Why Large Companies Move to 4PL Services
SUMMARY: Because 4PL providers handle a company’s entire chain, including challenges that are thrown up by advances in technology, they are increasingly being favoured over third-party logistics (3PL) providers, especially by big companies with complex supply chains. In its simplest form, fourth-party logistics is a model in which manufacturers hand over the entirety of the organisation and oversight of their supply chain to a 4PL provider. By contrast, the third-party logistics model is where a manufacturer retains oversight of its supply chain but outsources such processes as warehousing, shipping, packing, and distribution to a 3PL provider. When the COVID-19 pandemic began wreaking havoc in global supply chains, smaller companies turned to 3PL providers for help. Bigger companies with complex global supply chains, however, realised they needed sophisticated digital technologies and streamlined supply chain processes offered by 4PL providers to help them ride out the storm. The concept of fourth-party logistics has existed for some time but only truly began evolving with the arrival of Industry 4.0—the digitisation of manufacturing. Because 4PL providers handle a company’s entire chain, including challenges that are thrown up by advances in technology, they are increasingly being favoured over third-party logistics (3PL) providers, especially by big companies with complex supply chains. The Differences between 4PL and 3PL It will be helpful at this stage to determine the differences between 4PL and 3PL. The terms are often mixed up and some firms claim to be 4PL providers when in fact they only provide 3PL services. What is 4PL? In its simplest form, fourth-party logistics is a model in which manufacturers hand over the entirety of the organisation and oversight of their supply chain to a 4PL provider. What is 3PL? The third-party logistics model is where a manufacturer retains oversight of its supply chain but outsources processes such as warehousing, shipping, packing, and distribution to a 3PL provider. The key difference between the two can perhaps be explained in the following example: A 3PL provider working with a paint manufacturer may package and store products as well as transport them to retailers and/or customers. Unlike a 4PL, however, it won’t manage the paint maker’s entire supply chain. There are, of course, some other important differences between the two types of providers: 4PL is, in general, better suited for medium-to-large businesses, while 3PL is more suited to small-to-medium businesses.4PL companies operate at the optimisation and collaboration level...
Read MoreThe Best Time for the Shared Economy within Supply Chain
SUMMARY: For most people, the shared economy is best illustrated by the Uber and AirBnB concept of crowdsourcing and convenience services based on digital platforms. In logistics and supply chain management, however, transport and warehousing are the most significant sharing processes thanks to a welter of economic benefits for all parties—and the trend is accelerating despite the dampening effect of the COVID-19 pandemic. Logistics providers are driving the shared economy within the supply chain, offering shared services to customers such as higher filling rates of transport vehicles, better utilisation of warehousing space, reduced logistics costs, and/or a lower carbon footprint. The World Economic Forum estimates that by 2025, 15 percent of trucking will be via shared transport platforms and shared warehousing will comprise 20 percent of the market. In whatever form it takes, the shared economy will to a large extent shape the way we do business in future. For most people, the shared economy (also known as the gig economy) is best illustrated by the Uber and AirBnB concept of crowdsourcing and convenience services based on digital platforms. The technologies and business models supporting these platforms are also being applied to logistics and supply chain management, especially across activities such as warehousing, transportation, and shipping—with astonishing success. Why Businesses, Large and Small, Think it’s Fair to Share Logistics providers, both 3PL and 4PL, are driving the shared economy within the supply chain, offering shared services to customers such as higher filling rates of transport vehicles, better utilisation of warehouse space, reduced logistics costs, and/or a lower carbon footprint. The World Economic Forum estimates that by 2025, 15 percent of trucking will be via shared transport platforms, and shared warehousing will comprise 20 percent of the market. To get a better understanding of how the shared economy works within the supply chain, let’s take a look at some examples: Example #1: Amazon Flex With the growing trend towards online shopping, e-commerce giant Amazon in 2015 turned to independent contractors—basically anyone with a car—to deliver parcels to homes and businesses. The service, known as Amazon Flex, takes care of a portion of the company’s last-mile deliveries which, with some five billion items delivered each year, is beyond the capabilities of standard delivery companies. Since its launch in the United States, the Amazon Flex system has spread into many parts of the world, including Canada, the United Kingdom, Europe, Asia, Australia, and South America....
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