The supply chain industry uses short forms and terminologies for technical innovation in warehousing and logistics. Lately, jargon like 3pl and 4pl logistics has been widely used, which stands for 3rd party and 4th party logistics.
In the below article, we try to explain the term 4pl and its relevance to the F&B industry. Warehousing, logistics, and food cost substantially impact the final product’s cost and the restaurant’s profitability. Food entrepreneurs and restaurant chains who have a tough time managing inventory can utilise the services of 4pl logistics companies and cut down on their costs, wastage, increase scalability and aid rapid expansion.
Understanding 3Pl before decoding the 4Pl
What is 3rd party logistics or 3Pl ?
3rd party logistics service providers enable a restaurant or food business to outsource all their logistics requirements and fully concentrate on their core business,i.e. serving their customers and preparing a strategy to expand their business. A 3rd party logistics provides their clients with logistics and warehousing services, usually outsourced from a third party. A 3Pl logistics provider generally provides packaging service to add value to their service. 3Pl service, in brief, can be summarised as the integration of warehousing and transportation service.
What is a 4th party logistics service?
The 4pl encompasses the features of the 3pl logistics with add on features like technology, inventory management, digital infrastructure, overall building supply chain solution for food businesses.
In addition to the service provided by the 3Pl’s, the 4Pl service providers play the role of strategising and consulting logistics business solutions for their clients. 4Pl service providers usually give a digital platform to their clients, which aids them in decision making and provides a bird’s eye view of warehousing, logistics, and process interlinking to get seamless service
Advantage of 4th party logistics
The most significant advantage of using a 4Pl service provider is that professionals with expertise in logistical service centrally manage your entire logistics and supply chain. This becomes critical for the food business as they deal with food ingredients that need special logistical requirements. As 4Pl service provides a logistical solution for organisations and uses superior technical know-how, it is better placed to manage complex and spread out supply chain activity.
Usually, 4Pl service providers hire 3rd party warehousing and logistics. The 4Pls are not committed to using their facilities; instead, they hire the utility of 3rd party channel partners suited for the requirements of their clients. As a business uses a 4Pl service, tracking stocks and monitoring logistics becomes relatively easy.
4Pl for F&B industry
Advanced warehousing and logistics of perishable food ingredients are often expensive and complicated. 4Pl are often better positioned to provide negotiated prices for the speciality food supply chain. Large F&B chains are turning to 4Pl service providers due to better legal compliance, order and supplier management.
4Pls major clients include moderate and big F&B chains that need partners who can help them in rapid expansion and help them scale their business. These businesses hire a 4Pl service provider as they don’t have time or energy to find reliable supply chain and logistics partners they can count on in new places where they expand. As 4Pls service providers focus on removing hurdles for the food business, they provide solutions to restaurants as per their brand requirements.
4th party logistics are a relatively new concept and gaining popularity among F&B units looking for scalability, data-driven decision and increasing profitability.