Supply Chain and Distribution Issues

Many Businesses outsource their logistics as it is more cost effective and reduces internal labour and administration costs, leaving the distribution, warehousing and fulfilment to a specialist company.

A 3PL will handle the warehousing, distribution and often fulfillment of products for a company. They will receive and store stock and deliver goods (usually under your business name, not theirs) which is preferred by many companies.

A 3PL may also provide packing and inventory management of products and stock, depending on the business needs. Ultimately with a 3PL your business still has control over its distribution and can make management decisions regarding its product fulfilment to its customers.

A 4PL offers all the services of a 3PL but also manages the businesses overall supply chain including legal paperwork and managerial decisions and therefore has complete control of your entire supply chain. They use their own resources to ensure supply chain needs are met.

The negative of a 4PL is that management of logistics is taken away from the business (in some cases this is of course a benefit).

The main consideration therefore is one of control over your supply chain logistics and the cost/benefit analysis of appointing a 3PL as opposed to a 4PL.

If your business can handle the administration, insurance and logistics then a 3PL may be more suitable as it leaves the decisions to the business as opposed to a 4PL which will handle everything.

As with any contract you should seek specialist legal advice and ensure issues as to risk, warranties, indemnities and insurance are adequately covered to protect your business.