World Wide Shipping
Retailers, distributors and manufacturers look to 3PLs to outsource some part of their supply chain. The choice of 3PLs is broad as are the potential logistics areas to use them are. Yet despite the attention, many client/3PL relationships are not successful. There are many reasons that the relationships do not work. It can turn on expectations by either party, changing requirements, whether the use is strategic or tactical, perceptions of 3PLs, industry involved, position of the buyer in his industry, and the difficulty of the solution sought.
Much of the disappointment arises from needing supply chain solutions to manage the outsourcing of the supply chain process. Most 3PLs are task or functional players and are not process facilitators nor supply chain practitioners. This difference between what is sought and the method employed to achieve it is not subtle or minor. 3PLs are not supply chain service firms. Their primary focus is freight or warehousing with nominal interest in supply chain management to the point that it generates freight or warehousing opportunities. This is not a harsh assessment. It merely establishes the framework as to the 3PLs role, capability, capacity and why using them in supply chain efforts may not achieve the deliverables sought by outsourcing buyers.
The issue exists for both domestic and international supply chains. However it is especially true for international with its greater complexity, longer cycle time, more significant impact on the buyer and his company, extent of understanding and experience within buyer's company, and a variety of risks and their mitigation.
The situation opens the opportunity for 4PLs. 4PLs differ from 3PLs in four points:
Now comes the "so what". Depending on the outsourcing requirement and desired result of the outsourcing, buyers should look to either 4PLs or 3PLs to work with them. Each brings something different to the requirement. As such, the chance of success by either can vary.
These differences mean both 4PLs and 3PLs can be part of the same buyer's effort, just in different roles. 4PLs can manage 3PLs as part of the outsourcing solution; 3PLs cannot manage 4PLs. Depending on the project and buyer specifications, the buyer or 4PL can develop the Service Level Agreement (SLA) with 3PLs. The SLA should include supply chain metrics that support the deliverables sought from the outsourcing project.
Conclusion. A buyer of outsourcing should understand their project and what is desired from it. He should understand the differences that the 4PL and the 3PL bring to it. The distinctions of each can affect the outsourcing relationship and the longevity of it. As a final comment, a firm cannot offer both 3PL and 4PL services; that is not logical.