plan, which includes automation, delivery time, and coordination. However, even if your business is successful there is always room for improvement. As your business grows you need to find ways to streamline logistics planning processes so you can be successful. Here are some tips that show the importance of logistics and supply chain management, and where you can get the help you need.
Logistics Strategies Generate Positive Business Results
An experienced third-party logistics partner can make the back end of your business appear effortless. They will bring good logistics strategies to the table that are efficient, clear, and measurable. It’s easy for transportation operations, roots, and item locations to become a mess, so having a strong logistics plan can prevent issues from happening in these areas. Your logistics strategy should be designed to coordinate your goals and policies with your transportation and distribution partners. It should be adaptable to changes in your supply chain to avoid your customers from being affected. A good logistics strategy should include the following to provide positive business results:
- Ensure the right people in your organization are aware of changes in the supply chain
- Involve the right number of warehouses or distribution centres
- Measure the frequency that products should leave each warehouse or distribution center
- Regular reviews to find out if the logistics partnerships are working well for you and your customers
- Regular strategy revisions for optimization
Logistics Help Businesses Create Value
Key logistics strategies do more than promote positive results for your business. These strategies also create value for your customers. The better you are at making your products more available to your customers, the more valuable you can make your commodity. Raising demand also raises the value on certain items as they become available on a global scale. Be sure to review your strategy when issues negatively impact your customers. By dealing with issues on the distribution or transportation side, you can add value for them. If issues like warehouse overload continuously impact certain customers, you can adjust to provide better service and resolve this problem.
Logistics Reduce Expenses for Effective Cost Accounting
Another big challenge in supply chain management is operating costs. These can be challenging to manage in your cost accounting procedures, but with a good logistics program, you can maintain these costs and reduce expenses in areas like climate control, warehousing, and transportation. A good logistics strategy can also eliminate larger expenses entirely, so you can take more to the bank.
Logistics Improve Warehouse Management
The more effectively you can manage your logistics, the better your warehouse management will be as well. Your warehouse operations are highly dependent on the type of goods. If you distribute perishable goods like food, your logistics strategy should develop a warehouse inventory plan that minimizes the wastage of goods. By working with a third-party logistics provider, you will have full visibility of the priorities and weak points in your business so that you can create effective solutions.
Logistics Strategies Strengthen Customer Loyalty
Your business may already be able to attract new customers through your robust marketing strategy; however, it is important to boost your logistics strategy to strengthen your customers’ loyalty. If you generate new leads but fail to make them repeat customers, your business will not grow as you plan. You need to make sure you consistently get your orders in on time and resolve customer issues quickly. You need to make yourself a dependable company in order to maintain your customer base and have a steady stream of revenue. A solid logistics strategy guarantees that you can repair areas in your supply chain that are not dependable enough for your customers.
Logistics Plans Help You to Deliver Products on Time
Did you know that late deliveries can lead to a loss of customers? Companies like Amazon thrive by offering same-day shipping and getting their products to their customers on time or before. They provide tracking information so customers can prepare for the arrival of their orders and this feature helps them measure their expectations. By working with a third-party logistics provider, you can stay competitive and meet your customer expectations. On-time delivery should be one of your primary goals. Making sure your products arrive to your customers on time is affected by several factors which include lead time management, inventory management, and supplier management.
Lean Supply Solutions Provides Logistics Management Support
There are many benefits to working with a third-party logistics provider that offers logistics management support. When you partner with an organization like this, you will be able to focus on your core competencies while they take care of the back end of your business. Working with a 3PL provider can help you deal with the challenges of a growing business, whether you are a small- or medium-sized organization. With a 3PL provider’s supply chain services in your hands, you can benefit from their efficiency and talent. A 3PL provider will also offer you many advantages such as supply chain management software and technology that increase visibility and communication between you and everyone in your business network.
If you are looking for the right company to partner with, Lean Supply Solutions is the answer. We rise to the challenge of meeting our clients’ needs through our services which include product fulfillment, warehousing and distribution, e-commerce fulfillment, warehouse pick and pack, order fulfillment, and more. To learn more about outsourcing your supply management in Toronto or to ask any questions, contact us today.
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Supply Chain Challenges in the Consumer Electronic Industry
Today’s supply chain business is more challenging than ever. There are endless things to consider, such as how to reduce costs, increase safety in the warehouse, and deliver products to customers faster, etc. Although the supply chain is a big business for many companies, the rise in the consumer electronic industry has brought a whole new set of challenges that are unique to its processes, functions, and data requirements. Depending on the industry you work in, the challenges you face could vary; however, there are some key challenges for supply chain management in Toronto and Vancouver that you should know about. Here’s how supply chain services can help you face these top challenges in the consumer electronic industry.
