A new wave in supply chain management

Outsourcing, as stated by Harvard Business Review as one of the most critical direction constructs of the last 75 old ages, has become a volitionally recognized agencies of increasing wagess of non-core supply concatenation activities. Outsourcing allows organisations to stress and prioritise on their core-competencies, to supply an elevated degree of client service, and to harvest advantage of greater operational flexibleness. While outsourcing frequently provides major erstwhile cost decreases, it does non present the uninterrupted on-going nest eggs that concerns desire.

The following important development or moving ridge in supply concatenation direction has cropped up, and it is called Fourth Party Logistics or 4PL. Fourth Party Logistics enables you to reply today ‘s supply concatenation inquiries more strongly and efficaciously.

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Need for 4PL

Ever lifting competition in today ‘s planetary markets, increasing debut of new merchandises with shorter lifecycles, easier airing of information, and heightened outlooks of clients have forced organisations to put in, and concentrate attending on, complete supply ironss. Today, many companies are widening their range outside of traditional supply concatenation boundaries to prosecute in activities that go beyond their ain domain of control. To make this, companies organize competitory webs of endeavors to develop and entree supply concatenation capablenesss for all those organisations that are portion of such value-adding webs.

Following are the Current Customer Problems which needs to be addressed: –

Merchandise Incompatibility throughout the web or concatenation.

Disparate, broken and fragmented supply ironss.

Entire Supply concatenation costs are really high due to multiplicity of ironss.

Weak Demand Forecasting i? Urgent Orders Required i? Waste Generated

Lack of Supply Chain Visibility

IT package integrating throughout the Supply Chain

Development of Supply Chain – Emergence of 4PL

The above block diagram shows how supply ironss have evolved over the old ages. Figure 1 illustrates how this development has progressed over the last 30 old ages.

Fourth Party Logistics – Defined

A Fourth-party logistics supplier is a confer withing house specialized in logistics, transit, and supply concatenation direction.

Fourth Party Logistics is the development of supply concatenation outsourcing. Fourth Party Logistics is the shared sourcing of supply concatenation crossing activity with a client and choice teaming spouse, under the way of 4PL planimeter.

Typical fourth-party logistics suppliers are Deloitte, SCMO, BMT Limited and Accenture.

The Fourth Party Logistics supplier is a supply concatenation planimeter that assembles and manages all the resources, capablenesss, and engineering of its ain organisation with those of other service suppliers to present a comprehensive supply concatenation solution.

As conceptually illustrated in the book, Strategic ‘Supply Chain Alignment ‘ by John Gattorna, supply concatenation development has occurred, as organisations are traveling from insourcing to outsourcing to 4PL agreements.

Harmonizing to Gattorna, “ While outsourcing third-party logistics is now recognized concern pattern, Fourth Party Logistics is emerging as a discovery solution to modern supply concatenation challenges… to supply maximal overall benefit. ”

4PL Working Models

All 4PL solutions are customized to accommodate the demands of a peculiar client, the following operating theoretical accounts conceptually portray how 4PL relationships are more or less configured.

A Synergy Plus runing theoretical account relies on a working relationship between the 4PL organisation and a 3PL service supplier. In this theoretical account, a 4PL and 3PL signifier a partnership to market supply concatenation solutions which capitalize on the capablenesss and market range of both organisations. The 4PL provides a wide scope of services to the third-party logistics provider like engineering, supply concatenation scheme accomplishments, capableness to market, and plan direction expertness.

Another popular 4PL theoretical account is Solution Integrator. In this operating theoretical account, the 4PL operates, manages a comprehensive supply concatenation solution for a peculiar client. The Solution Integrator agreement encompasses the resources, capablenesss, and engineering of the 4PL and complementary service suppliers to supply a comprehensive integrated supply concatenation solution that delivers value throughout a individual client organisation ‘s supply concatenation constituents.

The most complex operating theoretical account is Industry Innovator. Within this theoretical account, a 4PL organisation develops and runs a supply concatenation solution ( theoretical account ) for multiple participants with a focal point on synchronism and coaction for all the participants. The formation of industry solutions provides the highest benefits ; nevertheless, this theoretical account is extremely complex and can dispute even the most able and learning organisations.

Activities of 4PL Service Provider

1. The 4PL offers logistics services for the supply concatenation, i.e. pull offing the LSP, supplying ample chance for cost decreases. The 4PL consolidates and analyses the logistics demands of many companies, which gain from the economic systems of graduated table and obtain advantages in dialogues with the logistics supplier. In short, the 4PL Acts of the Apostless as a Complete service supplier within the supply concatenation.

