UPS LOGISTICS AND TO MOVE TOWARDS 4PL- OR NOT? INTRODUCTION The fourth party log
ID: 344531 • Letter: U
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UPS LOGISTICS AND TO MOVE TOWARDS 4PL- OR NOT? INTRODUCTION The fourth party logistics service provider (4PL) participates in supply chain coordination instead of just providing operational logistics and fulfillment services, like a traditional third party logistics provider (3PL) would. The implementation of a 4PL model required a major transition for UPS, which has its heritage in express and physical logistics services, towards a more integral involvement in customers supply chains, with a greater impact on customer supply chain performance and strategy. Example UPS customer relations such as with Cisco Systems show how the potential of a 4PL approach for logistics service providers lies in areas such as: increasing value add to customers, strengthening customer relations and escaping the drive towards commoditization of logistics services. The question is however, how feasible this model is in the longer term, especially when factoring in the perspective of the manufacturer and the existence of alternative candidates for outsourcing supply chain coordination, including consultants and contract manufacturers. Further to that the question is how the migration from a 3PL to a 4PL concept impacts the transaction economics and relationship coordination requirements for both the provider and the client. INDUSTRY ENVIRONMENT AND BUSINESS MODEL CONTEXT Logistics service providers have been keen on contributing to innovations in their client's supply chain for some time now and they have been expanding service offerings for example through the creation of 4PL offerings. The 4PL model essentially elevates the 3PL to a coordinator of the flow of goods, not just an operator in the physical movement of goods This is seen by 3PLs as a method for not only increasing revenues but also, more importantly, as a method to contribute to offering higher value added activities in the supply chain than the warehousing and transport services traditionally offered. The market for these traditional services may still be growing, it is however, increasingly crowed with service providers increasingly offering cut-throat rates, an indicator of commoditization of the service. The 3PL model is also asset-intensive which in a price sensitive market further challenges return on investments and financial performance. The 4PL model is far less asset intensive as it focused more on coordination, rather than just operating assets in service of the customer (see also Bumstead and Cannons, 2002)Explanation / Answer
1) 3PLs consider a 4 PL strategy as 4 PL is much more advanced and does not provide only the traditional transportation and warehousing services.It provides a complete coordination of the entiresupply chain.
2) Relationship between the various parties become considerably better as it offers a complete coordinated solution for the entire supply chain. There are certain coordination requirements to be ensured as the entire supply chain is linked and then only there would be a smooth information flow amongst the various stakeholders of the supply chain.
3) The criteria used by customers to evaluate 4 PL's are :
4) Critical success factors for a 4 PL strategy:
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