The Rise of 4PLs; All the market insights and statistics you should know
If you have any experience with the world of logistics, you must have heard of 3PLs; the more efficient and hence superior way of handling fulfilment problems.
However, did you know that 3PL is now evolving into something known as 4PL, fourth-party logistics?
4PL is increasingly becoming the go-to logistics solution for many businesses across the globe – yet, as of now, not everyone is aware of what it is and how it can improve your set-up.
If you relate to the latter half of the statement above, you’ve come to the right place. This post is all about 4PLs, so all you have to do to learn about them is to keep reading!
Contents
- What is 4PL?
- Understanding the Rise of 4PLs
- Important 4PL Statistics and What They Mean
- Conclusion
What is 4PL?
Let’s start with the very basics: what is 4PL?
Fourth-party logistics refers to an outside logistics partner that can help you comprehensively plan and execute all major supply chain processes such as fulfilment, transportation, and technology. It may sound similar to 3PL services, and in a way it is, but where 3PL primarily focuses on order fulfilment, 4PL covers the entire supply chain and is hence a considerably more holistic form of fulfilment management.
One of the most important characteristics of a 4PL is that it has considerably more accountability in the management of processes. And in that regard, they have a much more active role in managing and streamlining the entire shipment journey.
A 4PL is not only responsible for paying attention to processes, but will also be the lead liaison between multiple 3PLs, more service providers, and the end-user i.e. the customer.
Understanding the Rise of 4PLs
As it will become clearer when we discuss the market insights and statistics to 4PLs, the 4PL market is definitely on the rise. But why is this the case?
In the simplest of terms, 4PLs are a more integrated way of managing the supply chain, and hence provide a greater level of convenience when it comes to the actual shipment of orders. But that’s not all, because 4PLs also provide the following advantages:
Provides more powerful data visibility
One of the most potent advantages of 4PLs is that they provide more powerful data visibility. Essentially, the 4PL framework is dependent on extremely advanced software and data analysis tools. Because of this, it is also easier to harness and leverage important data that enhances your business processes.
Considering that the supply chain is extremely susceptible to errors and even the smallest ones can cause major delays, it becomes critical to employ data that can ensure a smoother run for all your processes. Luckily, with 4PLs in the picture, it is not hard or complicated to get to this level. They allow you to utilise sophisticated data and make it work for your business; while also simultaneously ensuring that you can still focus on the core processes for your business.
Simplifies supply chain complexity
The supply chain has the potential to become a highly complex procedure if you don’t pay attention to what you’re doing. However, with 4PLs involved, you rarely have to worry about any of that. A 4PL provider acts as a single interface between you and multiple suppliers as well as logistics providers, which means you don’t have to indulge in the hard work yourself.
Not only that, but 4PLs execute your supply chain processes based on expert knowledge and experience, which means the guesswork and trial and error efforts are minimised, and you can make all the right choices for your business.
Provides operational efficiencies
Another thing about 4PLs that have been making them popular with businesses nowadays is that they provide operational efficiencies. With the help of a 4PL service, you get to bring increased automation to your operations, which means that your order placement and tracking gets considerably more evolved.
Not only that, but 4PLs also provide improved forecasting for production schedules and raw material needs, which means that you can make the right decisions for your inventory and make sure that there are no lags that you have to face in the overall fulfilment process as well.
Cuts down on costs
Another important reason behind why 4PLs are on the rise as of now is that they enable cost savings. By automating all the processes and introducing more operational efficiency to the supply chain, 4PLs make sure that there is a decrease in operational costs as well.
So, relying on 4PLs means that you can effectively lower your overhead and labour costs, as well as reduce inventory burden which could also lead to a deduction in the costs you have to pay. Other than that, 4PLs also result in an elimination of wasteful processes, which is why this way of handling logistics is increasingly becoming the go-to for many businesses.
Important 4PL Statistics and What They Mean
The 4PL logistics market is likely to expand at a CAGR of around 3.92% during the forecast period (2022-2028). (Global Newswire)
The future for the 4PL market seems bright. The fact that it will be expanding at the rate of 3.92 within this very decade shows that there is a lot of opportunity for growth within this industry. Not only that, but it also suggests that in the future, more and more organisations will be relying on 4PL and hence we can expect even more advancements in this area than before.
In the upcoming years, it would be wise to gear up and start perceiving 4PL as a key driver of growth, efficiency, and productivity within the supply chain and hence, as an integral component of the logistical framework of any business.
The 4PL logistics market size is likely to reach around $71,338.08 million by 2028. (Global Newswire)
Again, this shows that the market will be getting huge soon. The bigger it gets, the more advancement you can expect in every possible way which will only make 4PLs better at what they do; i.e. bring convenience into your logistics. So – even if you think that 4PLs are not advanced enough for them to be a part of your fulfilment processes as of yet, they will be quite soon in the future, and hence may bring more efficiency into the way you carry out things.
This way, 4PLs can be predicted to be even more popular in coming years.
One of the biggest drivers of growth for 4PLs is the eCommerce industry, which is expected to grow at a CAGR of 18.3% up to the year 2026. (All the Research)
eCommerce and 4PLs will grow hand in hand. This also suggests that in the future and even now, eCommerce businesses will greatly benefit from 4PL. As 4PLs make the eCommerce fulfilment process even smoother than it is now, they will become more indispensable for businesses – especially eCommerce ones. This is why as the eCommerce industry grows, so will the market for 4PLs because there will be an increased demand for the kind of conveniences they provide to businesses.
If you are an eCommerce business, we would definitely recommend you to look into 4PLs and how they, with the help of various technologies like inventory and order management systems, transform your fulfilment journey for you.
The biggest key player in the 4PL market as a service provider is the FedEx corporation, with a total revenue of $69 billion. (All the Research)
Although FedEx is a service provider for many services, it is one of the biggest players when it comes to 4PL. This is because it provides customers with unparalleled convenience and makes it easier for them to successfully deliver and receive consignments, without any delays or hitches.
FedEx is not the only major player in this area either – DHL as well as many other organisations all over the world are engaging in this particular type of logistics services, and hence this is quite an interesting playing field for everyone.
Geographically, Asia Pacific accounts for the highest industry shares in the global 4PL logistics market. (Polaris Market Research)
Although 4PL is a global thing, it is most successfully operating in the Asia Pacific as of now. This is true not for 4PLs only, but also for 3PLs and the logistics market as a whole. Asia Pacific is increasingly becoming the main hub of growth for everything logistics-related, and hence is one of the most important regions for businesses who are interested in both providing 4PLs and engaging with them.
There are many reasons behind APAC region topping the list when it comes to this area, but the most primary is possibly the fact that geographically, it is the biggest region.
Final Word
As the demand for integrated, efficient supply chain management increases, so does the need for 4PLs. This is essentially the main reason behind the rise of 4PLs – they provide businesses with the leverage they need to streamline their order processing, and hence create a better fulfilment experience overall!
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