Can 4PL be the future of supply chain outsourcing?

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by Sharika Dhar  15   Jan, 2019

Can 4PL be the future of supply chain outsourcing?

Before diving into the current rising trend that favours Fourth Party Logistics (4PL) it only seems fair to take a look at Third Party Logistics (3PL), the idea that precedes 4PL. Historically observations deduce that 3PL services focus on physical procurement, transportation, distribution as well as the logistics part of the process of facilitating goods to the final consumer. Only when the supply chain management is massive for one company to monitor and control by itself, will they opt for 4PL services.

4PL services facilitate complete supply chain management by piling resources, capabilities and technologies together. They, in short, take control of the entire supply chain. The vital difference between the two is that 3PL would only aim for a single function whereas 4PL will manage the entire mechanism. Accenture was first to adopt the idea of 4PL by combining a multinational company’s freight forwarder base. A 4PL firm manages all pieces of a supply chain with a combination of warehouses, shipping companies, freighters as well as personnel to oversee it all.

Certain attributes have to be facilitated by a 4PL firm to have a relationship with clients. The firm should essentially be able to manage and control activities of one or more 3PL providers. They should also have an experience in facilitating supply chain integration for its clients. Co-ordination of day-to-day logistics and supply chain management is also extremely important between the provider and that client organization. Any uncertainty in the supply and demand of the goods in question should be administered. The establishment of 4PL will surely lead to a reduction in time and expenses of the parent company’s executive management. A cognizance of the business in which the 4PL firm wishes to provide its services is of great importance.

A major point to be noted is that a provider of 4PL will take over all functions of 3PL, in addition to its own unique functions, thus making it singularly accountable for all business activities. A business in its early stage will not necessarily need 4PL services. It comes in handy when the business establishes its internal processes with experienced staff. Therefore it is safe to say that older and larger enterprises with highly complex supply chains are more prone to having 4PL services.

In conclusion, it is observed that opting for 4PL services adds sufficient value to a client organization. There is, however, a potential for 4PL to perhaps be the future of supply chain outsourcing.