7PL Logistics Update

Parent Category: ROOT
Monday, 04 March 2013
Written by Ken Kinlock
what is 7plLast year we talked about how a Fourth-party logistics provider (abbreviated 4PL) PLUS a Third-party logistics provider (3PL) might be regarded as a Seventh-Party logistics provider. But what is a LEAD LOGISTICS PROVIDER? Do we have too many layers, or does each add value? Is anybody, other than supply chain theory people embracing the 7PL concept?

 

Let's quickly review the levels of logistics providers and see if it makes any sense. While a 4PL is sometimes described as non-asset-owning service provider, their role is to provide broader scope management of the entire supply chain. Now, along comes the 5PL who sometimes define themselves as broadening the scope further to e-business. A 6PL adds in import/export customs. Don't forget, the 1PL is the shipper or the consignee, and the 2PL are actual carriers, warehouses, etc.

 

But what is a LEAD LOGISTICS PROVIDER?

The growing global economy along with increased competition has resulted in manufacturing and retail companies to outsource their logistics functions. It was never their core function anyway because they did not want to tie up assets in fleets of trucks, etc. However, it is very critical to their business. This made it ideal for any company to outsource their logistics to a 3rd party service provider who could do the job better and cheaper. Moving product was time-consuming, took a lot of management attention and got into areas like customs formalities that they are not familiar with.

With competition and globalization, there were gaps in what services were being provided. This signaled the start of 4PLs. They are usually a non-asset based service provider who works with several 3PLs and adds its own capabilities (like load planning, customs, consolidation of shipping, tracking, and performance management).

What do we call it when one company offers all the required services? They continue to sub-contract to 3PLs but they also own significant assets. They provide those value-added services that a 4PL provides. It is a total outsource of the logistics function. The retailer or manufacturer pays one bill and gets a lot of performance data to monitor how well their logistics function is performing. They now have a single point of contact. Can we all agree that they are a “Lead Logistics Provider” (LLP)?

Do we have too many layers, or does each add value?
As the logistics network evolved, the role of the super contractor (supervising and hiring sub contractors) emerged. The pioneer in this area was Andersen Consulting (now Accenture). That is why the idea that a 4PL was “non-asset” came from. Have to admit that the term “Lead Logistics Provider” (LLP) makes more sense than “4PL” or “7PL” but all these terms seem to be used interchangeably and defined differently by everyone. There are just as many critics of “7PL” as there are supporters.

Is anybody, other than logistics theory people embracing the concept?
Many companies that could be called a 7PL are sometimes referred to as “transportation based 3PLs”, however they can and do perform as Lead Logistics Providers. Examples are UPS Supply Chain Solutions, FedEx Express, Schneider Logistics, Ryder Dedicated Logistics. Anderson Consulting (now Accenture) can perform as a Lead Logistics Provider even though they own no trucks or warehouses.

So who declares that they ARE a 7PL? Not a lot. Easiest to find are YCH, IndiaMART and Value Logistics Group.

However, a well-established company (since 1976) who pioneered the NVOCC (Non-Vessel Operating Common Carrier) concept has declared itself a 10PL! See how Dedola Global Logistics has “modified” the PL categories. Hope you enjoy!