Switching 3PLs vs Staying Put, and 4PL Thoughts

Current Events - State of the Industry

Last week, we saw a number of contrasting takes on the unfortunate shutdown of Airhouse. Over the last month, Airhouse was unable to complete a round of funding and laid off the majority of staff, while transitioning clients to the partner facility(s) they were working with through Airhouse. The transition process has been complicated for some brands, but not all, and based on our conversations with many of the partner 3PL facilities there is a path forward for all of the impacted brands.

It brings to the surface an important debate - does the 4PL model work? At Fulfill, approximately 15% of our brands are partnered with a 4PL, while the balance work with traditional 3PLs of varying sizes. In short, we’ve found the 4PL model to be most effective when a brand is looking to tap into the global market in a turnkey fashion, under a single operating model. In contrast, localized, regional, and even national requirements are typically better served through a 3PL, unless your products require a significant number of nodes that a single 3PL cannot accommodate. If you just need a few locations (bi-coastal for example) and are only working with a single-location 3PL, it can often be more effective to work with network integrators to build a pseudo-4PL network of your own, or ask your 3PL to help find a partner to fill the need, rather than pull the plug on your current 3PL. There are certainly advantages of working with a 4PL, and we’ve seen it work wonderfully with many of our partners that needed specific features a 3PL could not offer:

• Having a single point of contact across multiple vendors

• Improved inventory efficiency

• Cost reductions through bundled rates across the entire 4PL. 

Given a 4PL works with many 3PL partners that are geographically dispersed, a 4PL can also make the transition of relocating inventory across several warehouses much easier.

Disadvantages of working with a 4PL may include higher costs for outsourcing (especially at an SMB level), less visibility into costs, and a lack of control given a brand is fully relying on the 4PL implementation with the 3PL partner.

We disagree with the blanket statements claiming the 4PL business model is inherently flawed, and expect the 3PL vs 4PL debate to be around for the entirety of our careers. Just as there are fulfillment scopes where a boutique 3PL is more appropriate than an enterprise 3PL (and vice versa), the same rings true for a 3PL vs a 4PL. As with all business models, it is a matter of execution, cash flow management, and client retention. Simply put, the 4PL model is more difficult to operate at scale given the additional layers of communication, management, and economics (it needs to work for brands, 3PL, and 4PL). Particularly, injecting VC-growth expectations and “cash burn for top-line growth” mantras into an environment that requires nuance to scale along with first-dollar profitability… causes problems.

The 4PLs we’ve seen succeed the most have long-term growth plans, significant cash reserves (or immediate access to capital if needed), and are usually privately owned (either through self-funded efforts or as a subsidiary of a larger corp).

We expect the 3PL partner(s) assuming Airhouse’s clients will successfully retain the brands and offer continuity of service going forward. In fire-drill situations like the Airhouse shutdown, brands are often left with no choice but to switch to new 3PLs, however, there are significant costs of switching 3PLs. Typically, warning signs of deteriorating 3PL relationships are visible months in advance of a contract termination. It’s human nature to think the grass is greener somewhere else, but often the better decision (economically and long-term) is to work to salvage the current relationship in lieu of finding a new partner., There are many “partnerships” that are unsalvageable, and in those cases it's important to look for a new long-term partner that meets your core criteria as a brand, and has ample proof of their ability to adhere to agreed SLAs throughout the course of your selling season. In light of recent events, we want to draw attention to a new 3PL mediation business focused on repairing partner relations, and not “ripping and replacing” your 3PL.

Logistics Resolve - Giveaway

Fulfill recently connected with Logistics Resolve (started by a former 3PL owner and e-com brand COO). They specialize in helping 3PLs retain clients where the relationship is headed or has gone "off-track" — starting with providing invaluable insights that provide the “real-real” on your client base satisfaction.

As you know, nothing is more important to 3PLs than client retention and Logistics Resolve has created a proprietary process (Customer Pulse 360) that identifies areas for improvement, uncovers customer hotspots, and even generates sales assets based on positive client feedback. 

Now for the amazing giveaway they have created ONLY for members of the Fulfill.com community.  Simply email [email protected] with YES-Fulfill.com in the subject line within 3 days and you will be entered to win!

Grand Prize

• FREE Customer Pulse Check ($950 value)

2^nd Place Prize

• 75% Off A Customer Pulse Check ($700+ value)

Fulfill’s Best Print on Demand 3PLs for 2024

Print On Demand (POD) services are changing how businesses handle products and orders. These services let you print and ship items only when someone buys them, reducing waste and storage costs. The top POD providers have the following characteristics:

• Easy Integration: The best POD 3PLs link smoothly with platforms like Shopify. They update orders and track inventory automatically, making everything simpler.

• Quality and Choices: These top 3PLs maintain high-quality prints and many options. This lets you offer a wide range of products without sacrificing quality.

• Can Grow with You: The best providers can handle orders of varying sizes and grow with your business. This flexibility helps you keep up as more customers shop from you.

• Eco-Friendly: Many leading 3PLs use green practices, like organic materials and safe inks. Choosing a sustainable provider can attract eco-conscious customers.

Given the growing needs in the POD space, and varying levels of proficiency with POD equipment, it can be hard to find a strong operator in this niche that is aligned with a brands’ immediate and future requirements. To help, we’ve listed our selection of the top POD 3PLs specialists here.

Lead Salvage Program

Do you know someone that needs help finding a new 3PL?

Are you a 3PL that has an opportunity that is not the right fit for you to ship for?

Fulfill.com features a “Lead Salvage” Program" that is simple:

1. Introduce the lead to our team at [email protected]
2. Fulfill.com's team places the lead with one of our great 3PLs
3. YOU receive 💸  for your referral (10% lifetime revenue share)

Submit your leads to [email protected] and our team will take it from there!

Talk soon,
Joe, Dan, and the Fulfill Team