Shippers are demanding far more from their logistics providers as disruption and supply chain complexity increase – but that does not necessarily mean they are ready to make the leap from 3PL to 4PL.
Contradictory Signals in Shipper-3PL Relationships
The latest annual Third-Party Logistics Study paints a contradictory picture of the shipper-3PL relationship: 88% of shippers describe their relationships with logistics providers as successful, yet half are consolidating the number of 3PLs they use. And expectations of the remaining providers are rising.
The study noted it was “no longer sufficient” for a logistics provider simply to execute the movement of freight from A to B, with shippers increasingly looking for continuous improvement, technology, expertise and value creation. Some 81% of shippers said disruption and supply chain complexity was driving interest in more strategic logistics partnerships, while 76% cited cost optimisation through greater collaboration and 57% digital transformation and technology integration.
When Does 3PL Evolve into 4PL?
This changing relationship prompted Seko Logistics to argue that some companies may have outgrown the traditional 3PL model altogether. Paul Lockwood, Seko’s UK & Ireland group managing director, said the shift towards 4PL typically began when a shipper’s supply chain had become too complex to manage through a collection of individual providers.
He identified fragmented visibility, rapid growth, increasing demands on internal logistics teams and disconnected technology systems as signs that a company might need to move towards a 4PL model.
“3PL is built to execute. 4PL is built to orchestrate,”
he said. Rather than simply moving and storing freight, the 4PL assumes responsibility for coordinating multiple logistics providers, technology platforms and data flows, potentially giving the shipsingle view of its supply chain.
Economic and Structural Barriers to 4PL Adoption
However, Global Shippers Forum director James Hookham questioned whether increasing demands on logistics providers were translating into a significant shift towards 4PL. He said shippers were certainly asking much more of their existing providers, particularly following successive supply chain disruptions, but he was not seeing a widespread move towards 4PL among the shippers he dealt with.
Instead, shippers had become more dependent on their logistics providers for ideas and solutions, rather than simply execution. The economics could also restrict the 4PL model largely to bigger and more complex supply chains, he suggested. Introducing another management layer is a significant step and requires sufficient volume, scale and complexity to produce a return on the additional cost. For many smaller shippers, that threshold may simply be beyond them.
Blurring Lines and Rising Technology Expectations
That raises the question of whether the distinction between 3PL and 4PL is itself becoming blurred. The study found that 81% of shippers credited their 3PL relationships with improving customer service, 75% with reducing logistics costs and 69% said providers had introduced innovative ways to improve logistics effectiveness.
Technology, however, remains a conspicuous weakness. Some 90% of shippers said technological capability was important when selecting a 3PL, but only 57% were satisfied with the capabilities their providers offered. Advanced analytics and network optimisation were each identified by 61% of shippers as important IT requirements from their 3PLs. Shippers outsource an average 62% of their logistics expenditure, study, but half are now consolidating their 3PL rosters.
Source: The Loadstar
Compiled from international media by the SCI.AI editorial team.
