Collaboration has always been seen as the stepchild at the logistics dinner table. It’s nice to have around, but no one really wants to think about what collaboration means for the company. After all, how can two competitors collaborate without compromising the information and structure of each company? Collaboration is driving an entire new way in the realm of logistics lending towards the rise of 4PLs. Collaboration is going to be the only way today’s logistics service providers can continue to improve their profits and improve efficiency. Essentially, collaboration comes down to three basic fundamentals: value-added services, expansion of services, and the future of an organization.
Value-Added Services and Collaboration Rising to More 4PLs
Value added services are not necessarily reminiscent of logistics service providers. For example, value-added service may include perks when shipping a large quantity of products on a recurring basis. Other value-added services may include industry expertise and training programs for partners within the given network. As explained by Joseph O’Reilly of Inbound Logistics, value-added services are actually also known as fourth-party logistics providers or 4PLs.
Fourth-party logistics providers (4PLs) do all of the typical functions of a third-party logistics provider (3PL), while adding something more to the table. In other words, 4PLs enable an organization to work smarter, more efficiently, all the while without the increased cost of purchasing such services from another consultant. As a result, the participating organizations increase their competitive advantage without risking the reputations or information of stakeholders. However, collaboration holds many promises for the projections of a given company.
The Present State and Benefits of Collaboration
Collaboration is the brainchild of reason, and companies that work together can pool resources to ensure everything is completed on time, at the right time, and accurately. For shippers, the obvious benefit of logistics providers as 4PLs and collaboration is addressing the demand for reduced costs of shipping, concerns over the driver shortage, and the need to improve existing fleet and compliance measures to meet changes in regulatory requirements. According to MH&L News, 29 percent of shippers report using 4PLs for the purpose of accessing more capacity.
In a sense, collaboration gives rise to greater data-capture points, aggregation, analysis, and change within an organization. All of this seems difficult, organizations that participate in collaboration with logistics service providers see enhanced probability and savings almost immediately. For both small- to medium-sized and enterprise organizations, the benefits of a partnership with 4PLs are even more pronounced. 4PLs can give small- to medium-sized & enterprise businesses access to advanced analytics capabilities, better shipping rates, and a wider range of resources to use to improve efficiency in the shipping process.
Cost-Savings and Future Planning
The third fundamental of collaboration in logistics trends focuses on how collaboration contributes to the livelihood of a company over an extended duration. In fact, a team of researchers at the University of Tennessee further defined this relationship. “Vested outsourcing tries to break down the walls of the typical relationship between a 3PLs/4PLs and a buyer, moving away from the transactional approach to look at the bigger picture, then determine how to work together to take cost out of the network,” reports Merrill Douglas of Inbound Logistics.
Furthermore, logistics service providers or 4PLs are continuing to seek out relationships with organizations that will last beyond the typical, 3-year contract. Essentially, each time a contract is renewed, the terms of the contract can change dramatically, and often, these terms do not favor the organization in need. As a result, the cost of operating increases with each renewal of a collaborative effort between logistics service providers and shippers. However, collaboration measures should be seen as memberships.
The duration of a contract with a logistics service provider can actually indicate the stability of the respective company and how well the company will do over time. Therefore, stakeholders can make a more informed decision about how future projections and cost savings for a company will benefit from collaborative relationships in the supply chain.
Collaboration between 4PLs and shippers also helps to safeguard against uncertainties in the industry. As with the driver shortage, labor shortages can occur without warning. This is going to become increasingly true as a more shippers turn towards advanced technologies, such as robotics and augmented reality, to improve efficiency. For the workers in shippers who do not have current collaborative relationships with large-scale logistics service providers serving as 4PLs, the potential investment requirements could easily bankrupt a company. In other words, big businesses that invest more heavily into their current systems will lead to a greater demand for skilled workers in new positions (and with the skills gap is increasingly more difficult). Consequently, shippers will need to have access to a larger amount of resources in order to survive.
What Does It All Mean?
Agile systems, lean production, big data, the Internet of things, and the driver shortage make up some of the latest, most discussed topics on value-adding 4PLs. However, few organizations take the time to truly think about how logistics service providers could improve collaboration, which will result in better rates and efficiency for all partners over an extended time. Collaboration is poised to be one of the biggest, if not the biggest, trend for logistics service providers to focus on in 2016.