FOURTH-PARTY LOGISTICS (4PL)
Fourth-party logistics was a term coined by Accenture Consulting in the mid 90s. The term was coined as a result of an exhaustive survey carried out by the organization on customer satisfaction, which indicated that the customer expectations regarding costs by using 5FL service providers were not up to the mark. The survey also indicated that the balance of risk-and-reward on which the 3PL business model is based had tilted the rewards unjustly in favour of the 3PL service providers while the risks were borne by the client organizations. This was because of the fee-based model of outsourcing that the companies adopted that resulted in inflated costs of operations with increase in the outsourcing business. As a result the supposedly dynamic nature of the 3PL service provider had become a dynamic one.
To model a more dynamic relation Accenture coined the term 4PL with the following definition:
"An integrator that assembles the capabilities, technology and resources of its own organization and other organizations to design, build and run comprehensive supply chain solutions."
For a firm to be 4PL it must have exhaustive skills in investing and maintaining the infrastructure and resources that makes it the manager of multiple 3PL service providers crucial to the client organization. However, the definition of 4PL was misinterpreted by many 3PLs who thought 4PL as a kind of 3PL plus service and began providing some value-added activities such as assembling, picking and then marketing themselves as 4PL providers.
Key Components of a 4PL
Four Key Components a 4PL Must Assemble
1. CHANGE LEADER
Multiple Customer relationship
Deal shaper and maker
Service, Systems and information integrator
2. DECISION MAKERS
Optimization engines and decision support
Manage multiple 3PLs
IT System integration
IT infrastructure provision
Real-time data to information
Convert data to information
Provide info to point of need
Transport asset provider
Warehouse, cross-dock, property facility
The 4PL should be the instigator of continuous innovations that help in maximizing the use of 311- service providers to the client organization. The process of innovation makes sure that the relationship between that of the 3PL and the client organization does not remain a static one and is evolving continuously for the benefit of the client organization. The change can come in process improvements or use of enhanced technology for efficient utilization of resources.-
The Control Room
The control room is the brain and intelligence of the 4PL. It is the decision-making components and should consist of experienced logisticians. Ideally, the control room component should contain people from partner and client organizations who can enhance returns with their collective intellect.
The Supply Chain Infomediary
The 4PL should have extensive resources and capabilities for collecting and disseminating information to various partner organizations. It must use enhanced technologies like GPS, GIS to increase visibility of goods. The 4PL provider must also possess capabilities to integrate the disparate technologies of various 3PL and the client organization so that sharing of information is complete. The 4PL is also the nodal agency for converting raw data into meaningful information. An emerging trend for information sharing is the use of web-based tools.
The Resource Provider
Finally, the 4PL provider must also provide some resources that are critical to the functioning of the conventional supply chain solutions. These resources include warehousing, packaging etc.
Technology Component of 4pl
Though technology is not the only component of a 4PL provider, it is one of the key components of disseminating information for being responsive to changes. And being dynamic is one of the most important challenges of a 4PL service provider.
GPS, global positioning system, is the only technology that can be used for determining the position of any object on Earth, with a high amount of accuracy and in any weather.
Key Components of GPS
GPS uses 3 main elements-space segment, user segment and the control segment. GPS uses 24 satellites that orbit in space 11,000 nautical miles above the earth, which comprises the space segment. The user segment consists of receivers, which can be hand held or mount on a car. The control segment consists of five ground stations, located around the world, which ensures the proper working of the satellites.
Use of GPS in Fleet Management
The use of GPS in fleet management helps to:
Know whether the vehicle has traveled out of an approved area, or entered a fenced-off zone.
Know how long the vehicle has spent in various places or in transit each working day.
Determine vehicle and/or cargo status according to external inputs.
Determine how long the vehicle has been in use.
Eliminate unauthorized use of vehicles.
Ensure that company vehicles are used legally.
Determine the location of the stolen asset in case of theft.