Lead Logistics Provider Capabilities Will Require Customized Innovation

With the onset of cloud computing, automation, and machine learning, organizations are integrating their global supply chains, and finding themselves with more transactional data than they could have ever imagined.  The question of how to convert this data to strategic advantage is one that consultancies and executives are seeking to understand.  One manifestation of this is the idea of a “Lead Logistics Provider”, capable of capturing and managing data from multiple providers, and able to provide a single integrating mechanism.  A central focus of this capability will be on analytics – how 4PL’s can capture data, derive insights from that data, and partner with other parties to learn from one another.  A big part of analytics is ensuring that the insights derived lead to the right decision that is actionable. But what does this mean in practice?

LLP Offerings Will Need to Be Configured to Client’s Needs

A recent study conducted by several academics and consultants in Germany of Fourth Party Logistics Provider services reveals several important trends, based on a panel of experts and an online questionnaire.[2]  The results suggest that:

• Current 4PL solutions focus on transport management and 3PL selection, focusing on service audits, customs management, and ensuring that logistics operations run smoothly. (They need to go beyond this!)
• There is no “standard” 4PL service offering except for basic transport and logistics management services. Future 4PL services will be specifically targeted at the client’s needs with different degrees of responsibility given to 4PLP’s.
• There is a move towards 4PLP’s providing an IT platform as part of their service. It doesn’t appear to matter if the 4PLP establishes and hosts the platform, or sources it from an external IT Provider and supervises operations.
• The most important function of 4PLP’s is managing internal integration and end to end solutions. Such integration is the key foundation for providing further 4PL serices related to data analysis.
• Value-added analytics services will be important in addition to monitoring activities.
• Partnerships between 4PLP’s and their clients are transferring from operational to closer strategic relationships. Managing a partnership through trust and transparency will be critical.
• A clear predictor of 4PL provider success is their ability to adapt digital technologies and transfer the advantages to their client’s business.

As more organizations recognize that logistics is not their strong suit, they will be seeking reliable, trustworthy partners that can operate their logistics network for them.  They will expect a strong suite of IT capabilities to be provided, even if these are not yet developed or available in the market.  These types of engagements, however, have the potential to create game-changing capabilities in the market if effectively tied to client’s business strategy and objectives.

[1] Speech given by David Quintilio, SCRC Meeting, December 2018.

[2] Schramm, H.J., Czaja, C.N., Dittrich, M., and Mentschel, M.  (2019).  “Current Advancement and Future Developments of Fourth Party Logistics in the Digital Future”, Logistics.  https://www.mdpi.com/2305-6290/3/1/7