Short Product Life Cycles
Short product life cycles create an environment full of risk. There are so many changes that happen over the course of the life cycle, so you will need to carry extra inventory to make sure you have enough products on hand to meet your customer demand. Unfortunately, this means higher carrying costs and a greater risk to your bottom line if the product does not perform the way you expected it to.
To resolve this issue, you need to create several supply chain policies that show the changes in life cycle demand. With these patterns on hand, you’ll be able to compare your plans based on changes in prices and customer segments and/or new markets to find the best results.
Multiple Partners/Globalization
There are so many partners involved in a product’s journey from the raw materials to the product being delivered, which means you will need to collect and organize various sets of data. Strong visibility across your supply chain is paramount to ensure that you are not constantly reworking plans and dealing with communication problems between your partners and suppliers and yourself. A lack of visibility can also cause you to miss any discrepancies. You won’t be able to see a problem coming from far away—you’ll have to wait until it hits you.
To anticipate change and risk, you need a single, harmonious end-to-end network. In other words, you need to capture all master and transactional data with one system, capture details from your partners, and operate from that single source of information. This will reduce the time it normally takes you to gather current data and search for any issues that you need to resolve. It will also serve you well to set control limits on international standards, regulated compliances, and customs requirements, etc.
Slower Decision-Making
Everyday you must be prepared to deal with any possible problems that come your way. You will need to dedicate yourself to finding the right harmony between costs, revenue, and service. For this to happen, you need to collaborate with your coworkers, and unfortunately, getting on the same page isn’t usually the top priority. It can be a struggle to get everyone on your team in agreement. This inability to balance daily decisions can slow down the decision-making process, and hold you back when you need to respond to changes in supply, demand, or capacity.
Merger and Acquisition Activity
The slower your data integration process, the slower the pay off. Mergers and acquisitions are valuable in company expansion and the consumer electronics industry, but that means you need to consider a variety of enterprise resource planning (ERPs) systems. However, in the supply chain, these systems don’t usually work well together.
The faster you can merge data, planning, and analytics, the faster you will reap the rewards of your investment. You’re planning solution should be able to incorporate data and model the behaviour of multiple ERP systems. Once this data is collected, you can manipulate it, analyze it, and reduce your inventory and cost risks. With a current set of data, your plans will be more accurate and likely to succeed.
Demand and Variety
Consumer tastes and interests are more customized than ever before, and supply chains face the constant urgency to create new products to match the changing preferences of customers. This will lead to more SKUs and shorter product life cycles. Aspects like product development, sourcing, and fulfillment, are more complicated than ever before. Transportation costs are also higher. The better a company can manage their inventory, the better they can meet these demands.
Implementing a quality inventory management software (IMS) will allow you to track the movement of the products in your warehouse. It will provide information so that you can forecast which products you need to restock, and which items have gone dead. With this visibility, you will be able to make better decisions that will save you money and ensure that you are getting the right products to your customers.
Pricing, Logistics, and Other Cost Pressures
The competitive global marketplace has benefited consumers because it has brought in the latest and greatest innovations at lower prices. However, for supply chains, this has led to shrinking margins. Manufacturers in the electronic industry must find ways to deal with this downward pressure on operating margins and find ways to save money without compromising service.
How Lean Supply Solutions Can Help
As you can see, there are many challenges in the electronics industry. However, with the right support you can face these challenges head on and gain a competitive edge. Large businesses may have the manpower and resources to tackle the challenges of their supply chain, but how can small- to medium-sized businesses compete? The answer is simple: Partner with a third-party logistics provider that has all the capabilities necessary to give you that competitive edge.
If you are looking for the right company to partner with, Lean Supply Solutions is the answer. We rise to the challenge of meeting our clients’ needs through our services, which include product fulfillment, warehousing and distribution, e-commerce fulfillment, warehouse pick and pack, order fulfillment, and more. To learn more about outsourcing to our supply management in Toronto, or to ask any questions, contact us today.
- Published in Blog
How the Modern Retail Sector Benefits from Supply Chain Management
Supply chain management (SCM) is one of the most valuable benefits to a growing business. It allows retailers to meet the demands and pressure of customers, optimize their processes, and reduce costs. But how does SCM provide these advantages? Here’s what you need to know about supply chain management in Toronto and Vancouver, and how it benefits the retail sector.
What Is Retail Supply Chain Management?
