When JB Delaney came to Infinera a few years ago as director of supply chain, the Sunnyvale, Calif.-based technology company was growing rapidly and needed a supply chain that could support its rapid global expansion. “We needed help,” Delaney says today, “particularly in international logistics.”
Rather than building out a large supply chain organization internally, Infinera decided to bring in a fourth-party logistics provider (4PL), Global4PL Supply Chain Services to manage the company’s expanding supply chain. It’s a decision that has produced significant benefits, says Delaney. “They’ve saved us a lot of money,” he says, “and helped us avoid issues [when] dealing internationally.”
A Matter of Definition
The consultancy Arthur Andersen is credited as the birthplace of the term “4PL” in 1996. A 4PL is defined as an integrator that marshals its own human resources, technical capabilities and expertise, and technology solutions, and leverages those of other organizations, like third-party logistics providers, to design and manage supply chains on behalf of clients.
The term is often used interchangeably with “lead logistics provider,” although an LLP may bring its own physical assets to bear (trucks, warehouses), while a 4PL is generally understood to be non-asset-based – that is, they’re specifically consultants, as opposed to operators. 4PLs are also distinguished from third-party logistics providers (3PLs), which specialize in managing operations, warehousing and transportation services (also on an asset or non-asset basis).
The Council of Supply Chain Management Professionals (CSCMP) further distinguishes a 4PL from a 3PL by noting in its glossary that a “4PL organization acts as a single interface between the client and multiple logistics service providers,” and “all aspects (ideally) of the client’s supply chain are managed by the 4PL organization.”
The Supply Chain Paramedics
Sergio Retamal, president and founder of Santa Clara, Calif.-based Global4PL Supply Chain Services, says that a key differentiator of his company, as a 4PL, is its ability to place staff within a client to act, essentially, as part of the client’s internal supply chain organization. He says that this capability makes Global4PL’s services particularly suited for two types of companies.
“First, we can manage the supply chain for companies that don’t have a supply chain organization or that are growing so fast that they need additional resources,” explains Retamal, who has been selected as a Supply & Demand Chain Executive “Provider Pro to Know” five times for his work in the industry. “We can manage everything from a process standpoint on our customers’ behalf, in terms of transportation and import/export compliance. We can have people in-house doing the work for our customers.”
The ability of a firm like Global4PL to bring in experienced staff that can be up and running quickly, managing complex import / export compliance processes, alleviates a growing company of the need to go through a lengthy hiring process or wait until a new hire gets up to speed. “When you bring in our experts, they don’t start from zero,” says Retamal. Plus, the 4PL’s consultants come armed with a set of solutions for compliance or transportation management, so the client does not necessarily need to invest in new software on top of the consulting. “We bring our own tools to do our work,” Retamal says.
The result: “You can go from having no systems, experience or expertise in-house to becoming a world-class importer or exporter in just a few weeks. There is no ramp-up,” according to Retamal.
This capability also makes a 4PL a good option for big companies with supply chain organizations that are large and sophisticated – but that are overwhelmed with too many discrete projects. In these instances, the 4PL can bring in team members that specialize in specific types of processes to augment the client’s staff. This could be for a specific project to do market entry into Brazil or to resolve a licensing issue in Hong Kong, for example. “These companies don’t need someone to tell them how to do something specific; they just need extra bodies to work on those projects,” Retamal says.