The Evolution from 3PL to 4PL: What Does it Mean & How Can You Benefit?

619 Views

If the last 15+ years in the supply chain industry has taught me anything, it’s the value of connections. Specifically – integrations, where a company can theoretically tailor its supply chain network with technologies that best fit its industry, size, preferred modes, and culture. This overarching philosophy has driven me to champion the intrinsic value of an open, integrated freight data ecosystem and the threat imposed upon necessary resources when customers aren’t provided with insight. While third-party logistics (3PL) was developed to oversee and manage most supply chain operations for a company, this approach can still fall short of providing a truly holistic solution.

The third-party logistics industry was developed to act as an intermediary between shippers and different logistics service providers. The network is meant to alleviate the pressure of supply and demand imbalance, as well as end-to-end load lifecycle management once a match is made. Yet the need for transparency and accountability within these spaces is ever present.

For years, innumerable businesses expressed their desire for technological advancements to be made by 3PLs, thus sparking the creation of 4PL services, which Gartner reports* is essential for seamless end-to-end supply chain management: “A 4PL assembles, integrates and manages all resources, capabilities and physical execution through external networks, while delivering singular visibility via an integrated visibility platform.”

*Read “Innovation Insight: 4PL Outsourcing Models Reduce Logistics Risk and Optimize Cost, Published 12 September 2022 by Matthew Beckett, David Gonzalezcourtesy of Redwood Logistics.

Conceptualizing a solution to track and monitor every one of the thousands of decisions made in a supply chain sounded nice, but the actual viability of this idea was difficult to implement. Complexity is inherent within the supply chain industry, but if these providers could automate a system to give total connectivity to the client – it would turn the tide and bring resolution. Needless to say, distinctive enhancements emerged for each of these companies to reveal a wave of gaps in the approach they administered.

Hundreds of hours of IT calls later, there were fundamental errors with these platforms. In order to help a business with an intricate supply chain manage their end-to-end operations, there must be digital connectivity to simplify complicated issues and find the best available outcomes. While 4PL is the logical next step for the supply chain system, it must be done correctly or the lack of visibility will surely lead to mistakes. Fourth-party logistics providers serve as informed counsel, using one software or platform to connect the entire tech stack, creating true end-to-end visibility – obtaining clean data from each SaaS provider, without the headache of contacting tech teams from each.

As Matt Beckett references in his 4PL article, the purpose is to provide greater efficiency and credible data through a streamlined process that enhances the overall logistics ecosystem. The following will inspect how this update to the industry will affect you and why Redwood has been working towards it over a decade.

Ushering in the Era of Complete Clarity

Our current economic climate leaves no room for error as even a minor operational miscalculation can have catastrophic consequences. Acknowledged by top leaders in the industry, the evident answer is to have a third-party logistics company offer full management control and one point of contact. When the perplexity of supply chain management is removed, establishments free up room to focus on the actual products that they are supplying.

A persistent issue that’s presented itself is the lack of transparency in the entirety of this process, and the continued confusion and frustration from clients as they are unable to consistently track their operations. With each company using their own specific framework to oversee the supply chain process, there comes a substantial lack of collaboration between the different parties and forms of transportation.

As 4PL service providers arrived on the scene to offer individual assistance, their software was not built to adapt to programs in other companies. From freight forwarders to shippers to intermodal providers, there was very little visibility and no true understanding of the supply chain orchestration for their own products. Some 4PL providers act as system integrators. Others provide management and oversight of a sub-network of 3PLs, and some 4PLs try to offer that “single pane of glass” experience by buying up the competition and stitching a monolith together. None of these individual approaches matched the unique needs of each customer. As we all know, no two shippers are alike.

Redwood Logistics noticed this hole in the industry early on. We agreed with the idea that the modern era should be ushered in with new technology, but that there must be a more intelligent fix than a setup solely understood by the organization who originally designed it. In order to help our customers get ahead of the game, we spent years building our answer to this problem: RedwoodConnect.

Redwood’s Journey to Provide a User-Friendly Integration

Redwood Logistics sits at the intersection of logistics and technology. Resolved to close the aforementioned disparities we saw, we’ve been creating highly composable open supply chains and delivering end-to-end network innovations before the industry even took notice of this possible evolution. Having traditional 3PL by roots, Redwood offers the 20+ years of brokerage operations experience and managed transportation solutions to help run physical supply chains along with an integration that connects your compounded data.

Determined to make logistics connections not only as simple as possible, but also built and managed by logistics experts, we built our no-code/low-code integration platform as a service, RedwoodConnect, with user-friendliness at its core. We wanted to present our customers with the bricks they need to build a structure on top of this solid foundation rooted in connectivity with all of the needs of enterprise scale built in. RedwoodConnect’s serverless plug-and-play design canvas gives them flexibility to have competitors become partners as they all use the same single point of access. Building meaningful digital connections in an industry powered by awesome people has never been easier or faster.

As the supply chain industry shifts and moves drastically to adjust with an ever-changing market, we needed to provide clients with a tangible solution that could keep up. The API data pipelines connect to client applications, trading partners, and data sources to create a streamlined experience. This solution will ensure that our customers can rest assured their logistics are being automated and monitored while they focus on their enterprise. This is the true value calling card of a Modern 4PL.

Author Bio: Eric Rempel is chief innovation officer for Redwood Logistics, a leading logistics platform company headquartered in Chicago, has provided solutions for moving and managing freight for more than 21 years. The company’s diverse portfolio includes digital freight brokerage, flexible freight management and innovative platform services all wrapped into a revolutionary logistics and technology delivery model — Logistics Platform as a Service (LPaaS)™. LPaaS utilizes an open platform for digital logistics that empowers shippers to seamlessly mix-and-match partners, technologies and solutions into their own unique digital supply chain fingerprint. Redwood connects a wide range of customers to the power of supply chain management, technology and the industry’s brightest minds. For more information, visit www.redwoodlogistics.com