The retail supply chain includes the various processes a business uses to get its products to its customers. These processes include getting the raw materials to build the products, packaging it for delivery, and transporting it to the customer. Supply chain management optimizes these processes to make the flow of products faster and more efficient. The goal of any retail business is to get your products to your customers as fast as possible, while reducing costs on your end. Many businesses will turn to a third-party logistics partner that has the technology, software, processes, and manpower to optimize their supply chain for them.
How SCM Benefits the Modern Retail Sector
Reducing Retail Supply Chain Costs
To deliver products as quickly and affordable as possible, it is important to find out which processes cost the most and where revenue is being used inefficiently. Some of these areas may include your storage strategy, supplier relationships, analysis of customer demand patterns, and the speed of moving supplies. Improving these areas can produce significant cost savings.
Optimize Inventory
Your inventory is money sitting on your shelves, and if you are improperly using your warehouse space or failing to restock in time for customer orders, you could be losing revenue and hurting your business’ reputation. SCM allows you to review your inventory levels in real-time, so you can make sure your stock balances with your needs. It also enables you to work better with your suppliers to focus on demand planning and forecasting you can stock up on the right items, and stop ordering dead or out-of-season products.
Omnichannel Operating Model
Over the past few years there has been a shift in customer buying patterns. Brick and mortar stores are expected to integrate the way customers interact with their products in person and online. This integration of digital and physical shopping avenues is possible through an omnichannel operating model. By using technology to manage warehousing and transportation, customizing the consumer experience, offering better and faster shipping, and tracking, the customer can have a seamless experience with your business.
Minimize Risk
When it comes to mitigating risk, collaboration is key. But you cannot produce or analyze information properly without visibility. SCM helps you to review your processes so you can catch issues early on and proactively resolve them.
Forecasting Techniques and Methodologies
Generating forecasts is key for planning and making the right decisions about budgeting, sales, marketing, raw materials, production, risk assessment, and more. Forecasting is a feature of SCM that is performed on a regular basis and it offers a variety of benefits:
- Improves supplier relations and purchasing terms
- Better use of resources
- Optimizes inventory levels
- Improves distribution planning and logistics
- Boosts customer service levels
- Facilitates performance management
Compete with the Big Players in the Market
SCM used to be intended for big companies, but even small- to medium-sized businesses can stay competitive with the help of these programs. SCM through third-party logistics enables smaller companies to improve their processes, find cost-effective solutions for transportation, gain access to better inventory management and on-time delivery, and more.
Customer Satisfaction
Customers expect great service and that comes down to getting the products they ordered on time. If problems arise, customers expect transparency to understand what went wrong, and how the business is working to resolve it. If you are unable to make your customers happy or resolve their issues in an efficient manner, you risk negative reviews and a dent in your reputation. Nowadays, dissatisfied customers can easily go online and post criticisms about your business or service. It is more important now than ever before to focus on implementing SCM to improve customer satisfaction.
Healthier Supplier Relationships
To succeed in the retail industry, your business needs to have successful relationships with its suppliers. Both teams work together to improve the efficiency of the work you do together, so the better you can communicate and manage your own processes, the better you can resolve conflicts or issues in the future.
Hire Lean Supply Solutions to Manage Your Retail Supply Chain
Even if your business is smaller, SCM is still something to consider. While the aforementioned benefits clearly apply to larger companies, your company can also benefit from these points and gain a competitive edge. SCM can help you improve your budget, inventory prices, and your customer experience.
Working with a 3PL provider can help you deal with the challenges of a growing business. With their supply chain services, they can manage all the tasks above so you can have peace of mind and focus on other core responsibilities. A 3PL provider will also offer you many advantages such as supply chain management software and technology that increase visibility and communication between you and everyone in your business network.
If you are looking for the right company to partner with, Lean Supply Solutions is the answer. We rise to the challenge of meeting our clients’ needs through our services, which include product fulfillment, warehousing and distribution, e-commerce fulfillment, warehouse pick and pack, order fulfillment, and more. To learn more about outsourcing to our supply management in Toronto, or to ask any questions, contact us today.
- Published in Blog
Top 10 Tips to Reduce Your Supply Chain Costs
Did you know that your business can increase profits even during times when you are not making sales? By optimizing your supply chain management in Toronto, you can experience cost reductions and improved processes that lead to increased revenue. One of the most tested and true methods to achieve these cost reductions is by working with a third-party logistics (3PL) provider. Their order fulfillment and supply chain services can help you reduce costs by focusing on your customer needs, improving supply chain performance, and adding automation and technology to your strategy to reduce errors and increase profits. Here are 10 tips to reduce your supply chain costs.
