5 ways 4pl Logistics can improve your Business
Even though it holds true for all companies where logistics are required, but for e-commerce companies like Amazon, Snapdeal, etc., having their own 4PL can be the most profitable and cost-cutting measure the business can take.
How it happens under a 4PL company or branch of functioning that operates inside a bigger company like Amazon, is that every side of the supply chain and logistics are directly undertaken by the company. This means that a company that has its own 4PL logistics cut out for itself, manages its own supply chain throughout the whole process. It does not need any outside help or does not need to pay to any outside service provider for logistics. This is the first way the business improves due to 4PL logistics.
The 4PL started developing in 1996 when Accenture, the management firm, was doing business with a multinational company as its client. To save costs, Accenture thought of and put in motion its plans to consolidate the company’s freight forwarder base. With the result that now the 4PL is a well-known way of functioning for any company that undertakes the entire supply chain process to cut costs for the client company, thereby awarding the client company a chance to operate the process of complex supply chains, which include shipping companies, freight forwarders, warehouses, and agents. This is another benefit of a 4PL logistics, that it helps the company manage its supplies and logistics in a much better way as it has complete control over the whole process. This better way of managing supply chain naturally results in increased productivity for the company. This way it essentially takes ownership of the entire supply chain and doesn't have to rely on the services of third-party logistics company.
Next up, the company also increases profitability by developing another revenue stream for itself. Having a 4PL logistics set-up all to itself can help the parent company increase revenues by lending its logistics services to other needy companies. For the sake of taking an example, the United States-based Amazon had in its sales catalogues and inventory around 480 million products in the year 2015. Because of having this big a size and scale of business and inventories, the eCommerce giant intelligently planned to evolve into a logistics company to reduce the costs and increase its profitability. Not only that, the company also formulated a strategy so that it could float an international logistic company, which was dedicatedly working for the parent company Amazon itself. This is another way, a 4PL logistics can improve the business, because the company can then also handle logistics for other companies and in this way develop an additional revenue stream.
Then, another way the profitability increases is that the company starts developing its own assets in logistics realm, adding to the overall value of the company. This 4PL strategy of having complete control of the whole supply chain solutions works for the e-commerce companies like Amazon the most, as 4PL helps them cut logistics costs tremendously. There may be the need to buy 3PL companies and to also develop its own fleets of trucks, and directly managing the cargo ships and planes. In this way, the company start developing its assets within the logistics realm, and those assets can add to the overall profitability of the company.
In the end, it must be mentioned that this strategy of having your own entire supply chain for logistics works well for companies in most industries. It also adds to the goodwill of the company because it is seen as having a self-sufficient system for the entire logistics and thereby improving its goodwill and market value.