Around for many years but with success primarily coming in the automotive sector, the concept of the “4PL” is starting to gain some momentum more generally.
So says Gartner analyst Mathew Beckett, in a blog post earlier this week.
Which would beg the question for many: just what is a 4PL?
Historically, 4PLs were characterized as 3PLs that managed other 3PLs, reducing or eliminating the need for a company to manage individual 3PLs themselves.
Gartner gets a bit more specific.
“Fourth-party logistics (4PL) operations are supply chain services providers who manage the designing, building, running, measuring and orchestrating of all, or part, of an end-to-end logistics network for a fee,” Gartner says, adding that the 4PLs “coordinate logistics operations via internal and/or external parties, delivering visibility, management control and optimization through an integrated technology platform.”
We’re not sure if that helps or not.
Regardless, Beckett says that traditional third-party logistics providers (3PLs) have been anchored in logistics execution, offering standardized approaches to logistics services to ensure cost effectiveness.
By contrast, Beckett says, a 4PL generally operates a highly customized, industry vertical-focused solution which extends capabilities into additional supply chain services with a highly integrated technology solution, providing data management and visibility as a differentiator.
4PL Model Gaining Strength
The 4PL market is growing because the logistics world is changing, with the frequency of supply chain disruptions rising, and with that the desire for greater resilience.
We have “entered a new era that requires a different type of logistics partner to support future-growth ambitions and enhance overall productivity,” Beckett adds.
What’s more, Beckett says, “If logistics has the potential to positively impact the commercial organization and the customer, organizations must reassess the type of partner they would typically have engaged. This new lens from which we may view logistics requires different capabilities from those that commonly exist in the 3PL world.”
In Gartner’s opinion, there are many advantages to 4PL outsourcing, with many examples of satisfied customers across both large and medium organizations. However, there is an equal number of companies that have been left disappointed by 4PL, perhaps because of unrealistic expectations or poor relationship management.
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 Beckett offers a list of reasons why 4PL relationships go sour, including the following:
• Not understanding 4PL model, leading to unrealistic expectations of service and value.
• 4PL failure to outline their capabilities.
• Poor relationship management frameworks choking ongoing innovation and development.
• Incorrect governance frameworks (contracts and service-level agreements).
• Lack of a continuous improvement roadmap.
• Aligning internal needs and selecting a 4PL partner that’s a bad fit.
Beckett believes the logistics outsourcing market has moved beyond one-size-fits-all logistics to more data-driven, customized and industry-specific logistics services and solutions.
“The 3PL market is still very much alive and growing. But there are more options for shippers depending on their specific requirements from 3PL to 4PL and from fulfillment partner to control-tower partner, Beckett observes, concluding that “Organizations have a choice to adopt these maturing outsourcing frameworks depending on their specific needs and requirements.”
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