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Posts tagged “4PL

4PL Services: What is it?

In business, there are four basic dynamics: 1PL (first-party logistics), 2PL, 3PL and 4PL. Each progressive number indicates the distance away from the actual product: 2PL, for example, indicates a transport or cargo company, while 3PL indicates a purely logistical company. In terms of 3PL companies, these can be either asset-based or non-asset based, depending on the types of businesses they work with. Asset-based companies are more hands-on than non-asset-based companies because they own or pay for storage facilities, transportation and even warehouse staff. Purely hands-off 3PL companies simply consult with their clients as to how best to handle business needs and logistics.

4PL Companies and Supply-Chain Management

3PL companies offer logistics consulting to their clients, while 4PL companies provide both these services as well as services specific to supply-chain management. A good 4PL company cannot only function as a 3PL by means of purchasing, storage and shipping, but it can also provide clients with financial services, customer services and supportive computer software. For 3PL non-asset companies, this means that extending the business model to include supply-chain warehouse management services is relatively simple. 3PL companies that already work in warehouse management are privy to information relevant to the supply chain and therefore will have an easy time incorporating supply-chain management into their services.

Offering this type of management does not require a 3PL company to become asset-based; it simply means offering a new, specific set of logistics management solutions. In terms of warehouse management, 4PL services could include providing clients with products such as voice-picking software as well as central-administrative software by which to organize delivery companies, call centers and other contractors.

Switching from 3PL to 4PL

Many 3PL companies are taking steps to expand their business by incorporating 4PL capabilities into their business models. Since the logistics-management industry is relatively new, it may well be that this trend is part of the natural evolution of the industry itself. Remaining a non-asset-based company while expanding to offer 4PL services is not impossible, but it does mean there will be restrictions on the capabilities of the business. A company may offer its clients software and consulting services that address everything from purchasing and shipping to customer care and financing, although it will not benefit from providing any of the physical services itself.

To transform from a non-asset 3PL company into an asset-based 4PL company, however, means endless opportunities for more clients and further growth in the future — not to mention a larger bottom line. Purely logistical transportation management systems, for example, are useful but only in terms of a consulting service. An asset-based 4PL company, on the other hand, is a one-stop solution for warehouse management. Not only can a client receive logistical support, but they need not worry about choosing their own associate transport and shipping companies.

Basic 4PL Services

The end goal of a 4PL company is often to help other companies save money where on their own they wouldn’t be able to break even. A wholesale distributor, for example, may be required to provide accessories or spare parts to the consumer, whether or not those parts are profitable. A side-business in buying and shipping these spare parts may take away much of the business’s core profit, however it is necessary to keep doing business. 4PL services should make it possible for clients to stop losing money on necessary but costly projects such as these.

If logistics companies want to be as valuable as possible to clients, extension into 4PL management is ideal.

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