Logistics is the beating heart of the world economy–this is most apparent when a major link in the global supply chain is broken. Anyone who remembers the Ever Given cargo ship incident in 2021 can attest to this.
The shutdown of the Suez Canal meant losing one of the world’s most important shipping lanes for a few days. That may not seem like much, but with perishable products, pressing deadlines, and thin profit margins, a single day lost can cost a small fortune.
Sudden supply chain emergencies, such as the Ever Given, have shone a light onto a little-known sector integral to the world’s logistics: fourth-party logistics, also known as ‘4PL.’
Supply Chain Transparency and Control
The key to explaining 4PL can be summed up with a hypothetical example from the Ever Given disaster.
Say that a cargo ship holding your goods is stuck in the Indian Ocean, thanks to Ever Given. The ship owner decides to redirect the vessel to a nearby port. Thankfully, a fourth-party logistics company is in charge of your cargo and is watching this unfold. It will already have contingency plans in place for just such an occasion.
The 4PL utilizes its vast network and learns that in that same port, there is another vessel that will set sail next afternoon. It just so happens that there is a rail terminal at the next port that can deliver your cargo to its final destination in a more efficient way than waiting another twelve days while the bottleneck resolves itself.
A fourth-party logistics supplier leverages its existing network of suppliers, contacts the parties involved, and ensures your cargo is offloaded, stowed safely on the other vessel, and shipped to its destination as quickly as possible. If things go smoothly, it may even arrive a day ahead of schedule. All this would be impossible without 4PL.
The above example is just one demonstration of what a fourth-party logistics company does every day. That exact scenario plays out across the globe many times a day.
You might think that no one could be capable of this vast understanding of the global supply chain, and to some degree, you’d be correct. Fourth-party logistics utilize advanced technologies and algorithms to find faster routes at better prices.
The difference between 3PL and 4PL is that 3PL focuses only on its network. Fourth-party logistics companies, on the other hand, have a vast top-down view of the supply chains of not just one company, but of all of the world’s major suppliers. This means they learn about new routes and more efficient means of transport more quickly than some CEOs.
The ability to see the big picture is where 4PL really shines. Because it is working with you and a host of other clients at the same time, it can also realize huge savings by combining your cargo with another client’s cargo. This means it can initiate bulk shipping deals that not even the shipping company thought of.
Solid relationships are the foundation of a successful logistics chain. A 4PL is built from the ground up for this purpose. It is precisely through leveraging their relationships with freight carriers, distribution centers, warehousing facilities, transportation companies, and global shipping partners that 4PL can achieve such impressive results.
Acting as the sole point of contact makes a fourth-party logistics company an all-seeing air traffic controller on a global scale. Transparency is the key to trust, and nowhere is that more apparent than with a 4PL provider.
It should be noted, however, that not all 4PL companies operate on a global scale. Some 4PL companies remain in a niche or operate exclusively inside one country–this allows them to hyper-specialize in just one area.
Connecting the Dots
Managing shipping routes, even when everything goes right, is a challenge. Managing these routes in the real world, where constant adjustments are required, is a massive undertaking.
This is why businesses benefit greatly from working with fourth-party logistics providers. If you want to learn more, be sure to check out our post on choosing a 4PL provider to help your company thrive!