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5 attributes a Fourth Party Logistic provider must have

Posted by Kirsten, Michael at Thursday, 05/03/2012 1:29 am
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Whether it’s running your contact centers, managing warehousing and distribution networks, or sourcing materials for manufacturing processes, Fourth Party Logistic providers (4PLs) may well tell you they can do it all. However, depending on the core competencies and processes that you wish to outsource, you need to find a 4PL that will do more than just assemble or reorder the pieces of your supply chain.

Very few organizations can be all things to everyone and still keep focus on the detail, so what should you look for in a 4PL provider?

1. A leader, not a manager: you need a provider that will lead rather than manage. This means finding a firm that will drive a cultural shift in the ways that all parties interact. The proof that they’re succeeding will be in the delivery of more sustainable, robust processes with lower associated cost (and risk, but more on that later).

2. 4PLs must demonstrate best-practice knowledge-sharing: their ability to transfer knowledge and improvements across their solutions is a real test. Some of this will be done through technology and other knowledge management processes, however, the most important assets are your human capital. Making sure you have the right knowledge (i.e. talent) in the first place is key.

3. They must think and act vertically: a genuine 4PL must be able to transfer knowledge across vertical barriers in your organization. Often, these vertical barriers will exist with good reason, so it’s not just a matter of breaking them down, but in finding ways to traverse them, sometimes hundreds or thousands of times a day.

4. Your risk profiles should decrease: since a 4PL assumes responsibility for a specific scope of service, they own part of the associated risks, such as missed shipments to your client and stopped production lines. So, they’re not just responsible for ensuring it doesn’t happen, they’re responsible for fixing it when things do go wrong. This being so, the motivation to consistently improve, close gaps and strengthen oversight to lower overall risk is a key part of the relationship.

5. Realize the true value of your supply chain: given how critical your supply chain is to the end-customer experience, finding ways to realize (and add to) its value can be a key source of competitive differentiation—think FedEx’s package-tracking system that allowed customers to see exactly where their package was in real time. 4PLs must be tasked not only with preserving your competitive advantage, but with looking for ways to consistently enhance it.

No matter how many suppliers sit within your supply chain, a 4PL must ensure a kind of seamlessness in the entire process. And, no matter how many ‘internal’ processes a single request may have to travel through in order to be executed, the customer experience should look and feel smooth. This takes more than a management approach. In fact, it takes the ability to transfer both information and knowledge along the chain and demonstrate value to all concerned.

A 4PL with good leadership qualities will be able to educate and inform people along the way, as well as improving processes. They should dedicate time to help different links in the chain understand each other’s challenges and constraints, and provide visibility to the ways in which they can improve each other’s experience.

The kind of 4PL that’s a leader instead of just a task manager focuses on building sustainable relationships that are mutually beneficial. Managing aspects of your supply chain is one thing, but a true 4PL provider must go well beyond this to add real value to the process. And if they’re experts in your industry, with an eye on the detail, and the kind of organizational strength to show real leadership and innovation, they should be able to deliver.

This post is part of 4PLs - More Bureaucracy or Strategic Change Agent?, a new whitepaper on Fourth Party Logistic provider. You can download a free version here.

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