4PL, What does it means?
In recent years, the concept of 4PL, an acronym for ‘Fourth Party Logistics’, has been increasingly present in our industry. It refers to a supply chain management model in which a logistics service provider coordinates and manages all logistics activities on behalf of a contracting company. Unlike traditional logistics services, the 4PL acts as an ‘integrator’ of logistics services, taking responsibility for the planning, management and control of all logistics activities involved in the supply chain.
To provide more clarity, it is necessary to go over the various levels of collaboration, which are indicated by the acronyms related to the level of service offered by the supplier company 1PL, 2PL, 3PL, and 4PL.
1PL (First Party Logistics)
This is first party logistics. In this model, the producer (or reseller) company manages the entire logistics process itself, in practice there is no outsourcing of the service.
This solution is certainly economically advantageous (both for the manufacturer and the consumer) but is only applicable for small businesses with local distribution.
2PL (Second Party Logistics)
In this case, the company opts for an initial outsourcing of the shipping service, turning for example to one of the many couriers or forwarding agents that can operate nationally or internationally.
With this model, the contracting company coordinates all operations related to warehouse management, preparing orders within its own storage site, and managing shipments.
Second-party logistics therefore allows the contractor not to think directly in shipping service with the purchase of vehicles and personnel management but can allocate the time and resources to developing its business.
3PL (Third Party Logistics)
This is a system whereby the service provider acts as an intermediary between the manufacturer, or retailer, and customers, managing the entire logistics process, starting from the storage of goods in its own facilities to last-mile logistics.
The third-party logistics provider then, in addition to organising transport, takes care of receiving the goods, checking, and storing them, managing orders, keeping an up-to-date inventory, handling returns, and other kind of services need for this kind of business.
This business model is currently also the most popular and cost-effective for high-growth companies that need to focus their resources on their business.
4PL (Fourth Party Logistics)
The next level of service outsourcing, an even more comprehensive level of logistics management.
It is not only concerned with the storage of goods and their transport. Its is more of a strategic and coordinating role:
- he manages warehouse operations.
- he integrates modern technologies.
- supervises the procurement of goods.
- selects and coordinates 3PLs for the operational part.
- monitors and evaluates supply chain performance through the analysis of logistics KPIs.
- identifies and manages industry risks by adopting strategies to reduce or avoid them.
- provides strategic advice to improve the supply chain.
