After waning amid the financial crisis, Fourth Party Logistics is rebounding with the increased savings, productivity and simplicity that outsourcing supply chains bring.
Fourth Party Logistics (4PL) services aren't new, but their performance enhancing, cost cutting allure has begun spreading considerably. A rising number of global companies are outsourcing their supply chain operations to expert 4PL management, and getting innovative, technologically advanced and contractually strengthened transport and logistics service in exchange.
Introduced in the early 2000s, 4PL marked a logical -- admittedly heady -- extension of companies using freight forwarding partners to orchestrate logistics and transport of cargo. Under 4PL arrangements, exporters went further by assigning one of those global experts decision-making and operational responsibility for their entire supply chains. That reduced suppliers' interaction in the vastly simplified process to single contact with their unique 4PL partner. In return, those specialists promised to attain annual savings of up to 10% through tightened procedures and selection of the best service provider options.
The 2007-08 financial crisis considerably disrupted business of companies worldwide, however, and many reacted by focusing on short-term procurement savings. Numerous clients who'd turned to 4PL, meanwhile, reassumed control of their supply chains. Even after the crisis began to abate, some exporters remained wary of internal 4PL considerations.
Chief among those was reversibility: customers' ability to reintegrate supply chains in a rapid, smooth and affordable manner, or shift their management to new 4PL partners if desired. Another was guaranteed neutrality of 4PL operators in selecting the best possible transport and logistics options available, rather than favoring their own affiliates. Also tricky was assuring sufficient visibility of internal 4PL operations to accurately measure optimization claims.
"Clients wanted transparent, neutral 4PL arrangements with guaranteed seamless reversibility when demanded," says Jean-Yves Gras, a veteran of 4PL services and current Vice President of Supply Chain and Logistics for Bolloré Logistics in Paris. "In relinquishing control of supply chains, companies demanded real efficiencies and cost gains through optimum market choices – not merely annual economies attained through unverifiable means."
Sector experts have moved to address those concerns, and thereby increased the allure of efficiencies, lower costs and fuller accountability of 4PL organization. So, too, has the rapid advance of technologies increasing speed and transparency of data exchanges central to 4PL services.
Those capacities, meantime, allow companies that scaled back supply chain investment following the financial crisis to immediately modernize their freight activity by outsourcing them to sector specialists via 4PL.
"The attraction of 4PL is now so strong that fully 70% of our big global clients have adopted or asked us to present them our 4PL services," Mr. Gras confides.
Within its offer, Mr. Gras says, Bolloré Logistics has updated its LINK information platform – to which all supply chain actors and clients provide real-time data -- for 4PL management. It is also using algorithms developed by its MFG Labs unit to optimize and anticipate best available options. Strengthening IT and artificial intelligence assets, meanwhile, is enabling predictive abilities to anticipate freight and transport flows, and generate contingency planning.
"We provide true digitalization of supply chains," said Mr. Gras.
Exploitation of data exchanges also drives increased automation of Bolloré Logistics' self-operating 4PL control towers. Eventually those will be entirely computer-run, with human intervention limited to incident resolution. The company's global footprint also provides clients access to its network of high-performance control towers at any time and in all regions of the world.
Neutrality is being assured in Bolloré Logistics' separation of profit and loss accounting of central 4PL services, and group transport and warehousing affiliates – a measure securing full transparency of where and how economies are made. Reversibility is guaranteed through 4PL customers' access to and use of Bolloré Logistics IT assets during eventual repatriation of supply chain management, or transfer to a new partner.
"Clients don't lose control of their supply chains, but gain performance and cost improvement by entrusting them to our specialized experience and management," Mr. Gras says. "It's a win-win choice."