What the Hell is a 4PL Anyway?
We have a sneaking suspicion that “4PL” is a term that has been coined because its a nice three letter acronym (TLA) that rolls off the tongue and seems to explain itself nicely. It “feels” so right. After all everybody knows what a 3PL is – so a 4PL is just an extension of that? Right?
Wrong. We went to the trouble of calling up 5 different logistics professionals and asking them “what is a 4PL?”, and we got 5 different answers.
We then went on a mission to track down an answer our team could get behind – and for the reasons why we care see below. We thought we would start with the more frequently spotted 3PL.
What Do We Mean when We Use the Term 3PL?
With a little help from a Google search and pulled straight from Wikipedia
A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides service to its customers of outsourced (or “third party”) logistics services for part, or all of their supply chain management functions.
Actually you can dig a little deeper and get a history for the origin of the term and hows its evolved to the point today where every company that offers some kind of logistics service for hire calls itself a 3PL usually these services are “bundled” together by the provider. Services they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. In 2008 legislation passed declaring that the legal definition of a 3PL is “A person who solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product”. We think this is interesting stuff.
Are There Really 1PLs and 2PLs?
I guess there could be. In our minds “First Party Logistics” (1PL) could refer to a company actually providing an internal service themselves for example where a manufacturing firm delivers to customers or the a retailer picks up themselves from a supplier. With globalisation and the related outsourcing and offshoring of manufacturing, distribution services that used to be assumed internally tend be contracted to external service providers.
Maybe then “Second Party Logistics” (2PL) could refer to a carriers that provides a transport service over a specific segment of a transport chain. It could involve a maritime shipping company, a rail operator or a trucking company that are hired to move goods from an origin (for example a distribution centre) to a destination (for example a port or air terminal).
Your luck with consensus on the above definitions will vary.
Lets cross into the fourth dimension.
So What Does That Make a 4PL?
The Orderly team at EWS Digital likes to think of a 4PL being an evolution of the 3PL model in some or all of the following ways.
- A 4PL could just be an existing 3PL pitching to provide broader scope of managing a customers supply chain
- A 4PL could be a joint venture or long-term contract between a primary client and one or more partners
- A 4PL could act as a single interface between the client and multiple logistics service providers
More aspects (ideally all aspects) of the client’s supply chain are then managed by the 4PL this could include, for example:
- Business planning
- Change management
- Project management
- Inventory planning
- Customer contact
- Order capture and management
- Inbound, outbound and reverse logistics management.
Why Do We Care?
Good question. We care a lot because as part of our Orderly service offering we come into contact with a lot of 3PLs of all different shapes and sizes. Many of the services we offer to our customers are services that could just as easily be considered closely tied to the logistics side of the equation. In a lot of cases its clear to see there would be an advantage to closer collaboration with the logistics provider. For example in one case where we are contracted to handle customer contacts and order placing calls from end customers we quickly see a trend where the majority of these calls relate to delivery and driver queries.
There are other examples but what Orderly provides would enhance any 4PL offering allowing the provider to clearly differentiate and make their offering “stickier”. Services we can offer to the mix include the following.
- A fully branded order capture platform (with the ability to add / build bespoke features) – supporting Phone, Web, Mobile, Fax and Email channels
- Full customer contact centre operation
- Ability to track inventory at the end customer point
I will save the mentioning of the term “lead logistics provider” for later. I did also check and Google hasn’t indexed a 6PL yet, maybe we should take this opportunity to invent the term and get some traffic.
You can learn more about Orderly here.