1. Focus on the Customer
The needs of your customers should be at the forefront of your mind when you consider your supply chain structure and strategy. However, many supply chains follow policies and systems that conflict with their customers’ requirements. As a result, these companies deal with frequent customer issues and complaints, and additional costs that are unnecessary. If you focus on your customers by offering options like next-day delivery or unlimited free shipping with a paid monthly membership, you will provide the solutions they want and be more effective as a business.
2. Supply Chain Strategy
Creating an effective supply chain strategy will help you frame your goals and be more efficient. Your supply chain’s performance should be evaluated on a regular basis to ensure you are meeting your customers’ requirements and staying on top of your goals. An effective strategy should meet the following criteria:
- Be clearly documented and understood
- Involve all areas of the company (sales and marketing, research and development, purchasing, manufacturing, logistics, etc.)
- Address and resolve customer dissatisfaction cases to prevent recurrence
- Meet the needs of the customers and the business
- Be clear and precise to allow for quick decisions and improvements
3. Make Better Use of Space
It costs to store inventory and supplies in your warehouse, so you should make it part of your plan to make the most of this space. Take an assessment of your warehouse and decide whether you are achieving this goal. If there are ways to reorganize your inventory, you may discover that you can save money and be more efficient in the way you use your space.
4. Sales and Operations Planning
Sales and operations planning (S&OP) are required for a supply chain to operate at its highest efficiency. Optimal performance depends on proper planning, but it can be expensive and complicated. When you work with a 3PL provider, the team will eliminate waste and redundancies, help you plan better through data analysis and forecasting, and increase visibility so everyone involved is up-to-date. The following problems, if they exist, should be addressed in the S&OP process:
- Uncontrolled SKU generation
- Frequent and unrestrained stockouts
- Commonly inaccurate forecasts
- High quantities of slow-moving or obsolete inventory
- Consistently adjusting demand and production schedules due to issues
5. Supply Chain Network Design
Supply chain network design involves reducing costs and increasing reliability to minimize product handling. Each “touch point” between your supplier and your customer raises costs and increases the risk of error and damaged products. A poorly designed network can lead to excessive handling, too many stock locations, and an inadequate use of your distribution locations. As a result, you will experience high distribution costs and poor customer service. Revising your supply chain network design will require special software and analysis that can be costly and confusing to manage on your own. This is yet another reason why it saves to work with a 3PL partner. They have the software and experience necessary to resolve issues in your network by designing an effective plan.
6. Move Supplies Faster
A 3PL provider can help you find ways to speed up shipments from suppliers so you can order closer to when you need items. When inefficiency causes you to order in advance, you can incur warehouse costs because you will need space to store these items when customers order them. Additionally, you run the risk of losing or damaging stock because they sit around in the warehouse. By outsourcing your warehousing and distribution, you can shorten the time it takes you to get items from your supplier to fulfill customer orders.
7. Automation
One of the biggest benefits of working with a 3PL provider is access to automation software. Automation can help you reduce supply chain costs and make your operations more efficient.
8. Outsourcing Supply Chain Operation/Management
Outsourcing your supply chain management to a 3PL provider will help you improve performance while reducing costs. Warehousing and transportation are two of the most expensive aspects of your supply chain and an outsourced partner can provide more cost-effective and skilled services. By outsourcing, you will receive these benefits:
- Reduced costs
- Rapidly access services and resources
- More resourcing flexibility
- More opportunity for cost-effective growth
- Access to specialized services, technology, and equipment
9. Utilizing Assets
Evaluating your assets and usage to find areas that need to be improved is one of the most straightforward ways to improve your supply chain performance. Supply chains are complex systems, so finding ways to increase efficiency and reduce errors is vital.
10. Track/Measure Performance
The next step to reduce your supply chain costs is to track your results. Observing your key performance indicators (KPIs) will help you determine realistic targets and set trackable steps to reaching those goals. Performance tracking will also help you accurately forecast for base supply, logistics, and stock renewals.
Reduce Your Supply Chain Cost with Us
Working with a 3PL provider can help you reduce costs that keep your business running so you can keep making profits. With their experience in strategizing the supply chain, they can manage all the tasks above so you can focus on your core responsibilities like sales, marketing, and customer service. A 3PL provider will also offer you many advantages such as supply chain management software and technology that increase visibility and communication between you and everyone in your network.
If you are looking for the right company to partner with, Lean Supply Solutions is the answer. We rise to the challenge of meeting our clients’ needs through our services which include product fulfillment, warehousing and distribution, e-commerce fulfillment, warehouse pick and pack, order fulfillment, and more. To learn more about outsourcing your supply management in Vancouver or Toronto, or to ask any questions, contact us today.
- Published in Blog