Shining a light on better supply chain management
When Thomas Edison invented the incandescent bulb, he brought light to the world. This one innovation introduced countless possibilities to people’s lives, to business and to economic development. Today, arguably the greatest innovation underway is the intelligent application of Big Data. Using sophisticated technology, businesses in industries as diverse as retail to healthcare to manufacturing are capturing and analysing large amounts of information about their customers, processes and products to add to the top line, take out cost and carve out competitive advantage.
One of the greatest areas of potential is logistics. US-based massive retailers with their own juggernaut logistics operations such as Amazon, Wal-Mart and Dell have for years harnessed data to simulate and optimise supply chain flows and reduce inventory and stock-outs. But what about companies without Amazon’s enormous capability? Enter fourth-party logistics (4PL) providers, which exist to manage the entire supply chain on a customer’s behalf, including leveraging data as routinely and seamlessly as flicking on a light switch.
What is a 4PL?
A 4PL, like efm, acts as a true extension of a customer’s business, delivering complete and agile supply chain management. This could include anything and everything from strategic advice to the management of warehousing, inventory, fulfilment, transportation and logistics on behalf of customers.
While a 3PL is responsible for freight shipping and warehousing, a 4PL is asset-light, meaning it has no trucks, airplanes, vessels or warehouses. Instead, powered by a sophisticated technology platform, the team creates a customised solution for each customer, bringing in a bespoke suite of carrier partners (3PLs) to specifically meet a customer’s needs.
How do fourth-party logistics providers use technology?
Every interaction in a supply chain can be captured with data including through radio frequency identification (RFID) and microsensors. Businesses might collect vast amounts of information but often lack the infrastructure or expertise to extract value. A 4PL enables its customers to take advantage of state-of-the-art technology without having to commit the capital investment.
Through the combination of high-powered software and highly trained people, a 4PL leverages the data to drive efficiency, improve visibility and end-to-end traceability. The outcome is reduced cost and long-term, sustainable value necessary for customers to remain competitive amidst the “Amazon effect”, wherein accelerated delivery to customers with improved visibility is the new normal.
What role do people play?
Just as important as technology is the customer service team that leverage it. They work in a high-touch, customer-centric environment, monitoring for, and intervening in, issues before they have a chance to come to fruition. Disruptions could include catastrophic weather events, human error, lost or damaged freight and carrier capacity restrictions.
A 4PL team’s real-time monitoring, rapid problem-solving and client communication are crucial to delivering a superior logistics experience. In particular, a key point of differentiation to look for in providers is whether their customer service is onshore. To be able to rapidly respond to emerging issues, the team must be intimately familiar with the geographic region and have seamless connection with the carriers.
What are the other benefits of a 4PL?
A 4PL is neutral and will select carrier partners based on the value they offer, assessed by their performance against key metrics. This neutrality promotes competition and as a result, better quality. It works for the carriers too; working with a 4PL they have more opportunities to become involved in a transport solution. While in a direct, 3PL relationship, a carrier may take freight that isn’t an optimal fit for their network, a 4PL will create a freight profile to match the carrier’s network, creating a better solution for both the carrier and the customer.
A 4PL will provide greater transparency around cost. If a business was to engage carriers directly, they would receive invoices from each and typically recognise transport cost as one item in their financial statements. However, with all the data converged in a single interface, a 4PL has the capacity to provide the customer with better insights to inform their future decision-making.
Over time, as data accumulates and patterns emerge, a good 4PL will monitor metrics against established benchmarks to facilitate ongoing improvement - and increased cost savings - for the customer.
By streamlining information from up to thousands of sources from across the supply chain into a singular portal, a 4PL can anticipate risks, determine possible disruptions and determine route shipments around problems to help ensure the safe, reliable transit across the entire supply chain.
4PL: A big advantage for customers
By definition, innovation irrevocably changes the accepted ways of doing things. Just like the invention of the light bulb means we now take electricity for granted; we now live in the era of Big Data. Through the combination of technology and highly trained people, a 4PL offers shippers the opportunity to adapt to the changing environment. At the same time, the model provides a host of other benefits that create efficiencies in a customer’s supply chain that will enable them to remain competitive and reap massive commercial and operational advantages. Or they risk staying in the dark.
Interested in finding out more about how a 4PL could benefit your business?
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