Partner blog by Comp-Win: The role of the 4PL model in the modern supply chain
Nowadays modern business systems must offer a high degree of individualisation when it comes to the requirements of end users. Competitive advantage can be reached by working with logistics service providers who have developed advanced algorithms that enable efficient flow of information and high-quality communication in the organization. Over time, most companies that have decided to outsource logistics processes are gaining more and more confidence in logistics operators and together they are starting to look for further improvements to be applied to the entire supply chain. The 4PL model is becoming increasingly popular; it acts as an integrator of resources, capabilities, and technologies turning them into components compatible with the logistics system. The result of these activities should be comprehensive solutions throughout the entire supply chain.
What is the 4PL model?
The 4PL service is a cooperation fully focused on designing and handling the entire supply chain – from production to the delivery to the end customer. The basic elements of this process are supplying: modes of transport and semi-finished products for production, management of warehouse stocks, accepting supplies of raw materials and organizing transport to wholesale or retail recipients. After taking over the management of supply chain, the 4PL operator, using modern technologies, ensures better visibility and operational discipline among partners and suppliers. In order to make it happen, it is extremely important to thoroughly understand customer needs, analyze current processes in the supply chain and build trust between the company and the logistics operator. A well-functioning system of cooperation and exchange of information allows for the development of individual solutions optimizing processes, reduces the time needed to perform individual tasks, and in the end – reduces logistics costs. An experienced 4PL service provider acts as an initiator looking for optimization areas in the company by being up to date with logistics hi-tech innovations. The key differences between 4PL and other logistics service providers are the special competence to provide value to customers across the whole supply chain and engagement at every stage.
Key business benefits of the 4PL model.
When deciding to implement the 4PL model, the key factor is choosing a company to take care of all logistics processes in the company. In this case, the supplier’s experience and its global market presence is very important; with such background the supplier will be able to integrate people, use their knowledge and practice in the company, and translate all into real business benefits. Moreover, by monitoring expenses and performance indicators, the supplier will show the client optimization opportunities that may cause further development of the company.
A well-organized cooperation should give the following benefits:
Better process transparency
The possibility to observe the supply chain at every stage is vital in taking important decisions. It allows you to quickly identify bottlenecks in the process and prepare a recovery plan. Only effective tools will make processes more efficient and increase company’s profitability.
Benchmarking of best practices in the industry
Thanks to the experience collected by the 4PL operator in previous projects, the operator may propose projects for the company that will improve process efficiency, reduce errors, and create new strategies for enterprise development all over the supply chain. The 4 PL provider usually manages networks of several clients at the same time, which gives the effect of knowledge synergy and skills of people.
Optimization of material flows
The proper cooperation of the company with the logistics operator should allow for such supply chain steering that will guarantee the production processes continuousness as per the logistic principles of 7R. In this case, it is also important to understand production processes so that the assumed financial goals can be achieved by minimizing manufacturing costs and ensuring an adequate level of supply handling.
Intelligent workflow management
Having one operator to manage all elements of the Supply Chain mainly expedites the ongoing control over changes detection in processes and it’s allowing to react with extreme agility. The exchange of information in one organization is much faster than when different operations are managed by different companies.
Access to the best technological solutions
The logistics industry is in the phase of searching for solutions that are new, easy to use, better tailored to Client’s needs, and at the same time technologically advanced. Logistics companies are constantly testing innovative ideas for process improvement based on artificial intelligence, robotics or machine learning. Cooperation with the 4PL provider gives you the opportunity to access proven solutions and introduce them to your company.
Time saving and peace of mind
The 4PL operators specialize in logistics services and thanks to that they perform tasks faster than internal employees who have less experience and only getting to know this area of activity. What is more, by outsourcing logistics tasks, the company is certain that customers will be served professionally and on time. Thanks to the outsourcing of logistics services, the company has the opportunity to focus on tasks that are crucial to the company’s development.
When to start cooperation with a logistics operator and how to choose it?
Before a company decides on this type of outsourcing, namely logistics management, it is necessary to accurately identify the problems and business needs the company has. Afterwards the Company should think of what kind of effects it expects from the 4PL operator. A predefined specific expectations always speed up the dedicated offer preparation process. In most cases, companies decide to cooperate with logistics operators when problems begin to occur at different stages in the supply chain. This is related to both the development of the company and constantly growing volumes, but also to the increasing Client’s requirements. The company should remember that the sooner it identifies a logistics problem in its organization, the more likely it is to adequately respond and start cooperation with the logistics operator.
When choosing a business partner, one should pay attention to references from previous logistics projects and experience in the industry. All services offered by the logistics operator should be carefully considered, as the company’s reputation and success may soon depend on its reliability. The operator should have the skills that will meet the short-term needs of the company as well as have an idea how to develop logistics services in the company over a longer term. The sustainable development of the logistics operator is currently of great importance. A company that is constantly developing, expanding the scope of its services and testing innovative solutions in logistics will be a stable business partner and will cope with all possible crises and urgent needs.
The speed of changes in the logistics market and the growing complexity of customer needs along with the development of new technologies a causing that experienced 4PL operators have more and more work in their hands. Natural partners offer great potential in the concept of comprehensive design and optimization of existing logistics networks. A properly selected logistics partner, openness, commitment and willingness to change your company are good determinants bringing many business benefits.
Additional note of ATIM Solutions: click here for more information on our supply chain solutions