Fourth-party logistics, or “4PL,” is the arrangement where a firm contracts or outsources its most of its supply chain solutions to more than one companies (who are often the third-parties of the logistics and supply chain). In short, a 4PL company or contractor is more of a coordinator the activities of the 3PL.
A 4PL provider ultimately accumulates resources, technologies, and capabilities to run the entire supply chain of a company. Ideally, the outsourcing of transport services through a 3PL has been an effective way of utilizing expertise, improving processes as well as reducing costs of transportation by a company. 4PLs are gaining more and more popularity in the logistic sector. They are the multi-service providers handling all the logistic operations right from planning to final reporting.
How 4PL Differs From 3PL Services
A 3PL company does or specializes in the field job i.e. activities such as warehousing, freight forwarding, inward and outward material, contracting transporters, packaging, and safety of cargo among other tasks. 3PL companies typically customizes all these services to suit customer needs.
A good example is the reputable 3PL company United Facilities, Inc. This 3PL provider is so versatile with its logistics and supply chain solutions that many business can rely on them without needed to work with a 4PL to help simplify things.
Lately, most 3PL companies have specialized in some areas of the industry. The advantage with them is that they have various footprints in most parts of the country, and this enables them to serve most clients located in remote areas.
4PL, on the other hand, deals majorly with the management of supply chain, analysis, planning, design, and optimization among other key sectors. 4PLs majorly concentrates on the corporate job and does less of the field tasks. in a nutshell, 3PL mostly execute the real-time tasks while the 4PL primarily executes more of future planning by use of past information. 4PL are effective in improving the supply chain and inbound logistics of a company.
Advantages of Working With 4PL Companies
1. Information visibility offered by 4PL companies allows a company to drive savings and improve service delivery. They are capable of highlighting areas of inefficiency in a shipper’s line of operation. This makes them more efficient, unlike 3PL’s that lack the incentive to drive out wastages and reduce costs.
2. Optimization of material flow. 4PLs enable a smooth transport management system and freight consolidation and other backhaul services and opportunities.
3. Improved productivity. 4PL providers can handle all the logistics on behalf of a company. This allows for easy detection of flaws in the supply chain hence improving the overall productivity of a company.
4. Quality personnel continuity. This is what sets 4PLs apart in the logistics industry. A company can access well-trained staff for quality operations.
5. Ensures neutrality. By fully acting on behalf of a client, a 4PL is capable of providing high-quality services in implementing the transport services of a company. Additionally, they provide essential information needed in meeting the shifting market dynamics.
With the current transition of 3PL to 4PL for some companies, certain business models and manufacturers have found the more conducive logistic services over 3PL. Taking the instance of the automotive industry, electronic and other warehousing companies, 4PL’s have been able to help them pick the best areas of specialization.
This has helped most clients excel in winning customers’ loyalty. Similarly, medical and other health care providers have found their way in seeking an intricate service delivery in clinics and hospitals. They are now able to drill down dip in their line of specialization.