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How 4PL services add value to your business

Jonas Mehrhoff
Jonas Mehrhoff
June 28, 2021
5 min read

Note on the authors

Heiner Murmann is the founder and CEO of Orkestra SCS, a logistics, technology and services company. In addition, Heiner serves as Executive Chairman for Evolution Time Critical and President of The Five Inc., and as an Advisory Board Member for both Metro Supply Chain Group and Black & McDonald Limited. Notably, Heiner previously held various senior executive roles at DB Schenker, one of the top three global logistics companies, as a Member of the Board of Management responsible for Air and Ocean Freight, and as CEO of the Region Americas.

Arnold da Silva, Senior Ocean Freight Advisor for Orkestra SCS, is head of an ocean freight consulting company where he actively advises global shippers on ocean freight strategy and execution. With 40 years of experience in the ocean freight industry, Arnold served as Executive Vice President for Ocean Freight Region Americas for DB Schenker. Arnold's passion is to conceptualize and implement innovative ocean freight solutions that transform one’s supply chain and promote a shipper's success.

The supply chain landscape has changed, especially in the last couple of years due to the disruptions caused by the pandemic and the many challenges facing global supply chains. Companies have realised that a resilient and future-proofed supply chain is needed to handle such disruptions and are learning to adapt to the new norm.

Data and supply chain analytics have become key components of a successful supply chain. However, having data and supply chain analytics alone is not going to be enough. Success in supply chains depends on how the data is used and the information is leveraged. Although some companies have found ways to deal with these neo-problematic supply chain disruptions, there are many benefits in integrating the capabilities of service providers who can assist in identifying, handling and managing such problems.

A Fourth Party Logistics (4PL) service provider is one such entity that many companies are turning towards to find solutions for their supply chain problems.

The need for a 4PL service provider

For supply chains to achieve maximum efficiency with cost savings and ensure that the supply chain is both sustainable and robust, it must be designed or re-engineered to handle different use cases covering the various ‘what ifs’ that have come about. A major part of achieving this is to ensure that there is an effective logistics support structure in place.

Supply chain managers need to place their trust in the right service providers and must have confidence in their abilities to provide workable solutions to steer the business through volatile times. This is where a 4PL service provider can add immense value.

4PL is a supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.

- Accenture

A 4PL has the ability to integrate the resources of manufacturers, retailers, 3PL service providers and other stakeholders in the chain to achieve holistic improvement throughout the supply chain. A 4PL is able to be flexible and integrate the resources of its own and other companies to design, build and implement inclusive supply chain solutions.

Being non-asset-based, 4PL services are more managerial in scope and are generally focused on integrating functions and technologies to achieve greater efficiencies, cost-savings, leaner production, inventory management and distribution. As a 4PL deals with suppliers and the customer at both ends of the chain, 4PL services have the ability to collect and analyse data from both parties and use that feedback to shape the best supply chain for the business.

Leveraging the advantages of a 4PL

The relationships that a professional 4PL service provider has with various stakeholders can be leveraged. They can simplify both upstream and downstream logistics activities including managing transportation, fleet management, material handling, warehousing, fulfilment, supply and demand planning, inventory management and distribution.

A 4PL has an unencumbered 360° view of the various opportunities, resources, and technologies available in the market. Combining this with the global networks in which they operate and their extensive experience in handling various cargoes, a 4PL service provider is able to manage resources, offer innovative technology, broad expertise in supply chain dynamics and deliver strategic business insights. A 4PL’s global network, offers companies additional resources, skills and local knowledge of markets in which the customer may be present. These examples show what companies can leverage from 4PL providers.

4PL Network

How a 4PL service provider can add value

A 4PL service provider provides several unique benefits in helping companies tackle their supply chain problems. Here are some of the ways in which a 4PL service provider can add value to your business:

  • A 4PL service provider simplifies your supplier management process as the company would need to only deal with a limited number of 4PL service providers instead of directly interacting or managing hundreds of suppliers and service providers.
  • Today’s business and supply chain environment is highly complex a 4PL service provider can amplify the value that they provide as they coordinate several logistics activities for the company. 4PLs can become trusted partners and through a totally collaborative process assist in ensuring efficient supply chain execution sustainably and also assure accountability through supplier audits.
  • Using a 4PL service provider allows companies to redistribute their resources and leveraging operational improvements designed to streamline work and eliminate inefficiency allows a reduction in logistics spend.
  • Widen your reach – a 4PLs global network encompassing a wide range of supply chain partners, suppliers and technological innovations is a highly valuable resource capable of providing timely and actionable data-driven insights which allow supply chain managers to make data-driven decisions. Using data curated by the 4PL service provider, companies can analyze, adjust, and optimize each link in their supply chain and devise strategies for sustainable supply chains.
  • Cost reduction and savings – A 4PL will have many established and tried and tested standard operating procedures and boiler templates for the handling of various types of products and supply chains associated with these products. Using this plug-and-play option, companies can reduce and in many cases case costs as they don’t have to reinvent the wheel as these include best practices in supply chain management.

Key-take away

A new study by Oracle found that recent supply chain delays and disruptions have negatively impacted the lives of Americans, leaving many feeling frustrated, angry, and scared that the disruptions will never end, according to Oracle.

The study found that worries about more delivery delays, product shortages, and disruptions are worsening across the nation due to the rise of the COVID-19 Delta variant, and that people are looking to brands to help settle their concerns.

Traditional supply chains require to be reengineered to be able to allay such fears and provide unique and new solutions to new problems. Technology alone cannot be the answer to common supply chain problems and supply chain managers need to build real-time problem-solving capabilities with modern thinking and increased collaboration in order to improve customer value and ensure customer satisfaction in supply chain.

A 4PL service provider can be a viable solution for many supply chain problems experienced by companies as they provide the required mix of skills required in terms of operational functions, technology, analytics and managing of the end-to-end requirements.