The Rise of Fourth Party Logistics (4PL)

01-4plThe customers’ expectation towards external providers is continually growing. Third party logistics companies are necessary to continuously invest in procuring technologies and developing skills to meet growing expectations. Sometimes, the required internal capabilities in order to provide the broad set of skills, technology and strategies go beyond the capabilities of third party logistics companies. So as to meet the expectation of customers, the third party logistics companies may align with leading edge consulting 4 firms, technology providers, and other logistics providers to enhance their own capability and provide integrated service to customers. This group of organizations can be called Fourth-Party Logistics Providers (4PL) (Bade and Mueller, 1999). The 4PL Provider was first registered and defined by Andersen Consulting, now Accenture, in 1996. It defines “a 4PL is an integrator that assembles the resources, capabilities and technology of its own organization and other organizations to design, build and run comprehensive supply-chain solutions” (http://www.accenture.com).

The Differences between 3PL and 4PL

In the traditional view, management consultants focus on strategic supply chain solutions such as reinvention and transformation. They utilize their consulting skills to redesign and integrate the whole supply chains. Also, they may focus on improving specific supply chain functions. In contrast, 3PL focused on operational issues such as implementation and execution. This includes the integration of technology across the members of supply chain and the movement of material and goods within supply chain (Bade and Mueller, 1999). The 4PL try to leverage the capabilities of both management consultant and third-party logistics providers to provide the 4PL solution which include reinvention, transformation, implementation and execution (Blade and Mueller, 1999). Also, the 4PL can be an interface between a primary client and several logistics provider. They make sure all providers work together (Tom, 1999). This reduces the coordinating effort by the primary client. The main reason for the appearance of 4PL is the service vacuum of 3PL. In contrast to 3PL, 4PL focus on process, people and technology. It combines these three elements and gives customer more reasonable expertise to meet their demands. To be a successful 4PL, both strategic and tactical know-how are necessary. They should have the real logistics experience that can better understand the situation of process, people and technology.

Furthermore, 4PL handles the process and helps customers manage it. In his article (http://ops.fhwa.dot.gov), Jack Roeser, a long-time logistics consultant, defines the difference between a 3PL and a 4PL provider in this way: “[A 4PL] acts as the integrator of multiple 3PLs all working for a company which requires multiple 3PL services, no 3PL having the ability to provide all of the required services itself. The multiple 3PLs work through the integrator to the company itself. The 4PL integrator…is the direct contact to the company.”.

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