Tag Archives: LLP

4PL definitions

4PL box
What makes a good definition?  Take a look at a good dictionary and you’ll see plenty of examples.  Even complex ideas can be summarised succinctly.  This definition of relativity comes from the Oxford English Dictionary:

The dependence of various physical phenomena on relative motion of the observer and the observed objects, especially regarding the nature and behaviour of light, space, time, and gravity.

Now that’s not going to help you get a first in physics but it is a good general definition for the educated layman.  It is:

  • concise
  • simple
  • unambiguous
  • complete

So why does defining 4PL give so many such difficulty?  A quick trawl of the net produces the following examples (there are many more).

Accenture

Everybody seems to start with Accenture’s landmark 1996 version:

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.

As I have already said, I can’t find the original but this is the most often quoted version.  As far as it goes it’s fine, but I think the problem we logisticians have with it is the same as a physicist would have with the relativity definition above; it might be good enough for the layman but for the practitioner it just doesn’t go into enough detail.

I think there are a couple of problems with it, though.  First, it uses the word ‘integrator’.  Using the conventional definition of the term (a person or thing that combines things to make a whole – thanks again Oxford) that’s OK, but in logistics integrator has another connotation, the parcels carriers like UPS, Fedex and DHL.  It therefore potentially fails the ambiguity test.

Second, it doesn’t address what for me is a fundamental issue.  A 4PL doesn’t execute the physical storage or movement of product.  Were it to do so it would be a Lead Logistics Provider (‘LLP’) wouldn’t it?  This makes it difficult, but not impossible, for third-party logistics operators to run 4PLs and, I suspect, was in the minds of those at Accenture that came up with the concept.  They are not in the business of coming up with great ideas for which they don’t get paid.

Council of Supply Chain Management Professionals

This august body chooses not to define 4PL but to distinguish the concept from that of third-party logistics (3PL):

Differs from third party logistics in the following ways; 1) 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners; 2) 4PL organization acts as a single interface between the client and multiple logistics service providers; 3) All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and, 4) It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure.

Hmmm.  Let’s go through those one by one:

  1. .…often a separate entity … joint venture or long-term contract  it might be a JV and I’m not sure an entity can be a contract
  2. … single interface between the client and multiple logistics service providers.  Tick that one.
  3. All aspects (ideally) … of the client’s supply chain are managed … No, that doesn’t follow.  There are plenty of inbound 4PLs, or finished goods examples.
  4. … possible for a major 3PL to form a 4PL … Tick that one too, but it needs explanation.

Other contributions

The award for chutzpah goes to Concargo, who explain that they ‘conceptualised and envisioned this initiative as early as 1988’.  Shame they kept it to themselves.

And Logistics List only adds to the confusion with the statement: ‘That said a 4PL (also sometimes called a lead logistics provider) …’  Sorry guys but 4PL and LLP are very different things, as I hope to explore real soon.

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.