Three Keys for 4PL Success
This is part 2 of 3 article on the topic of “How 4PL Services Can Help Up the Game in the Omni-Channel World. »
As I discussed in my last blog post, the pandemic has driven dramatic growth for fourth-party logistics (4PL) providers. As the world’s supply chains grow larger and more complex, and face increasing disruptions, it only makes sense for companies to rely on a single source of expert guidance for storing, transporting and distributing their products worldwide.
4PLs deliver a number of benefits, including the ability to negotiate better shipping rates and access more transportation lanes due to their large scale. They’ve also invested in advanced digital capabilities — including artificial intelligence (AI), machine learning (ML), digital control towers and predictive analytics — that are designed to optimize end-to-end logistics.
Amlan Bose, Vice President of Digital Transformation at DSV, joined Blue Yonder for a recent LinkedIn Live event focused on 4PL trends and success factors. Few people have a better perspective on this topic than Bose. The fourth-largest 4PL in the world, DSV achieved 59% growth in revenue and 71% growth in operating profit in 2021. The company leverages Blue Yonder’s transportation management solution and Luminate Control Tower to manage logistics for a range of customers around the world.
Another expert on the 4PL market joined us for the LinkedIn event: Richard Ryan, Senior Director for Industries at Blue Yonder. Based in Singapore, Ryan has a keen understanding of global logistics success factors.
As the 4PL market grows, more companies are entering this challenging field. I asked Bose and Ryan about the key success factors for 4PLs. What capabilities will distinguish the leaders as this industry matures? Their answers can help manufacturers choose a top-tier 4PL supplier, but they can also help smaller 4PLs see the path forward.
Disruption Management: A Core Capability
Given the volatile nature of global supply chains today, Bose and Ryan agree that 4PLs must have a reliable way to identify and respond quickly to disruptions across their extended networks. From port closures and production shutdowns to geopolitical events, 4PLs must recognize risks at the early possible moment and rapidly bring the supply chain back on track. They must investigate all potential resolution scenarios thoroughly in collaboration with their customers and the carrier network.
“COVID broke the global supply chain, something that has never happened in the history of the modern world,” says Ryan. “The supply chain will not go back to work the way it worked before. COVID changed the rules of the game for a lot of reasons. We now understand that local disruptions like the Suez Canal blockage have an enormous global impact. So what we need to do, and what the leading 4PLs are doing, is build back a more resilient supply chain.”
“If COVID had any benefit, it’s that we’ve been awakened to the fact that there are no shortcuts,” Bose points out. “The end-to-end supply chain must be connected so we know exactly what’s going on everywhere, right now. Resilience used to mean building up inventories. Now it means building connections with every trading partner, from factories to trucking companies. It means creating an ecosystem that can see and respond to disruptions together.”
Digitalization: An Absolute Imperative
So how do 4PLs create this kind of connected ecosystem? Both Bose and Ryan agree that it can only be accomplished by leveraging advanced digital technologies that link the end-to-end supply chain in real time. From high-level control towers that sense exceptions to dynamic freight procurement platforms that minimize costs, purpose-built digital solutions help 4PLs manage logistics for customers better, faster and more profitably.
“A lot of companies are embracing the concept of digitalization post-COVID, but it’s important to recognize that digitization is not just converting your manual processes to automated process. That’s not the point. It might be the first step, but it’s not the goal,” Bose notes.
“What digitization actually does is free you up from regional boundaries and functional boundaries,” he continues. “It creates centralization and end-to-end visibility. Everything is in the cloud and everyone can access it, no matter where they are. You can create a digital ecosystem run by a larger digital control tower, with one global talent pool and minimal brick-and-mortar investments. You can track and trace inventory across the world, from anywhere in the world.”
“This is a huge transformation that’s happening, and we all need to participate in it,” Bose emphasizes. “It’s not just automating processes, it’s a paradigm shift that, as supply chain leaders, we must support.”
Democratization: Amplifying Technology’s Impact
The paradigm shift and digital ecosystem described by Bose enable more logistics team members to access information and actively participate in decision making — a trend call democratization. This increased participation is helping 4PLs manage worldwide talent shortages, while also amplifying their investments in advanced technology.
“I think that democratization comes from the moment that you have apps that anyone can access,” explains Ryan. “Suddenly you have information at your fingertips that you didn’t have 10 years ago. The app will do all the work for you today because it’s connected to the larger ecosystem. You can get the best price and the optimal route, in real time. So everyone is working more efficiently and you have AI helping to identify the best decision. It’s a huge change in just the last few years, and there’s no turning back.”
“Digitalization has created an easier way of doing business, which leads to democratization,” says Bose. “It’s seamless. There’s less paperwork, less bureaucracy, less obstruction and less disruption. As a 4PL, we want to improve our efficiency so we can attract more and more multinational customers. That means being easy to partner with.”
“Today we can sit in one location, with a small team of talent, and manage the entire supply chain. We can optimize logistics, we can evaluate performance, we can track and trace products, we can gather global requirements, and we can manage exceptions. That’s the real value of digitalization and the democratization it enables,” Bose concludes.