Should You Jump Aboard the 4PL Train?

By Matthew Beckett | July 19, 2022 | 0 Comments

Supply ChainPower of the Profession

You’re probably familiar with the term 3PL — but not everyone is as familiar with the term 4PL. Even those within the industry who understand the 4PL concept struggle to define what services a 4PL provides and how it’s different from a 3PL or even an LLP.

Nevertheless, 4PL service providers are becoming increasingly popular in today’s highly complex logistics environment, which is awash with risk and disruption. Shippers are actively seeking out 4PL service providers to form closer, more integrated and longer-term, value-driven partnerships.

So What is a 4PL?

A 4PL, or fourth-party logistics provider, is an outside transportation and logistics partner that delivers comprehensive planning and execution of all shipments for a client across the value chain. They have a strong focus on technology solutions to digitize end-to-end processes and develop data-driven logistics ecosystems.

And what are the benefits of a 4PL?

  • Single point of contact and access for all your managed transportation activities across your supply chain, simplifying logistics operations and execution.
  • End-to-end visibility and data access across your operations, providing a platform to connect all your mainstream logistics technology applications and processes.
  • Agile planning and execution through increased levels of collaboration and integration, allowing you to better navigate the increasingly complex logistics environments.
  • Risk assurance through a single connected platform, which provides better protection from cybersecurity breaches.
  • Increased flexibility through improved coverage and access to advanced networks, allowing better forecasting and capacity management.
  • Superior levels of visibility and data to be able to internally manage logistics data analytics to assist in better planning and customer experience.
  • Improved levels of consistency across delivery networks, driving higher levels of customer service.

So Who Are Some of the Key 4PL Providers?

There are various industry communities that offer 4PL services and these can be segmented into three distinct groups: 3PL market, technology vendors and integrators or consultancy. Some of the key players operating in the global 4PL industry include market participants such as Bollore (Prism), Geodis, Havi Logistics, Redwood Logistics, Maersk, DHL, Kuehne & Nagel, 4Flow, Flexis, E2Open, BlueYonder, Accenture, Deloitte, 4PL Group, United Parcel Service, Inc., CEVA Logistics, C.H Robinson Worldwide, Ltd., DB Schenker, GEFCO Group, Global4PL Supply Chain Services, DSV, Logistics Plus Inc. and XPO Logistics, Inc. (see Figure 1).

What are the services commonly outsourced to a 4PL?

  • Freight rate benchmarks and bids for all transportation modes.
  • Carrier procurement, negotiation and contracting.
  • Management reporting and interactive dashboard tools.
  • Detailed analytics and reporting of service, cost and performance.
  • Robust, continuous improvement programs.
  • Multi-modal transportation planning and execution.
  • Proactive shipment monitoring via web-based track and trace.
  • Domestic and international shipment management.
  • NVOCC and freight forwarder credentials.
  • Brokerage and dedicated fleet-capacity management.
  • Rail fleet management.
  • BulkTainer ISO container fleet.
  • Freight bill, audit and payment

All forms of outsourcing logistics are expanding rapidly, but 4PL value is increasing at record-setting rates. As reported by GlobeNewswire, “the global 4PL Logistics Market was estimated at USD 57.65 Billion in 2019 and is expected to reach USD 84.43 Billion by 2026. The global 4PL Logistics Market is expected to grow at a compound annual growth rate (CAGR) of 5.5% from 2019 to 2026.”

And, Finally, What is in it for the 4PL?

A 4PL has now become an “end-to-end supply chain and logistics partner.” It’s a more lucrative line of work that allows a 3PL or LSP to make money by consulting on its clients’ supply chain strategies and selling access to its logistics software in addition to freight fees.

Many LSPs and 3PLs have followed the industry trend toward expanding into 4PL services. The 4PL market argues that by consolidating end-to-end logistics services into one package, they can boost efficiency and lower prices. However, this consolidation leaves shippers with less choice and fewer companies controlling supply, which will ultimately hurt the consumer.

During the good times, this may not matter. Then shippers can enjoy the cost benefit and ease of doing business by not having to think about their supply chains. But in times of crisis, those shippers may be forced to find alternatives if the 4PL dream does not come true.

Matthew Beckett
Senior Director Analyst
Gartner Supply Chain

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