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Lead logistics providers (LLPs), also referred to as fourth-party logistics (4PL) providers, have a broad role within the supply chain. They assume many of the same roles as third-party logistics (3PL) providers, but have much broader responsibility and accountability in helping the customer reach its strategic goals.
“Accountability and control help differentiate a 3PL from a 4PL,” says Robert Daymon, vice president of freight management operations at Penske Logistics. “As a 4PL, we become a trusted advisor, and the customer becomes reliant on our data to drive them forward.”
When functioning as a 4PL, a logistics provider becomes a true partner with the customer, working to create a lean, cost-effective supply chain. “The 4PL is the big umbrella. Under the umbrella you have all of the supply chains – transportation, warehouses and anything that is moving,” Daymon says. “The 4PL manages the big umbrella. That brings more sense of control and ownership.”
A 4PL typically directs every moving part within the customer’s supply chain and serves as a single point of contact for all parties involved, says Paul Skorupski, director of finance at Penske Logistics. An LLP’s role typically includes managing and analyzing large amounts of data, overseeing transportation management, managing other 3PLs and transportation service providers, supervising warehouse operations, or operating any other portion of the supply chain.
“3PLs are very transactional. As a 4PL, you’re leading that customer,” Daymon says, adding that 4PL relationships typically evolve from a 3PL relationship. “The customer becomes reliant on our data to drive them forward. Eventually we are sitting at the table with them, and the operational component is expected.”
As an LLP, a 4PL uses its high level of visibility, real-time information, communication abilities and broad knowledge to align 3PLs, customers and service providers. A 4PL draws on the data it collects. In addition, it collects, stores and manages data from other supply chain partners. That visibility plays a key role in allowing the customer and 4PL to provide seamless supply chain services, improve customer service, manage exceptions, and remove costs and inefficiencies from the supply chain.
When a 3PL transitions to a 4PL, it changes the type of information the provider may access. “I am still a Penske employee, but I am cut off from financial information at Penske because I am working in the customer’s best interest,” Skorupski says, adding that a 4PL’s goal is to find the best overall transportation solution for its customer. “Penske submits bids, but I am comparing them to bids from their competitors.”
Skorupski says transparency is key for 4PLs that may also function as a 3PL. He proactively works with customers to demonstrate the checks and balances Penske can put in place, such as creating confidentiality agreements that prohibit the sharing of information and data from the customer’s other 3PLs and transportation providers.
Building trust as a 3PL helps smooth the transition to a 4PL function. “You have to build relationships ahead of time, and we do that as a 3PL,” Skorupski says. “Then, as a 4PL, you have to deliver and put it into action.”
Bob Daymon is vice president of freight management operations for Penske Logistics. He is responsible for the global growth and development of transportation management which includes network engineering, carrier procurement, shipment execution and freight payment plus transportation analytics. Daymon earned a bachelor's degree in business and organizational development from the University of Akron.
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