4PL Overview: Managing 3PLs for Better Performance and Cost Management
4PLs give you rapid access to their 3pls while managing your overall cost of logistics to cater to your supply chain requirement.
February 10, 2023
Operations strategy involves a balancing act between operations performance and keeping costs manageable. This becomes a greater challenge for large enterprises as this is coupled with managing these factors across multiple destinations, cultures, and providers.
When covering multiple countries, enterprises have a range of operations strategic options, ranging from in-house deliveries and fulfilment such as what Amazon uses, outsourcing to end-to-end providers such as DHL and Fedex, managing multiple third-party logistics providers (3PLs) themselves or outsourcing the management of 3PLs to fourth-party logistics providers (4PLs).
When Does it Make Sense to Use Multiple 3PLs?
For enterprises looking to rapidly expand internationally or build their operations networks quickly, leveraging on the existing expertise and assets of multiple 3PL players makes sense. They can help you deal with:
Complex Local Operations
Having multiple local 3PLs can cover any gaps in local operations, such as archipelagic geographies like in the Philippines and in Indonesia.
Overcoming Limited Access
Having many partners who specialise in different parts of the country gives you wider coverage
Having multiple partners lets you rate shop and compare prices between partners
3PLs each have different specialisations and weaknesses. For example, 3PL A could have better last mile delivery performance and rates for deliveries in Luzon, Philippines while 3PL B would be better suited for Mindanao, Philippines.
Businesses that look to optimise both costs and speed would want to consider using 3PL A for Luzon and 3PL B for Mindanao if they choose to outsource their Philippines deliveries. With multiple partners competing against each other during your request for quotations (RFQ), you can rate-shop for the best rates. However, getting the best rates consistently for all your customers’ postcodes requires running regular RFQ’s.
Having multiple 3PLs also allows for having options based on different supply chain needs. Some eCommerce businesses let their customers choose between paying more for express delivery or cheaper but slower postal options.
Those who sell bulky items as well as regular parcels would also need different partners for each delivery type. All these options can be done via a single end-to-end partner, but such flexibility and premium service would not be cheap which is why onboarding and managing multiple 3PLs is often required.
You are also able to manage supply chain risks better by having multiple shipping partners available in case something goes wrong with one of them. This brings to mind how eCommerce deliveries from China were delayed back in 2020 during the first outbreak of COVID-19.
However, there are also some challenges to managing multiple 3PLs on your own.
Tracking and performance monitoring issues – Your business needs a way to standardise statuses, tracking numbers and other data for supply chain visibility across multiple partners, especially if different partners. This is vital if different partners handle different legs of the delivery process. For example, partner A handles first mile logistics while partner B handles last mile deliveries
No local customer service – In regions like Southeast Asia, most countries have their own languages so having a customer service team that can cover multiple languages is a must for regional expansion
Tech integration – Different local partners each have varying degrees of technology adoption and not all of them would be readily available to integrate with your current operations tech stack
Most businesses are aware of how managing multiple 3PLs can manage the costs of logistics, but they are also similarly aware of the logistics management costs too.
Finding, negotiating with, onboarding, and managing the day-to-day operations of multiple 3PLs requires a lot of resources: manpower, technological capabilities, relationships and money, etc.. Managing these 3PLs in-house would usually require considering headcounts for operations heads, operations executives, customer service staff and tech staff which adds to the cost of hiring and maintenance for these 3PLs.
Tackling all the above challenges and managing all these costs is where 4PL solutions like Janio, come in. 4PLs act as a gateway and a single point of contact to their 3PL partners in their network that best fit your business’s needs.
