4PL, 7PL, 9PL
Fourth Party Logistic Model (4PL) The manufacturer does not only outsource the organisation of its logistic tasks to third parties, but also the management thereof. Fourth party logistic service providers often check the entire supply chain. The organisational and executive activities are again often outsourced to other parties.
Fourth party logistic service providers often have no means of transport and warehouses (non-asset based logistics). The fourth party logistic role demands intense involvement from the service supplier in the client’s business activities. After all, not only does the latter outsource the execution but also the monitoring of the logistic processes. The short-term thinking with collaboration agreements purely on the basis of cost-related reasons is replaced with long-term partnerships where quality of the service will play a primary role, and which involves shared risks and benefits.
Fifth Party Logistic Model (5PL) This applies when the switch is made from supply chains to supply networks.
A fifth party logistic service provider guarantees the management of networks of supply chains. The industrial actor hires third parties for the supply of strategic, innovative logistical solutions and concepts. A fifth party logistic service provider develops and implements, preferably in close consultation with the client, the best possible supply chains or networks. Fifth party logistic is often linked to E-business.
3PL + 4PL= 7PL The need for an outside logistics provider triggered the evolution of 3PL services which has been the most dominant and arguably the largest market in the world. 3PLs offered great advantages to the companies in terms of
- Economies of scale (merits from large truck fleets, warehouses, etc.)
• Access to world class processes and technologies
• Access to the resources not available in-house
• Risk sharing
• Adaptability to business changes
With all these advantages companies had better focus on their core competencies. However competition further intensified when they had all the time to focus on better competing.
What is 4PL
When competition intensified, globalization reached the peak and world looked so flat that the services provided by 3PLs seemed just not enough. This created an opportunity for the rise of 4PLs, a non asset based service provider assists companies by integrating resources, capabilities and technology of its own and coordinate with various 3PLs (Transportation, warehousing, air freight, shipping, customs clearing etc) along with load planning, tracking, shipment consolidating, carrier performance management, billing and payments etc. 4PL provides a comprehensive supply chain solution in package that in turn helps companies manage complexity and time as well.
While companies thrive for better results in the bottom line and more value and better impact on the entire supply chain, a new concept is taking birth & it’s called 7PL!
What is 7PL
Its 3PL+4PL=7PL. Yes it is the combination of 3PLs with 4PL i.e. one service provider can provide a client with both 3PL and the services of 4PL. 7PL overseas the entire logistics system, where all the services are provided under one roof. This gives customers an easy way to deal with 7PL under one contract, one bill and single point of contact to manage entire logistics.
7PL is being used to describe a turnkey solution where instead of dealing with several people for various services like inbound, outbound and warehousing, The concept is ‘one contract, one bill’. 7PL is the combination of 3PL and 4PL into one (3PL + 4PL = 7PL). One logistics service provider provides a client with both 3PL and 4PL services under one roof. 7PL is referred to as a turnkey solution where instead of dealing with several people for various logistics services like inbound, outbound and warehousing, clients deal with one person under the ‘one contract, one bill’ concept.