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August 11, 2020
5 minutes

Own warehouse or use 3PL or 4PL?

3PL and 4PL can significantly facilitate a company’s logistics management. Depending on the type and turnover of products a company sells, it may be worthwhile to seek help from an outsourced warehouse (3PL) or transportation management (4PL). Jon Jacobsson, Key Account Manager and Rikard Jonsson, Specialist Sales at Unifaun give an explanation here about 3PL and 4PL.

OUTSOURCED WAREHOUSE, 3PL

If your company does not want to or is not able to manage its warehouse itself, you can engage so-called 3PL, or third-party logistics, to take care of it. A 3PL warehouse is a large outsourced warehouse that takes care of the stock of several different companies. It is responsible for incoming goods, packing shipments, and making sure that they are dispatched to the end customer. There are various reasons for wanting to outsource your warehousing and not take care of it yourself. Apart from lack of space, it can sometimes be more economical to use 3PL. You avoid the need to rent premises, the work involved in packing, and possibly also the transport. It is easier to control your costs, you do not need to manage staff and holidays, and if you want to grow as a company, it is sometimes a prerequisite for your stock to grow elsewhere. By contrast, the possible disadvantage is that you eventually lose control of your core business as well as keeping a check of your goods. On the other hand, however, the company can choose to instead work from a small office at an exclusive address, if that is considered desirable. Some 3PL warehouses also offer value-added services. For example, a security company that stores its uniforms can get help with labelling the uniforms for new employees with their names as well as the correct badges and other labels prior to dispatch. Transport can also be included in the cost of warehousing. All of the major carriers have their own 3PL companies, but they are separate from the carrier, so even if you choose Bring 3PL, for example, you can ask for Postnord to deliver a shipment if required.

4PL

Although they sound very similar, 4PL, fourth-party logistics, is actually something completely different from 3PL. The major difference is that 4PL personnel never see the goods. A 4PL company uses its experience, knowledge and competitive prices to offer its customers the service of booking the right transport. It is often cheaper to engage a 4PL company to take care of all of the transport instead of doing it yourself. By virtue of buying larger quantities of transport, they can negotiate reduced prices with the carriers and after a supplementary charge can still offer their customers a better price than the customer could get alone. 4PL functions as an external control tower. Someone outside the company keeps track of all of the shipments and advises if anything goes wrong. For example, it may be a pallet that was not included in a shipment, or a truck that missed the boat or suffered a puncture so the goods will be delayed to the end receiver. They keep track of the carriers, sort out problems and work continuously with procurement. 4PL companies often become a company’s own logistics department, which you call when you want to know where a shipment is, etc. Some customers who use 4PL also have 3PL, and others have their own warehouse. It all depends on price, working capacity and what type of products you sell. Whether it is a question of small items that you can easily find space for and handle, or if the goods are larger and more difficult-to-handle. You need to work out what is profitable, but in many cases all sizes of company with a turnover of up to around SEK 10 million can profit from using 4PL. Beyond that it stops being so clear-cut as to what works out cheapest.

4PL GOOD FOR FOREIGN TRANSPORT

All companies spend a lot of money on transport costs. You need to keep updated and informed to know what choices to make. A 4PL company is in continuous contact with the carriers and is therefore very knowledgeable about which carriers to use for which countries, among other things. 4PL not only provides this knowledge but also its implementation. What needs to be done to send with TNT in Austria or with DHL in France, which companies are good in which countries, etc. These are not always easy things to deal with. A lot of manufacturing factories in the world do not have a good understanding of these issues, which can result in delayed and costly transport.
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3PL AND 4PL AT UNIFAUN

Unifaun’s system is rarely an important part of 3PL, but we are often the core of 4PL.

There are several 4PL companies that book their shipments using Unifaun. Two examples are Fraktus and VChain. Both have built their own websites using Unifaun’s system but with a tailored layout profile so that their websites look as if they are their own. Customers recognise the website because it has a familiar style, and they do not even need to know that Unifaun is behind the booking system.

Read more here about how VChain uses Unifaun’s system.

RIKARD JONSSON, SPECIALIST SALES AT UNIFAUN

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