4PL – what’s that smell?

Avro RJ100

Can there be a logistics topic that is surround by more confusion and contradictions than that of fourth-party logistics?  If you think there’s any clarity or consistency out there take a look at this hilarious discussion on LinkedIn.

Try finding some wheat in that chaff.  Of course the first description came from those nice people at Andersen Consulting (now Accenture) back in 1996.  It is often quoted as:

A 4PL is an Integrator that assembles the resources, capabilities and technology of its own organisation and other organisations to design, build and run comprehensive supply chain solutions.’

Now I can’t find the original Accenture document but in Gower Handbook of Supply Chain Management, Bedeman and Gattorna (both authors now ex-Accenture, by the way) extend the definition thus:

‘… and which have the cultural sensitivity, political and communication skills, and the commercial acumen, not only to find value, but to create motivating and sustainable deals that offer incentives to all the parties involved.’

I don’t know if that was included in the original Accenture characterisation but I suspect it was; it has the whiff of consultant-speak all over it and neatly sums up how Accenture seeks to differentiate itself from the competition.  That is not to deride the importance of the added terms; they are actually an essential part of what is needed to establish a 4PL in the first place and anyone that quotes the first part without the second (as most seem to do) is taking a very mechanistic view of the concept.  In fact, they’re almost entirely missing the point.

But even that extended definition isn’t adequate.  Bedeman and Gattorna go on to discuss other essential characteristics of a 4PL structure like IT, capabilities and again leap into consultant jargon: ‘… culture of innovation… extract value… world-class project management… extraordinary capabilities to construct value-sharing deals… value creation and sharing mechanisms…’ and so on.  Or, to put it another way, the only organisation that can do all this is a sophisticated change management and IT organisation, like Accenture!

One final point on Bedeman and Gattorna’s discussion.  the final attribute they mention is ‘relationships at or above supply chain director level.’  This is fundamental.  I have seen many 4PL (or LLP, but we’ll come back to that some other time) initiatives flounder because the people involved would be the proverbial turkeys voting for Christmas, and many of the real benefits of a 4PL solution come in areas like headcount and working capital reductions which are more appreciated by the CFO than the transport manager.

So who’s doing 4PL?

For all the hype it’s difficult to get to the bottom of what’s actually happening in the market place.  Other mainstream or IT consultancies leapt on the bandwagon (IBM is the example that first springs to mind) but did they actually implement much?

Well Badema and Gattorna (they were writing in 2002) identified a couple of early Accenture examples; New Holland (which doesn’t sound much like a 4PL) and Thames Water but it’s difficult to find out much about them.  A quick and quite unscientific trawl of Accenture’s web site revealed just one meaningful example – some work they have done with Unilever – and a mention of 4PL in a business process outsourcing paper.  That might be considered a little surprising; Accenture is not known for hiding its light under a bushel.

As for IBM, I can’t find a single example of its 4PL activities and searching its site only throws up systems for 4PL operators.  In fact they sold their supply chain operations to Geodis in 2008.  For a splendidly biting discussion of the success of their approach take a look at this commentary.

The reality is that the players that have built significant 4PL capabilities and operations are the third-party logistics operators, and it’s the monsters (DHL and Kuehne + Nagel) that have greatest scale.  Of course even within 3PLs there’s still a lot of conflict and confusion.  Quick clue for freight forwarders:  just because you have a control tower that doesn’t mean you’re a 4PL.