The Top 5 Opportunities for Fourth-Party Logistics

Opportunity 1 - Inbound Raw Material Supply
The first is in inbound raw material supply. Many logistics customers are searching for providers who can manage their inbound procurement and supplier collaboration. Properly supported and designed, a 4PL solution would include the entire procure-to-pay process managed as part of a multi-party, multi-echelon network. It also includes, but is not limited to, supply operations planning; where the forward forecast is taken to create production schedules and raw material plans for each factory, including the third party co-packers and contract manufacturers. Such a solution should be multi-tier and compute all required raw material and packaging needs, whether it is provided to the internal manufacturing sites or the outsourced sites.

Opportunity 2 –Global Available-to-Promise/Dynamic Logistics
The second opportunity is in global available to promise, or what we are calling dynamic logistics. Especially in markets such as high tech and medical equipment, build-to-order and postponement strategies are often times deployed, and many channels such as web sites, resellers, retailers, etc., are often used to sell the products. This typically means that logistic customers are seeking sophisticated demand-driven strategies such as real-time order promising, inventory commits and dynamic logistics optimization.

When a customer comes to a web site and orders five products that are sourced from five different locations, products still need to be assembled and shipped on one shipment to the consumer, all in less than five days. With the proper underlying technology, logistics providers can manage the coordination between OEM sites, contract manufacturers’ sites, suppliers, and logistics providers to help achieve this. And in the process they can enable their customers to optimize services levels and inventories, and manage to least landed cost.

Opportunity 3- Demand-Driven Logistics
Most if not all transportation implementations are managed after the order is created. In a demand driven world, orders are created by aggregating order forecasts on lanes and across lanes, weighting service levels, and inventory and transportation costs concurrently. Because of network-based technologies, today’s logistics providers have the opportunity to provide all the optimization to compute and build intelligent shipments based on future expected demand, then optimize the logistics, scheduling and other capacities, in a multi-echelon network.

Opportunity 4- Global Orchestrator
All global companies struggle with the logistics of their global supply chain. Most have moved to contracting with 3PL’s that specialize in a particular geography. This can many times equate to five to 50 of these parties, all operating today with different TMS solutions, with little or no relationship with the other providers. This creates a real problem when trying to obtain visibility to all of the many different freight moves. The problem becomes exacerbated when contract manufacturing is added into this highly disconnected process.

There is a real need to offer global visibility to all demand, supply, fulfillment activities both for planning and execution to the customer, OEM, contract manufacturers, suppliers, and carriers. Since there is no clear owner of this process, there is a real need for an Orchestrator role to be put in place. Through permissions, this role would offer global visibility for planning and execution, and take responsibility for making the partners work together.

Opportunity 5-Global Fulfillment Lanes
A natural extension to the last two opportunities is something called a global fulfillment lane. This is where logistics providers take advantage of today’s global multi-enterprise cloud networks to jointly offer the visibility and execution services to aggregate multi-party shipments, from Asia to the U.S. as an example, and other lanes where expected demand can be aggregated to create all movements. This could be sold at a rate and a service level. With enough volume and frequency, no single company (regardless of how big) could match the reduced cost and increased frequency (and therefore reduced supply variability) that could be offered.