Fourth Party Logistics — Everything You Should Know

Fourth-party logistics (4PL) help businesses to optimize their entire chain. Although it is gaining popularity, people still have little to no idea what 4PL is. 

In this article, we will discuss what 4PL means. We will tell you its process and the difference between 3PL and 4PL logistics providers. Additionally, we will tell you the advantages and disadvantages of 4PL.

Once you are done reading this article, you will have a deeper understanding of what 4PL is. Thus, you will know what operational model will work better for your supply chain.

4PL: What is it?

A fourth-party logistics, typically known as 4PL, is an operational model where a business outsources its entire supply chain and logistics to a single external provider. 

In a 4PL model, the external provider (also known as the lead logistics provider or LLP) manages and coordinates all aspects of the supply chain, including transportation, warehousing, inventory management, and distribution. This provider may also manage other third-party logistics (3PL) providers on behalf of the client company.

A 4PL provider also contributes to bringing real-time visibility and control over the supply chain through advanced technology and analytics, allowing the client company to focus on its core business operations.

4PL providers usually offer more strategic insight and management over the company’s supply chain. Thus, in many cases, 4PL providers can help businesses to develop more cost-effective and efficient logistics solutions than businesses could create on their own. 

Furthermore, as the logistics industry continues to grow, 4PL will continue to play an important role in helping businesses to streamline their supply chain and logistics processes. 

The 4PL Process: How Does it Work?

The 4PL process involves the following processes:

1. Assessment

The first step in the 4PL process is to assess the organization’s supply chain and logistics requirements. This helps the 4PL provider understand the organization’s needs and identify areas for improvement.

2. Developing strategy 

Once you are done assessing the supply chain and logistics of an organization, the 4PL provider will develop a logistics strategy that optimizes the supply chain, reduces costs, and enhances efficiency. This includes checking for new logistics providers, renegotiating contracts, or implementing new software.

3. Execution of strategy

The 4PL provider executes the logistics strategy by coordinating and managing the activities of multiple logistics providers, such as carriers, warehouses, and customs brokers. 

This involves ensuring that each provider is meeting their obligations and working together effectively to optimize the supply chain.

4. Monitor the performance of the 4PL provider

4PL providers continuously monitor the performance of the logistics providers and the supply chain, using real-time data and analytics to check issues and opportunities for improvement. 

This helps the 4PL provider to know and address potential problems before they become major issues that will cause the business to have a setback. 

5. Check what can be improved

Based on the performance that the 4PL providers monitored, they must now optimize the supply chain and logistics operations to ensure that they meet the needs and goals of an organization.

 This may involve adjusting logistics providers, renegotiating contracts, or implementing new technology software to reduce costs and improve efficiency.

Difference Between 3PL and 4PL