4PLs: Enabling Rapid International Scaling and Managing the Costs of Logistics
With their experience in managing other shipping partners, 4PLs give you rapid access to their partner networks while having various means of managing your overall cost of logistics while catering to your supply chain requirements. 4PLs have software solutions to provide visibility over your deliveries and supply chain while having experienced team members to manage your supply chain for you. 4PLs are able to add value at every stage of onboarding and managing shipping partners:
Procurement and Onboarding
Supply Chain Visibility Dashboards
Network Partner Management
Returns and Claims
Partner Procurement and Onboarding: Managing the Costs of Maintenance and Rapid International Go-to-Market Times
While managing your 3PLs in-house gives you direct access to them compared to working with a 4PL, the costs of onboarding and maintaining these 3PLs will only grow in tandem with the needs of your business.
Building this degree of control involves opportunity costs in terms of time and resources such as:
Operations and customer service manpower
Technology department manpower
Long-term relationships with 3PLs
Building up teams in-house requires building firm standard operating procedures and teething issues for both the operations and tech teams. Time is also needed to get to a level where you and your 3PLs are familiar with your business and your systems.
A 4PL will provide you with quick access to their readily-available network of 3PLs while you will need to only cover the costs of services rendered and are free to allocate time and resources to other profit-driving activities.
To consistently get the best rates, your company will be running frequent requests for quotations (RFQs) among new and existing 3PLs. RFQs take time and resources to manage, especially when answering the network partners’ own requests for information (RFIs) when they respond to your initial request.
Rates simulations to match and analyse the rate cards with their corresponding postcodes across all your RFQ partners will take time to set up and execute as well.
4PLs function as a gateway to their network of 3PLs and would already have existing rate cards for partners that they conduct regular RFQs with. The partners that the 4PL onboard onto their network are managed and underwritten by the 4PL itself.
RFQs are also consistently done by 4PLs to bring on board 3PLs that better match your requirements, be they for optimising rates, delivery performance, or special requirements such as temperature controlled warehousing. This cuts out the RFI and waiting time while providing your business with the benefits of regular RFQs.
Supply Chain Visibility with Control Tower Dashboards
Supply chain visibility depends on how well a company standardises data from their logistics partner and analyses it to produce useful feedback. 4PLs like Janio standardise data from each of the 3PLs in their network to give you usable insights at every stage of your supply chain in an all-in-one dashboard.
These dashboards give your business an overall view of your supply chain from order statuses, estimated delivery dates, exceptions handling and right down to customer service performance and turnaround times.
These insights are then used by both the 4PL’s management teams to manage 3PL performance via event management and can be used by your business both for strategic purposes and tactical uses such as managing shopper expectations in the case of exceptions.
Without 4PLs, those expanding their 3PL network for the first time need to map each of their partners’ postcode coverage, rates for different postcodes, delivery statuses and more when onboarding them. This onboarding will require tech team man hours for every new network partner added.
Transportation Management Services – Flexibility and Order Analytics for Performance Management
The next step after procurement and visibility is matching the right 3PLs to your business’s needs. 4PLs can help your business select the optimal combination of shipping modes and 3PLs based on rates, speed, and distance based on different needs:
Express vs postal needs for businesses that want to provide their shoppers with options to pay for faster delivery
Bulky or non-bulky handling shipments
Special requirements: - cash-on-delivery - temperature controlled storage and fulfilment - etc.
4PLs also act on your behalf to monitor 3PLs’ performance data and any gaps in performance are followed up with regularly to continue optimising performance. These steps are taken proactively and compiled in monthly business reviews between the 4PL and the client to show monthly performance improvements.
To further maintain and improve delivery performance, 4PLs’ transportation management services also include managing their 3PLs in terms of exception handling, customer service, returns and claim management among others.
Exceptions Management and Early Warning Systems for Customer Service
When delivery exceptions happen, fast and proactive customer support for service recovery is needed. Working with multiple network partners means adjusting to each of their customer service teams’ styles of working, communications channels (calls, emails, Whatsapp) as well as their committed response timings.
The complexity lies in consolidating the different 3PLs responses across all their different channels to get the right responses to your customers at the fastest time possible. This, in turn requires building systems using platforms like Zendesk and having customer service manpower in-house to converse with your 3PLs’ customer service teams.
