Is it possible to reduce operating and logistics costs, while devoting less time and resources to the company’s transportation? This method for business is called 4PL. What it consists of and who implements it – we will consider further.
What is 4PL
4 PL in logistics is the most effective way of transportation in the modern globalized world. In 4PL, the company transfers all logistics management to an external integrator. He is responsible for all processes, partners and costs. This is not only planning and coordinating transportation – it is also creating a strategy, providing analytics and implementing modern technologies throughout the logistics chain. This creates comfort for both business and its customers.
What functions, in addition to delivery itself, do 4 PL operators perform:
- selection of the optimal route;
- search for international partners;
- development of logistics strategies, focusing on their business goals;
- control of the transportation budget and forecasting;
- customs clearance;
- insurance;
- labeling, packaging, loading / unloading of goods, repackaging, etc.
The term stands for Fourth Party Logistics – fourth-party logistics.
Logistics levels: 1PL, 2PL, 3PL, 4PL, 5PL
Logistics models are different – from 1PL to 5PL. The higher – the higher the quality of management.
What are the levels of logistics besides 4PL and how do they differ:
- 1PL – often the sender or manufacturer himself, who independently carries out his own logistics operations;
- 2PL – standard transport companies that carry out cargo transportation;
- 3PL – a logistics provider with additional services, such as warehousing, packaging, inventory management;
- 4PL – an integrator who manages the entire logistics system of the client, acts as an intermediary between business partners, 3PL operators and clients;
- 5PL – the most modern level, where logistics management is carried out through digital platforms with full automation.
1PL 2PL 3PL 4PL 5PL – among Ukrainian businesses, the most popular formats are 3PL, 2PL and 4PL.
How is 4PL different from 3PL
The 3PL format is more suitable for small and medium-sized businesses, however, if the company plans to expand and conduct commercial activities abroad, it is recommended to immediately choose 4 PL.
Comparison of 3PL and 4PL formats:
| 3PL | 4PL |
| The operator performs logistics operations; | The operator manages all logistics; |
| organizes only transportation; | manages the entire supply network; |
| has transport and warehouses; | does not necessarily have to have its own transport and warehouse system – can use the services of partners and various 3PL operators; |
| operational level; | strategic level; |
| limited logistics planning; | full strategic logistics planning; |
| basic IT integration; | deep IT integration of all systems; |
| medium flexibility; | high flexibility. |
That is, a 4PL can combine several 3PL stages and coordinate them.
When a business needs a 4PL
4PL operators provide comprehensive logistics control, thereby freeing up the company’s resources to focus on its core business.
Who should definitely use the services of a 4PL operator (4PL provider):
- companies that need to carry out transportation across Ukraine and Europe as part of their activities;
- large companies and international businesses;
- manufacturers with complex logistics;
- e-commerce with global deliveries;
- large importers;
- FMCG companies.
4PL is definitely needed by a business for which deliveries are a strategic system, and not just periodic deliveries. This method is also suitable for most industries: retail, manufacturing, automotive, pharmaceuticals and electronics.
Advantages and risks of the 4PL model
A 4PL system is a single point of coordination for carriers, 3PL operators, warehouses and customs brokers. That is, a business works with one partner instead of several. This is especially convenient if the company has suppliers and sales in several countries, warehouses in different regions and plans to enter new markets.
What are the advantages of the 4PLs logistics model:
- a significant reduction in operational workload due to the formation of a single control center;
- scalability;
- transparency of processes, including cargo tracking;
- simplification of communication with dozens of intermediaries (everything is done by the logistics provider);
- strategic planning;
- digitalization (thanks to modern IT systems WMS, TMS, etc.);
- flexibility.
The only risk of the 4PL model is the higher price than for 3PL services, but most logistics companies meet the client’s needs and select an individual offer to fit the budget.
In addition, with rapid growth in sales, the 3P system or the company’s own logistics service (1PL) may not be able to cope with deliveries. It is often cheaper to transfer logistics management to an external integrator than to maintain an internal department responsible for transportation.
Conclusion
To implement 4PL, you should contact experienced and professional logistics companies. Therefore, we recommend considering comprehensive 4PL services from the international transport and logistics company TVL.
TVL’s approach to 4PL logistics is an individual and a strategy for the specific specifics of the client’s business. TVL specialists configure all the necessary processes, integrate the latest technologies and constantly improve the result. That is why we can say with confidence that 4PL is an investment in increasing efficiency and reducing costs.
