Talking about 4PL

I have been working for 3.5 years now as Managing Director at IDS, the best 4PL Control Tower for Europe, and in many a conversation with shippers we talk about the term 4PL. But what exactly does it stand for?

First, the last 2 letters: PL.
The abbreviation PL stands for Party Logistics and is about the degree of outsourcing of logistics activities by a shipper to external service providers. Actually, a better description is the degree of collaboration because it’s about how you reach a higher level of efficiency together. This can be in many areas such as transportation, warehousing, cross-docking, inventory management or return logistics.

For a shipper, some activities, such as core competencies that distinguish you from the competition, are better kept in-house. Other, more secondary activities are fine to outsource to create efficiencies and cost savings. Similarly, there are several choices to be made in the area of transportation.

And then the 4 in front of it: 4PL.
A 4PL is an organization that acts as a kind of outsourced transportation department of a shipper. It is a partner that can organize and optimize various transport and logistics activities on behalf of the shipper. This so that the shipper can continue to focus on its core business. Characteristic for a 4PL is that it has no assets of its own but rather acts as a orchestrator managing various carriers and logistics service providers in order to achieve the best solution for the shipper.

If there is 4PL then of course there is also 1PL, 2PL and 3PL.
A 1PL or First Party Logistics involves a shipper who stores its own goods and transports them to the end user him or herself. Often you see the 1PL’er in small manufacturing companies with local operations. These organizations choose to keep everything in-house. An elegant solution when the knowledge is available in the organization and the scale of business fits with the possibilities in terms of storage and transportation.

With 2PL or Second Party Logistics, outsourcing transportation activities begins. Companies offering 2PL services are often very good at demarcated specific logistics tasks such as storage and/or transport. As a shipper, you then specifically outsource certain logistics activities to specialized service providers. These also have the assets to carry it out.

And then there is 3PL or Third Party Logistics. This is about outsourcing a larger part or even all transport and logistics related tasks to an external logistics service provider. Examples include: transportation, warehousing, inventory management, order fulfillment, customs clearance and return logistics. A characteristic of 3PLs is that they have their own assets, so they can solve problems with their own warehousing facilities and their own means of transport.

It may happen that, as a shipper, your shipment profile does not exactly fit one particular 2PL carrier or 3PL logistics provider. In that case, you will work with multiple 2PLs and 3PLs to fill your transportation demand. Some 2PL and 3PL also offer subcontracting. In that case they subcontract the transport they cannot or do not want to fill in themselves to a colleague 2PL or 3PL. The big advantage for you as a shipper is the central control. The disadvantage is on the cost side and in

addition, subcontracting is not always core business for a 2PL or 3PL. And there are shippers who don’t allow it either. This is where a 4PL can offer a solution.

So back to the 4PL. In addition to independently organizing and optimizing transport, we often see a broader package of services available at a 4PL. Think of services and solutions in the field of tendersupport, visibility and status updates, dock planning, dashboards and analytics, freight audit & pay and making transport more sustainable.

A good example of this is around the selection process of carriers (a tender). Some organizations place this activity entirely in the hands of the 4PL, while others want more involvement in the decision-making process, up to and including making their own price agreements with 2PL and 3PL in order to subsequently place the transport management back in the hands of a 4PL.

Working with a 4PL also makes it easy to select multiple carriers. Choose the carriers for whom a route, complexity or type of goods fits perfectly. This is immediately reflected in the performance, CO2 reduction and costs.

At IDS, we took a closer look at the acronym 4PL.

For Performance Logistics
Driving customer excellence is the key to success. Creating agile and resilient supply chains who hit the KPI’s and leveraging digitization and technological innovation. For IDS, 4PL is equivalent to For Performance Logistics.

For Profitable Logistics
Ambitions tailored towards operational excellence and cost containment to deliver bottomline growth. For IDS, 4PL is equivalent to For Profitable Logistics.

For People Logistics
We believe that especially in a increasingly digital world, people can make a difference. Technological innovation continuously empowers people, shippers, clients and other supply chain partners to become better cand better. It is also about offering a safe and inclusive work environment where everyone feels welcome, motivated and inspired. For IDS, 4PL is the same as For People Logistics.

4PL = For Planet Logistics
Realizing sustainable transport solutions. We like to do this together with our clients, our partners in transport and everyone who shares the same dream. Try new things and become a little better every day. For IDS, 4PL is the same as For Planet Logistics.

For Positive Logistics
Just imagine what can happen when you bring together best-in-class technology, bright people working together and a commitment to deliver. Its Positive change. Breaking new ground together and always looking for continuous improvement in an increasingly digital and complex transport world. For IDS, 4PL is the same as For Positive Logistics.