A 4PL functions as a gateway to these network partners and functions as a single touchpoint for customer service and exceptions management. Early warning systems implemented across your 4PL’s network partners can flag out different risk levels of a parcel getting lost or delayed to help you manage the expectations of your customers or begin claims proceedings.
Early warning systems powered by the supply chain control tower help you better manage your customers expectations by allowing 4PLs like Janio to proactively communicate with their 3PLs regarding the affected deliveries.
Examples include updates to the estimated delivery date or the risk of the parcel getting lost. This helps to speed up investigations to increase the turnaround time of your customer service responses with shoppers while providing insights that can be used to better manage these exceptional situations.
Failed Delivery Management, Returns, and Claims
The final stages of the 3PL management journey deals with the closure of exceptional delivery cases. In the United States in 2022, it was reported that on-time delivery of parcels nationwide still lagged behind pre-pandemic levels with only 4 in 5 parcels arriving on time in September 2022.
4PLs will already have in place a standard set of responses for common types of exceptions and can adjust how these work according to your business’s needs to minimise your business’s involvement in these decisions. These cases include, but are not limited to:
Failed last mile delivery – e.g. customer is not at home
Service partners will attempt to deliver the next day at least once. Partners like Janio will investigate the cause of the failed delivery, such as incorrect addresses or phone numbers or and attempt to rectify the situation. The recipient is notified of the updated delivery date. In Janio’s case, there are multiple redelivery attempts based on the destination country. If all attempts are unsuccessful, the parcel can then be chosen by the client to be returned to the origin.
Parcels rejected by the recipient upon delivery – Return to Origin
Parcels that cannot be delivered, but are still with the shipping partner can be returned to your business’s inventory. 4PLs like Janio can help you manage the process on your behalf to consolidate and return these parcels back to your warehouse
Janio’s system will flag out at-risk and aging parcels on our dashboards. Estimated delivery dates are updated for each parcel for the customer service team to use to manage recipient’s expectations. Different risk levels, which are based on how long the parcel is delayed, are available for different types of service recovery responses to maintain brand loyalty.
Lost parcels – Claims Process
Parcels that have been aging for too long are marked as having the highest probability of being lost. After a set period of time, the claims process is automatically initiated by 4PLs like Janio. This allows the refunds process to begin to bring closure to the affected client and recipient. Investigations will also take place to minimise the chances of parcels being lost in the same way.
4PLs are most useful to clients that require the benefits that having multiple 3PLs can bring when it comes to balancing both the delivery experience and the cost of logistics, while wanting to maintain a manageable cost of logistics management on top of that.
4PLs like Janio serve as the go-to supply chain partner and extension of your supply chain team. Our goal is to help our clients reduce their overall cost to market and increase their velocity of distribution by acting as their logistics fiduciary to navigate the complex logistics market.
We do this by actively managing some of the region’s best-in-class delivery partners to cater for our customer’s specific needs, and by creating delivery products that outperforms market benchmarks in order to delight our customers.
Our 4PL service provides an end-to-end solution that manages all aspects of your logistics requirements, from eCommerce fulfilment, to freight management, customs clearance and final mile deliveries.
Our digital product and network of hundreds of trusted 3PLs allow us to negotiate the most competitive rates for your specific needs. Our product and processes also ensure a superior customer experience with real-time visibility coupled with actionable insights that safeguards your customer experience.
With a 4PL like Janio, you can focus on your core business while we handle all of your logistics needs and deliver the same outcomes and control that you expect of your internal supply chain teams while significantly reducing the administrative and IT burden that comes along with setting up such internal teams. Our vision is to help you delight your customers as you seamlessly enter new markets with our logistics infrastructure network and supply chain expertise.
To find out more about our Janio’s 4PL services, rates and coverage, you can click the button below to reach out to us.