4PL & The New Layer of the Logistics Industry
Before we discuss 4PL, which is growing in popularity as a new layer of the logistics industry, we must take a look at 3PL and what it sets out to achieve. Further, other key questions will be answered such as, are there advantages for manufacturers and other businesses in working with 4PL providers over 3PL companies? What is the value-added solution offered by 4PL? Are there certain business models or manufacturers that are more conducive to 4PL over 3PL services?
These are all valuable insights you will be interested to know if you’re in manufacturing or production operation that requires outsourcing your supply chain management functions.
Defining 3PL Services
3PL stands for third-party logistics. 3PL services are a practice of utilizing various resources (i.e. warehouse storage space, transportation, etc.) to take care of tge logistics needs and activities of a company. Logistics in the business world is the activity of managing the flow of things from the origin point to the use point for the process of meeting the needs or requirements of corporations or customers.
Traditionally, this practice was performed as an in house function of an organization. By definition third-party logistics is the outsourcing of any activities in the area of logistics that were once performed within the company or organization.
Added Value Solutions With 4PL Services
4PL is the concept known as fourth-party logistics. The idea of 4LP is different than 3PL in the following way to put it simply. 3PL service provider is focused completely on a single function whereas 4PL is concerned with managing the process not the job of single supply chain logistics. What this means is that you can employ a 4PL model as a value-added solution to manage many 3PL organization thus controlling logistics with a top down model. This is the 4PL model.
A comparison has been made calling 4PL the general contractor benefiting businesses and manufacturers by managing or becoming a hub for forwarders, truckers, custom house agents, other 3PLs and more. By taking the process completely into responsibility 4PL offers the hub one place touch control to customers saving time and confusion in the long run.
Who Can Benefit From 4PL over 3PL The Most?
Unlike working with certain 3PL companies, organizations with many moving parts would be most likely to benefit from a 4PL style of logistics management system. The reason is for companies with fewer links in the supply chain from origin points to company or company to customer using a 4PL type set up would actually be redundant.
But with today’s continued increase and ease of communication via multiple channels there will be companies that will benefit greatly from a 4PL setup. The way to decide would be imagine you were an airport. Are you able to handle the flights you have on one runway or do you need several concourses? If you answered several concourses 4PL might be for you.
In the simplest of business terms a 4PL provider of logistics management can be looked at as an agency or external consulting firm. This firm not only controls on your behalf the problem-free flow of logistics via management of the supply chain and transportation based on your experience but also based on their combined experience as well. So the advantages are defined by the needs. What needs do you have? Keep those in focus and it will be easy to decide if 4PL is the right value-added solution for you.