Has your business become so large that you can no longer handle your logistics solutions? Thankfully, you can outsource all of your logistics needs to an external provider with fourth-party logistics.
Fourth-party logistics (4PL) is when you outsource all of your logistics operations to a single partner. 4PLs have grown significantly in recent years, with a market size that is expected to grow over 100 billion by 2025. (Source)
For businesses that would rather not deal with the complications that come with logistics solutions, 4PL can completely take over and allow the business to focus on more pressing issues.
Throughout this article, we will go over what functions 4PLs have, the benefits of 4PLs can have on your business, and more.
What is Fourth Party Logistics?
4PL is where manufacturers outsource all of their supply chain and logistics management to one external provider. This partner is then responsible for the entire supply chain management, including evaluating, planning, constructing, running, and measuring solutions. The partner will also control and manage the client’s warehousing, shipping solutions, freight, and more.
The difference between 4PL and 3PL is:
- 4PL is typically used by medium-large-sized businesses, while small-medium-sized businesses use 3PL.
- 4PL handles all of the supply chain networks, while 3PL focuses mainly on logistics.
- 4PL has one point of contact for its operations.
What Does 4PL Do for Businesses
4PLs analyze, optimized, and enhance the entire supply chain. Through their expertise, experience, and connections, 4PLs will find the best logistic and warehousing solutions for your business and act as an interface between the client and the external solutions.
4PLs also provide their clients with the ability to view and control all of the different aspects of their supply chain, usually through an electronic interface. Clients can inspect, manage, and track their logistics performance, warehouses, shipping facilities, delivery agents, and more from this interface. It also provides information on remain stock and other order fulfillment information, acting as an all-encompassing interface for every aspect of the supply chain process.
What are the Benefits of Working with a 4PL?
While working with 4PLs may be more costly than working with 3PLs, the added benefits ensure that the additional cost is worth it. Some of the benefits of working with a 4PL are:
- Provides oversight of your supply chain so you can strategically optimize each step of the process.
- Provides a single point of contact throughout the entire supply chain.
- Allows you to focus on other parts of your business rather than worry about logistics and supply chain management.
- 4PLs coordinate with an extensive network of suppliers to ensure that you incur the lowest possible transportation costs.
- Reduces inventory waste and inventory write of costs.
- Through the integration of technology, the logistics process is optimized and automatized.
The benefits listed here are just a few that you will inherit when partnering with a 4PL. They will optimize and improve your business’s logistics, which is an excellent solution for larger businesses with logistics needs that are too complex for their in-house team to handle.
Why 4PLs Are Growing in Popularity
4PLs have grown significantly in popularity in recent years. While it may seem that the ease of having professionals deal with your logistics is the key reason for this boost in popularity, it goes beyond that. Here are some examples of why 4PLs are becoming more prominent:
- Manufacturers and retailers are focusing more on their core business, so subcontracting things like logistics to those who have the expertise and knowledge to optimize their supply chain is a great option to facilitate that. With an external company focusing on their supply chain, businesses can focus more on its core competencies.
- Thanks to their high expertise, 4PLs implement newer supply chain management practices than those with less experience in the industry.
- Due to the growth of outsourcing and offshoring through things like e-commerce, supply chains have become more complex, with additional segments, so having professionals that know how to implement and optimize these new supply chains is a must.
One of the main reasons to choose 4PL is that they offer a more robust understanding of logistics and supply chain management procedures. Manufacturers or producers will typically hire a 4PL to outsource the logistics tasks and so that the 4PL optimizes their supply chain. So, if your logistics needs are becoming too lofty or complex for your business to handle, partnering with a 4PL is a great way to ensure your supply chain is running as smoothly as possible.
At Flex Space Logistics, we are partnered with a vast network of 4PL providers across Canada, offering solutions for any logistics or storage needs your business may have. We ensure that your product is delivered and stored with care so you can get back to the more essential parts of your business.
If you’d like to get started, get a quote today, or contact one of our FlexSpace Logistics advisors to find the right solution for your business at 1-844-985-3539.