2. With the LSP, the 4PL co-ordinates storage, cargo and bringings. To carry through this, 4PL ‘s have online location tools and client services which are able to do the conveyance operations throughout the supply concatenation evident. Basically, It besides manages claims and payments of contractors.

3. In distribution services, the 4PL may utilize the LSP ‘s ( 3PL supplier ) assets or its ain to present the merchandises to the clients. Various other services can besides be incorporated, such as packaging and assembly.

4. Consultancy services for supply concatenation: the 4PL supplier can analyse the Information flow procedure of concatenation to redesign an efficient concatenation. This includes happening out the best options of transit, distribution operation site, or bringing frequence. Its technological capacitation is besides indispensable for the execution and integrating of services.

Below tabular array shows difference between 3PL & A ; 4PL services sing assorted factors: –

4PL Value Proposition

Gross Growth

Increased Revenue growing is majorly due to following grounds

Enhanced Product Quality

Improved Product Availability

Improved Customer Service & A ; Retention

No stockouts throughout the concatenation

Reduced Operating Costss

Some steps that are possible with a 4PL supplier are:

Better Operational Efficiencies

Better Procurement Savings

Economies of Scale

Integration of Procedures

Improved Planning & A ; Execution of Supply Chain Activities

Working Capital Decreases

Inventory decreases

Reduced “ order to hard currency ” rhythm times

Technology increases direction of SKU ‘s

Fixed Capital Reductions

Capital Asset Transfer

Enhanced Asset Utilization by 4PL Supplier

Fring of Organization ‘s Fixed Assets

Reduced Capital investing by organisation in fixed assets gives it a opportunity to construct up on its Core Competencies.

Advantages and Risks of Migrating

Below table lists the advantages and hazards, which are involved while a supply concatenation is migrating from 3PL to 4PL

Pitfalls in Implementing 4PL

Large Progresss in IT Required:

The grade of coaction to do 4PL as a construct work can merely be made possible by the coincident progresss in nomadic engineering, web-enabled and browser-based IT package ‘s ( applications ) and their synchronism and integrating with makers ‘ ERP systems.

Use of Advanced Technology has provided illimitable visibleness across supply ironss theoretically but practically upgrading every company ‘s systems to such a degree is rarely possible.

Measuring Gain-sharing fiscal inducements:

With the focal point on 4PL ‘s presenting mensurable cost nest eggs and service degree betterments, the fiscal constructions of each spouse must integrate feasible systems for set uping the base line costs and agencies by which these costs will be assessed against future costs so that any existent cost nest eggs can be shared in an in agreement ratio between the 4PL supplier and client.

Measuring the fiscal benefits that a 4PL can give to an organisation is a dashing undertaking and it needs to be evaluated right and exactly for each and every spouse in supply concatenation for effectual integrating.

Clear Agency Functions:

In many supply ironss, 3PL service suppliers who have been making the regular Supply concatenation activities for long are working along with the freshly roped in 4PL spouse which is responsible for different activities.

The parametric quantities of the 4PLs bureau assignment needs to be set out exactly and clearly as excessively frequently this of import structural point is omitted wholly.

Intellectual Property Issues:

Where a 4PL supplier is held-out as portion of makers ain operation ( unrevealed bureau ) the specific safeguarding steps should be put in topographic point sing rational belongings of maker i.e. usage of company letterheads, e-mail formats and other material with an exclusion of any rights in regard of the same, particularly post expiration of the contract.

Independence of Manufacturer and Arms Length Behavior:

Sometimes, 4PLs may buy 3 PL services from their really ain organisation, the appraisal of 3PL services and bear downing ( duty ) mechanisms by which the 4PL makes its determinations have got to be disclosed and justified so as to recognize an betterment over related current market monetary values.

Regular Coverage:

With the strategic of import operations managed by the 4PL, greater attention and look into should be maintained on the informations received by the 4PL ‘s client to guarantee that the end-to-end supply concatenation is being decently managed. The coverage will turn to the 4PL ‘s conformity within its specific service degrees, and besides include exclusion studies in relation to the 3PLs ‘ public presentation.


Fourth Party Logistics is the following moving ridge in supply concatenation outsourcing. Supply concatenation activities are complex, information-rich and progressively going planetary. Simultaneously, computing machine engineering and e-enabled capablenesss are taking the manner. To enable a house to hold on all the wagess of supply concatenation co-operation, coaction and synchronism, a new moving ridge of integrating must be deployed, which is at present beyond the capablenesss of traditional sourcing methods.

Submitted by

Anshul Jindal

306, MBA-Tech


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