4PL Business Process Evolution The continuing growth of logistics and supply chain complexity, given globalization and other business realities, augers well for the increased involvement of 4PLs. Companies want one service provider and one point of contact to do it all.
Now, with secondary and tertiary sourcing strategies becoming common- place, having a single point of contact to properly integrate and manage myr- iad outsourcing partnerships is of great value: it allows enterprises to divest transportation and logistics activities and better target growth initiatives spe- cific to their core value proposition. Andersen Consulting (now Accenture) first defined the 4PL con- cept in 1997 when acting on behalf of a major chemical company that had winnowed its forwarder base from 30 to three. The company left the consultant with the responsibility of managing its remaining core partners. “The original 4PL concept was designed for businesses with large undertakings,” says Brooks Bentz, asso- ciate partner for Boston-based Accenture Supply Chain Management. “The idea of using a 4PL was slow gaining traction. Now, as a result of globalization, 4PLs are fast gaining momentum.” One reason for this growing demand is the simple fact that finding a best- in-class service provider capable of managing a global supply chain is challenging. “Businesses that outsource logistics find it hard to distill their core inter- ests down to two or even three service providers,” says Jim Ritchie, president and CEO of YRC Logistics, a global 3PL based in Overland Park, Kansas. The 4PL concept has necessarily followed the path of globe-trekking enterprises exploring less expensive and more reliable sourcing and out- sourced manufacturing locations–as well as multiple logistics partners. But equally significant, the concept has not remained static and the very nature of a supply chain “management” partner continues to shift course with prevail- ing global trends. 4PLs and LLPs: Apples to Apples? The function of the 4PL is as fickle as the various terms flung around to describe the interface between a customer and its multiple logistics partners–be it a 4PL, LLP, or systems integrator. (Note: we use the terms 4PL and LLP interchangeably in this article.)
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Internal Logistics Management Many companies manage logistics business processes internally.
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3PL Outsourcing Startpoint Logistics complexity calls for 3PL involvement, for many reasons.
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4PL Outsourcing 4PLs are called for when logistics/supply chain complexity mandates involvement of more than one 3PL and other strategic management functions.
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SOURCE: Frost & Sullivan
Bentz doesn’t see a difference among the terms, comparing the 4PL model to that of a general contractor that admin- isters niche responsibilities to a team of specialized service providers. “The 4PL concept has been around in a defacto sense for some time. Logistics service providers such as Exel use subcontractors at different levels to manage their operations,” he says. For others, the 4PL concept is a mat- ter of perspective. “A 4PL takes the lead on advising or making supply chain decisions on behalf of the cus- tomer, but does not execute the result of that decision,” says Jurrie-Jan Tap, global key account manager for CEVA
Logistics, a global 3PL headquartered in Hoofddorp, Netherlands. In other words, a 4PL is a non-asset- based advisor or integrator. “A 4PL can be paid a management fee or can act as a main contractor. By contrast, an LLP has the same capabilities as a 4PL, but aug- ments that proposition with the ability to use its own assets in concert with sub- contracting activities,” Tap adds. How logistics service providers define and contextualize the 4PL/LLP dynamic is perhaps irrelevant because ultimately, the customer’s perspective dictates pro- tocol. In fact, the seemingly amorphous parameters within which 3PLs, consul- tants, and even IT providers act as lead
82 Inbound Logistics • July 2007
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