We are in an age of constant progress. In fact, progress is occurring so rapidly in some fields, that it can be hard to keep on top of everything.

In supply chain management, one the latest developments is the expansion of fourth-party logistics (also known as 4PL). This is a supply chain model that is likely to largely compliment and scale existing 3PL operations in the coming years.

Below, we’ll take a look at the 4PL model and discuss how this new system may help you take your business’s operations to the next level.

The 1PL to 4PL Spectrum

Where your business falls on the logistics spectrum depends on the nature of your business and your operational needs. While Gartner recently highlighted 4PL growth as a way to reduce logistics risk and optimize cost in a 4PL Innovation Insight report, not all businesses are at the same stage of growth, and as such, supply chain model needs may be more or less complex. From 1PL to 4PL, all these supply chain strategies are here to stay.

1PL

First-party logistics refers to very small outfits where the business produces the product then transports it to the consumer.

2PL

Second-party logistics could be exemplified by a company that produces the goods and then uses a transportation service to deliver said goods to the consumer.

3PL

3PLs can be thought of as a group that handles most logistics considerations, as compared to one that handles all logistics needs. As a 3PL, Redwood has covered this topic in-depth throughout our website. This article is a good one to check out: When It Is Time to Hire a 3PL?

What is 4PL?

At this point, most businesses are likely intimately familiar with 3PL companies. Third-party logistics providers handle important components of a company’s logistical needs. These groups can significantly improve productivity and profit for companies throughout nearly every industry.

Fourth-party logistics providers are the next step in the evolution of supply chain management. 4PL providers take over every aspect of overseeing the supply chain for companies in their physical and/or digital supply chains, not limited to a few components like a 3PL would traditionally handle.

How Can a 4PL Help Your Business?

For business owners today, time is at a premium and margins are thinner than ever. Therefore, any logistical errors or operational mistakes can lead to devastating outcomes to brand reputation and/or reduced profits. In some cases, companies can struggle to recover if they make an error at a critical time. 

Fourth-party logistics providers essentially take over even more supply chain responsibilities than would a 3PL. These groups ease the burden for business owners so that they can focus more on the important day-to-day and big picture items that require their full attention.

Let’s take a look at some specific ways in which a 4PL can help your business grow and thrive.

The Sole Point of Contact for A Business’s Supply Chain Needs

With a fourth-party logistics strategy, you only need to communicate with one group in order to gain insight or make changes to your supply chain operations. In contrast to some other methods, this can make a 4PL a much cleaner option in terms of communication and management.

A Viable Option for Both Large and Medium-Sized Companies

When it comes to very small operations, a 4PL might not be the right option. These groups likely have relatively uncomplicated needs and they can often manage their supply chains on their own, or with the assistance of a 3PL.

For bigger groups, who have incredibly complex needs and many moving pieces, a 4PL can be a godsend. The fourth-party logistics provider can be counted on to handle any and all supply chain issues without interrupting operations or disrupting the schedules of busy company leaders.

More Accurate Information

4PLs tend to provide both more data, and more efficient integration and in-depth analysis of the data. As a result, business owners can gain a better picture of the exact state of their supply chain at any given time. With this information in hand, these decision makers can identify pain points and make changes as necessary.

All of us are looking for more and better information which we can use to back up our decisions. A 4PL provides excellent data in spades. 

Reduced Costs

Perhaps above all else, your 4PL will increase your business’s efficiency. It goes without saying, but better efficiency leads to improved profits and lower costs. By lowering your overall costs, you can take your business to new heights that you may never before have even thought possible.

Simplified Operations

There is an interesting trend in the world today: people are beginning to simplify their lives. In fact, some movements, such as minimalism, have produced individuals who live extremely simply. These people may only own a few key items and they may rent out everything else.

Perhaps minimalism isn’t for everyone, but businesses can learn a lot from this practice.

By keeping things as simple as possible, and reducing complexity, supply chains become easier to manage. Also, this tends to help companies in numerous other ways, many of which have already been touched on earlier in this post.

A 4PL finds straightforward, effective solutions to complex problems, and your company benefits as a result.

4PL is the Next Evolutionary Step

Fourth-party logistics is the next step in the evolution of supply chain management. These providers can help businesses in numerous ways by allowing for the following benefits:

• Being a single point of contact for all logistics needs.
• Helping businesses with complex supply chain considerations manage their operations.
• Allowing for access to more in-depth information than was ever available to companies before.
• Lowering operational costs. 
• Simplifying complicated problems and finding the best available solutions.

Want to learn about other new strategies and trends to look out for in 2023? Read this article. And if you're looking to engage with a modern 4PL, Redwood was named a Representative Provider by Gartner. Read their full 4PL Innovation Insight report.