Logistics is a Science, the scope of which is ever expanding and quite soon it will expand to encompass various business functions and will become the Prime Driver of the business model of any organization. Considering the rise of 3PL in logistics and supply chain.

Fourth Party Logistic Model (4PL) – The manufacturer does not only outsource the organization of its logistic tasks to third parties, but also the management thereof. Fourth party logistic service providers often check the entire supply chain. The organizational and executive activities are again often outsourced to other parties.

4PL service providers often have no means of transport and warehouses (non-asset based logistics). The fourth party logistic role demands intense involvement from the service supplier in the client’s business activities. After all, not only does the latter outsource the execution but also the monitoring of the logistic processes. The short-term thinking with collaboration agreements purely on the basis of cost-related reasons is replaced with long-term partnerships where quality of the service will play a primary role, and which involves shared risks and benefits.

Fifth Party Logistic Model (5PL) This applies when the switch is made from supply chains to supply networks.

5PL service provider guarantees the management of networks of supply chains. The industrial actor hires third parties for the supply of strategic, innovative logistical solutions and concepts. A fifth party logistic service provider develops and implements, preferably in close consultation with the client, the best possible supply chains or networks. Fifth party logistic is often linked to E-business.

What are your views on this ever expanding concept v/s the traditional transportation concept ?

Authored by:Sachin Haritash

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