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Comparison of Functions between 4PLs and 3PLs
Third party logistics (3PLs) and fourth party logistics (4PLs) have a number of differences in the functions and value they bring to the supply chain. When analyzed in terms of functionality, a 3PLs basically entails the outsourcing of logistical services (among other services) by a company.
Most of the time, a 3PLs system manages all logistical functions in the organization, ranging from purchasing, billing, online sales bidding and the likes (but such functions are determinant of the needs of a client, the financial provision and the infrastructural ability of the company) (Boaz, 2009).
A 4PLs on the other hand, is able to manage more than one company or company branches in any given environment. In other words, it is not only able to carry out logistical functions in one company, but a range of functions from subsidiary companies. For instance, if a company has three plus 3PLs and an additional transport company, the company is better placed using the 4PLs because it can combine the functions of both companies (Gail, 2009, p. 20).
Majorly, 3PLs have been used by most organizations to reduce inventory costs and improve customer service by making the organization more flexible and responsive to customer needs but a few organizations have been noted to use the 3PLs to achieve strategic and competitive advantages by capitalizing on the above benefits (Boaz, 2009).
The 4PLs however goes beyond reducing the costs of logistics because it manages several 3PLs at the same time. Also, 4PLs are known to have better management of resources and in the same manner, a better control of information technology in general.
Reasons why more Companies Rely on 4PLs
More companies are relying on 4PLs because 3PLs have been observed to have a number of shortcomings. Many companies are therefore opting for 4PLs to avoid the shortcomings 3PLs poses. Boaz (2009, p. 3) notes that “3PL’s success factor no. 4, labeled “scope creep phenomenon,” has paved the way for the 4PL….the expectations companies have of the provider are now more in-line with the capabilities of the 4PL”.
However, it is important to note that the success of the 4PLs is based on the performance of the 3PLs but many companies have ignored this assumption, and concentrate on the fact that the 4PLs is more effective than the 3PLs (Gail, 2009, p. 20).
It is also important to note that many companies are currently expanding, and many more are realizing an increased need to integrate most of their expanded operations. In this case, the 4PLs comes in handy because it is able to integrate the functions of a number of companies all at once. These are some of the reasons why the 4PLs is increasingly being adopted.
Importance of Establishing the Metrics in 4PLs
It is important to establish a metrics system in quantifying the benefits 4PLs brings to the supply chain system of an organization because many organizations already have different levels of utility through the current ways they handle their utility systems. In this manner, organizations can be able to quantify the benefit 4PLs systems bring to the organization’s supply chain, after translating its benefits into monetary advantages.
Moreover, supply chains systems are becoming increasingly complex and it is also increasingly difficult to verify the benefits 4PLs systems bring to the organization, viz a viz the 3PLs. It therefore becomes increasingly difficult to establish the appropriateness of a given supply chain system if it cannot be quantified using the appropriate metrics.
This necessitates the inclusion of a metrics system. Gail (2009, p. 20) also notes that it is important for the 4PLs system to incorporate metric systems because various companies have different supply chains and they are managed in different ways. Moreover, each supply chain system has its own unique way of reporting and therefore, it is important to include a metrics system to analyze the different supply chain systems.
Logistic Solutions for Big Lots
Unyson’s solution for Big Lots can be said to be in line with the benefits 4PLs brings to supply chain management. Nonetheless, it is important to note that Big lots had been experiencing a problem of saving on transportation without compromising on the quality of service; improving shipment visibility for all supply chain stakeholders and improving efficiency through process improvement efficiencies (Uniyson Logistics, 2010).
Uniyson’s solutions to these problems were consistent with the objectives of 4PLs because from its recommendations, Big solutions was able to cut on transportation costs to register increased savings of up to 25%, without compromising the quality of service (Uniyson Logistics, 2010, p. 12).
This is one aim of the 4PLs (cutting on supply costs). This development was achieved through advancing transport management techniques and optimizing LTL shipments, which is also in line with the objectives of 4PLs, as observed by Boaz (2009, p. 9) who notes that “4PLs take a purely collaborative approach”.
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The collaborative approach identified here can be evidenced through coordinating the activities of management and LTL shipments (which was the subsidiary transport company for Big Lots).
Considering the speed Unyson was able to enjoy the benefits of an improved supply system for Big lots, it is correct to note that their strategy was in harmony with the ‘speed’ value 4PLs bring to the supply chain. In other words, through the utilization of 4PLs, a company is able to enjoy increased efficiency of the supply chain through speedy operations.
Boaz, D. (2009). Global Logistics. Web.
Gail, D. (2009) The Rise of the 4PL. World Trade, Troy, 22(1), 20
Uniyson Logistics. (2010). Uniyson logistics Case Study. Web.