What is 4PL and 4PP and how do they reinforce each other?
In my profession, I work for many high-tech companies. Most of them are already used to working with so-called 4PLs (Fourth Party Logistics). A 4PL is the first and only contact regarding all logistic activities within the supply chain. He or she manages and communicates in an integrated manner throughout the entire chain. With 100% focus and expertise, often helped by ICT solutions, they have a complete picture of all information flows. This enables them to continuously improve the chain and implement optimisations in areas such as integrations, inventory costs, availability, efficiency and lead times.
What I still find strange, however, from a packaging perspective, is that the functions of such a 4PL’er are often still preferred to be performed in-house. Maybe it is because the role of the 4PL’er is not yet completely clear, or maybe there is still too little knowledge within companies about the advantages of leaving your logistics to one external party.
Once you’ve experienced it, outsourcing your logistics makes so much sense
Achieving Service Level Agreements (SLAs) and Total Cost of Ownership are becoming increasingly important topics within manufacturing companies. Not only to reduce costs and optimise profits, but also to keep your customers satisfied. Read more about SLAs and their relation to packaging here.
In addition, increasing globalisation and the complexity of today’s supply chain make it increasingly difficult to manage. Outsourcing various activities within the supply chain (such as logistics) to a 4PL provider offers many advantages:
- Increasing focus on own core business.
- Access to quality resources and expertise that you do not have internally.
- Increase reliability of the specific activity (risk management).
- Reduce and control (operational) costs.
- Increasing productivity and efficiency.
- Flexibility and scalability.
- Freeing up own resources for other purposes.
- Reducing the number of suppliers to one point of contact.
- Being able to use economies of scale that are not possible in-house.
Globalisation and the complexity of your supply chain make it difficult to manage. Outsourcing your logistics to a 4PL'er delivers all kinds of benefits.
Erik Drissen | Business Consultant at Faes
Servitization - Logistics as the key to success
I see it more often in companies in the high-tech sector; there is a shift going on from a product-oriented business model to a product-services system. Also called servitization. These companies have a broader scope than just the physical product. They focus on ‘total care’ where the product is a means and the service adds value.
Then what is 4PP: Fourth Party Packaging?
Even though not every company works with an (external) 4PL’er yet, the term has become fairly well-known and more and more companies are seeing the benefits of it. When you understand the concept of 4PL properly, the step to 4PP is a lot smaller. Still, many companies hesitate to choose for Fourth Party Packaging. A pity, because these two roles are – just like logistics and packaging – strongly linked to each other. And yet, a 4PL’er does not by definition understand packaging. A 4PP’er does. And not just about physical packaging, but also about packaging processes within companies (and how to optimise them).
Example: the added value of 4PP
I recently came into contact with a company that had to ship a specific, terribly sensitive and very expensive part. All the requirements and specifications for sending it by airfreight to the other side of the world had been thought through very carefully. Therefore, in the context of “better safe than sorry”, an extremely good but also expensive packaging was developed. But what did it turn out to be? Nine out of ten shipments with this component were transported locally by road. Moreover, it was a one-way trip, so the instruction was to destroy the packaging after arrival. This had been going on for some time and quite a bit of capital had been destroyed before it came to light.
Without a responsible process manager, packaging can be a value drain
The above was a good example showing that, unfortunately, in practice there is often no real integral chain approach or policy. The functionally built-up structure of most organisations means that packaging can be a real value drain unnoticed because no one has overall process responsibility. And this while the strategic importance of a thorough and integral packaging management is only increasing for many companies. In many cases, a 4PP could – like a 4PL – lead to greater efficiency, higher customer satisfaction and reduced costs throughout the chain.
Want to know more about 4PL and 4PP?
My colleagues at Faes and I are packaging experts. This means that we go further than just designing and developing the best custom-made packaging. We look at your entire chain and advise you and relieve you of everything to do with packaging. If you want to know more, please fill in the form below, or contact us directly.
