What is a 4PL?
A 4PL is an outsourced service provider that manages the warehousing, inventory, fulfillment, transportation and logistics on behalf of its clients, often the entire supply chain from the production line to the point of final distribution. 4PLs, also known as lead logistics providers, are often engaged in the international flow of goods especially across complex supply chains.
4PLs provide many of the same services as 3PLs, third party logistics providers and can provide strategic advice as well as operational support. While a 3PL is a logistics service provider, a 4PL has greater range and acts as a supply chain partner. A 4PL may be contracted to only manage a particular segment of the operation or supply chain, providing a specific range of services such as warehousing and distribution, or be hired to work for a particular product, handle a specific geographic area or provide services during a specified time of year.
4PLs do not own assets. A 4PL relies on the expertise of its team to establish and control complicated logistics systems and consults with its customers to provide advice on how to organize information infrastructure, transport and logistics and other services.
How a 4PL is Different from a 3PL
3PL vs 4PL: Understanding the Difference
Warehouse Storage and Delivery Capacity
4PLs tend to have extensive warehouse networks that may range from dozens to thousands of warehouses that exist in a much larger geographic area. Having such a large warehouse network enables 4PLs to facilitate logistics service to reach consumers in 1 to 2 days. The range of coverage may extend across entire countries or geographic regions and even may include international coverage. This enables 4PL customers to have the flexibility to scale the scope of the services, time limitations and geographic range of the services for which they contract.
4PLs are highly skilled and effective at managing the strategic deployment of warehousing facilities to meet specific delivery windows for area populations. This aids in providing maximum distribution efficiency for the customers of 4PL in a highly cost-effective manager.
By comparison, 3PL providers often provide service to a specific geographic region and have much smaller networks of less than 50 warehouses.
Service Level Differences Between 3PLs and 4PLs
4PLs are strategic service providers, meaning their expertise is not limited to the transactional services usually provided by 3PLs. Because 4PLs serve a wider area, they are better positioned for flexibility and scalability, ideal for growing companies and those who deal with seasonal demand and changes.
Services Provided by 4PL Organizations:
- Supply chain consulting
- Logistics strategy
- Information technology
- Inventory planning and management
- Inbound, outbound and reverse logistics management
- Procurement
- Information technology
- Analytics such as transportation spend, capacity utilization and carrier performance
- Freight sourcing strategies
- Freight bill auditing
- Tendering and freight procurement
- Operations
- Network analysis and design
- Business planning
- Change management
- Project management
- Control tower and network management services
Why Use a 4PL
4PL Management Solutions Provide “Clean”, Accurate Data
Within the supply chain, there are many partners and suppliers. From raw materials providers, manufacturers, ocean carriers and airlines to customs brokers and 3PL outsourced warehouse operators, all have varying degrees of competency in using technology and in the quality of the IT systems they use. The same is true of the standards used in exchanging data. It may surprise you to learn that there are few supply chain data standards and no formally accepted industry standard information brokers to establish and police the data standards.
Because supply chain companies are left to define their own data standards, it is often challenging to map supply chain data from partner to partner to meet these standards. How does this impact the supply chain? Incomplete, outdated and inaccurate data is then poised for exchange, making interaction difficult to understand or even occur.
Here is where the value of a 4PL, a lead logistics provider can come into play. A 4PL can define data standardization, manage exceptions and streamline the view of supply chain data so that the view is clear of obstructions. This enables supply chain partners to focus on their core competencies instead of being plagued by inaccurate information and the need to deal with escalations, exceptions and correcting errors and problems.
4PLs Help Companies Grow and Thrive
Growth-oriented companies, such as fulfillment which need to service multiple geographic areas but do not have the capital and labor to purchase or lease more warehouses and hire more workers often find 4PLs appealing. Outsourcing to a 4PL gives the customer access to entire networks of warehouses, facilitating growth without a massive outlay of capital and diversion away from core competencies.
4PL customers usually have inventory spread across a large number of warehouses and can use an online web portal to gain real time access to information about their business across the 4PL’s warehouse network.
Seamless Flow of Data Across Customer Supply Chains
4PLs provide outsourced services, back office operations that are managed by experts to deliver economies of scale. The cost of outsourcing is usually made up from savings in inventory turns and transportation costs.
A major part of the value that a 4PL brings is its technology. Leading logistics providers use top notch technology to capture data from all over the supply chain, assimilate and standardize it. 4PL team members manage exceptions and issues to eradicate problems or minimize the impact.
4PLs Are Known for Their Use of Technology
Today there is an increased need for a single view of warehousing and logistics operations, by leveraging reporting, business intelligence and visibility tools. Having access to real time data ensures that action can be taken and the correct decisions can be made in a timely manner. As data involving operations and logistics accumulates, patterns emerge and metrics can be monitored against established benchmarks.
Using advanced technology, 4PL service providers create seamless connections and visibility across global supply chain networks. Having this “big picture” view can help lead logistics providers anticipate supply chain risks and possible disruptions and help to ensure safe, reliable transit across the entire supply chain.
4PL WMS Systems Help Customer Businesses Grow and Thrive
- Multi-platform integration capabilities
- Cost reduction on operations
- Capabilities for rapid scale up or scale down
- Multi-warehouse, multi-lingual, multi-currency and multi-commodity
- Top notch flexibility
The heart of 4PL technology is flexibility. In order to manage the supply chains of many different customers, the technologies used must be incredibly flexible and scalable. The 4PL must be able to adapt to and manage each customer’s processes according to the specified requirements. In addition, the 4PL WMS must be able to adapt to changes in the business and capable of dealing with supply chain disruptions. Real time data visibility is essential.
In addition to flexibility, the 4PL WMS must be able to accommodate a robust rules engine and be able to model rules so that processes can be streamlined around them. The system must be adaptable based on seasonality, changing business conditions or demand. Within the system, there must be tolerances established when managing by exception.
Summary
The 4PL business model is gaining popularity in the supply chain logistics industry. This may be due to the increase in global trade and international shipping. 4PLs are IT system mavens, masters of system integration, with a myriad of supply chain and logistics management technology tools to handle complex operations such as reverse logistics, transportation and warehouse operations as well as the supply chains of multiple customers.
4PLs are sometimes confused with third party logistics providers. Understanding the difference is one largely of scale. Although both fourthparty logistics providers and third party logistics providers tend to be involved with logistical operations, 4PLs manage entire supply chains rather than logistics processes.
Supply chain companies involved with B2B ecommerce, especially those in need of help with international shipping tend to thrive with the help of fourthparty logistics providers due to their specialized expertise with complex supply chains and challenging logistics models. Managing entire supply chains, lead logistics providers facilitate greater flexibility and scalability of operations as well as cost savings.
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