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Having to choose between a 3PL and a 4PL is obsolete

Expanding you eCommerce business to or across Europe will require you to select between partnering up with a 3PL or a 4PL provider. Which one is best?
3PL or 4PL

The post-pandemic explosion of eCommerce across Europe has been driving demand for 3PL and 4PL services.

According to the European eCommerce report for 2022 by ECommerce Europe, 75% of European Internet users are familiar with buying goods and services online. While in 2021 eCommerce sales grew by 13% (718 billion euros), 2022 is the year where this upward trend is experiencing opposing forces  such as the effect of the war in Ukraine, inflation and high energy prices causing it to stabilize all the way to slightly decline for certain verticals. 

Overall, the situation calls for opportunity and when it comes to comprehending what does this looks like, here is a visual example.

Online European shoppers in 2021
Source: Statista

Let’s take a look, it is clear that smaller economies are following the same trajectory of more developed markets making Europe one big land of opportunities for brands and companies seeking new customers for their products and services. 

Brands aware of how eCommerce will play a major role in Europe’s future, want to be part of the game by expanding towards and across Europe. This will lead them to having to figure out how to handle logistics as this is essential to a winning strategy. 

Fulfilment and last mile delivery are the most challenging aspects especially because Europe is known for its widely dissimilar areas to which delivery presents a direct impact on conversions, customer experience and retention rates.

For this reason delivery isn’t to  be considered secondary matter to be handled “behind the scenes”. 

There is little to no choice for eCom retailers and DTC Brands that want to be competitive to outsource logistic functions to Logistic Service Providers which are highly specialized and present a very advanced level of expertise. They can seamlessly handle complex logistic operations on one or more European countries. And that’s where the real advantage stands. 

Let’s open this paragraph with the biggest spoiler:

The best solution to sell to European countries is to partner up with a LaaS Company (Logistics as a Service) able to offer a state of the art 3PL network. Qualifying as “state of the art” involves being able to provide flexible warehousing conditions and adaptive fulfilment management, but that’s not enough. 4PL services like cutting-edge tech solutions, product sourcing or financing and just as much needed.

Sounds intricate? Then let’s break it down, shall we?

 

sounds difficult to understand

 

3PL vs 4PL

The typical distinction is between 3PL vs 4PL because these are the typical alternative services the outsourced logistics market has to offer.

However, warehousing is no exception to the post-pandemic swift changes witnessed in all businesses, therefore avant-garde results of adaptation must not be ignored as they represent the competitive advantage needed to satisfy customers who’s expectations align to trends set by bigger companies like Amazon

3PL – Stands for Third Party Logistics.
It’s called “third party” because it’s not owned by the eCom organisation nor run by its personnel.
A 3PL takes care of three specific steps in the supply chain: transport, storage and distribution

The warehouse is owned and run by a third party which will be executing all warehouse functions  –  like order fulfilment, pick pack, transportation, distribution, purchase ordering, payment collection , etc… – and operations based on the organizations’ needs. The warehouse and transport management software is generally proprietary. 

4PL –  doesn’t focus on the aforementioned three steps, but can focus on the entire scale of the supply chain.
It integrates multiple 3PL services, but it is not limited to those. In fact, the contract includes services that go beyond warehousing functions – like product sourcing and finance – . A 4PL also uses sophisticated technologies to offer sustainable and cost effective solutions.
4PL’s popularity rose in 2020 during the pandemic when companies suffered the lack of computing infrastructure resources and personnel to handle the supply chain disruption.

It is not always simple to draw a line between 3PL and 4PL companies but we can say that while a 3PL has an internal operational plan, the 4PL operates more at an ecosystem level and has the responsibility of selecting the right 3PLs. 

Which one’s better?

So what is the best solution for a company looking to expand into European countries?
The answer is in the middle:
a Logistics-as-a-Service company that can give you the best of both:

  • Access to a 3PL network with warehouses situated along strategic ares across Europe
  • The chance to apply any expansion strategy your product, company size and budget requires, without having to depend on what logistics services and their infrastructures can offer. 
  • The chance to test different markets with one stock and to double down on the ones responding positively
  • The know-how and expertise of people that are profound connoisseurs of supply chain matters and that can help optimise as well as identifying warehouses and services able to satisfy customer’s preferences in terms of delivery, even when these preferences reflect on checkout (i.e. Cash On Delivery)
  • Single warehouses with personnel fully integrated in the latest best practices regarding transportation, management and delivery
  • Additional supply chain-oriented services like product sourcing or financing that can actually allow you expand without cashflow matters holding you back
  • An expert at your side that can further help reducing spend, saving time, and increasing profits
  • The technology needed to handle stocks and shipments in simplified manner in order to keep focus on the main picture 
  • The data that can be leveraged to isolate  –  or create  –  and track your Key Performance Indicators 

Conclusions

In a growing customer-centric eCommerce reality, your distance from the customer is crucial.

Physical distance intended as the need to place your products strategically within your target areas in order to assure fast delivery and a great customer experience.
Management distance intended as the need to be in control on how products are delivered to your customers.
When delivery preferences and target areas multiply, different approaches are required, this can become more challenging for many eCommerce companies and cause them to stall or fail in their expansion. 

One of the main differences between a 3PL and a 4PL is how close you are to your customer. 

Choosing to work with a 3PL will allow you to stay very close to your customer and be aligned with their satisfaction levels, behaviour and retention rates. However, this is not scalable so on the road to expansion, you will be forced to hit the breaks. 

Working with a 4PL will assure that global vision on performances for all areas, but being in such a distance from the day-to-day operational life, you will lose your ability to predict behaviour as well as sight on day to day operational dynamics. This will lead to a total loss of proactivity up to the point that you will only be able to bring aid to a situation once the eggs are already broken. 
In other words, if you’re too far away, you will have to accept that with a lot going on, you could lose control on crucial aspects of your business. 

At Borderl3ss we can give your brand the intimacy needed to deliver a premium service to your customers united to corporate services to work at a higher level. This is the recipe that will allow you to work on any European area or to affirm your Brand on multiple countries at once.

Schedule a meeting with one of our managers today  to  explore the technology and the options that Borderl3ss can offer to address your – and your customer’s – specific needs. 

Robin Calandri

Robin Calandri

DTC Fulfillment Blog

Find all the information you need to optimize your European fulfillment operations. 

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