TMD50US

CHAPTER OUTLINE
3. Third- and Fourth-Party Logistics Providers (3PL
and 4PL)
3.1 3PL and 4PL Providers
3.2 Private carriers
3.3 Nature, Functions & Services of 3PL and 4PL
3.4 Freight forwarders
3.5 Courier companies
3.6 3PL and 4PL Business Models
 Learning outcomes for this course

1. Discuss distribution networks and their key

systemic performance objectives.

2. Explain and apply theories, models and tools

for needs identification, design and
implementation of physical distribution solutions
across various industries.

3. Compare and contrast the use of different

transport modes and infrastructure across
various operational situations.

4. Outline the importance of international trade

regulations, taxing and risk/security issues in
physical distribution operations.
 Overview of Third- and Third-Party
Logistics Providers (3PL)
 Third-party logistics (3PL) is a logistics
outsourcing type involving contracting a
company to handle all or part of your
company's logistics operations. According
to Armstrong & Associates, 86% of US
Fortune 500 firms use 3PLs for logistics and
supply chain activities as of 2018.

 Third-party logistics providers offer a wide

range of services, which can be customized to
meet the needs of your business. These
services may include transportation,
warehousing, order fulfillment, freight
forwarding, inventory management, customs
brokerage, cross-docking, and more.

However, they do not offer the same end-to-end

suite of services that fourth-party logistics
providers do. Instead, they focus on specific areas
of supply chain management.
 Overview of Fourth-Party Logistics
Providers (4PL)
 Fourth-party logistics (4PL) is a newer model
of outsourcing that takes a more strategic and
all-encompassing approach to supply chain
management. An unprecedented number of
businesses are looking to outsource fourth-
party logistics.

 While 3PL providers focus on the execution of

logistics services, fourth-party logistics
providers, also known as lead logistics
providers, offer comprehensive logistics
services by integrating and managing all
aspects of the supply chain. In other words,
4PL providers act as a single point of contact
for their clients, overseeing the entire process
from start to finish.

 Thanks to their holistic approach, 4PL

providers are uniquely positioned to optimize
the supply chain and drive significant
 The differences between 3PL and 4PL

 The biggest difference between third-party and fourth-party logistics is the level of
involvement.

 While 3PL providers offer services that can help businesses with their supply chains, they are
ultimately focused on the execution of logistics services.

 4PL, on the other hand, is a more comprehensive solution that integrates multiple logistics
service providers into a single, seamless network. In other words, 4PL is a one-stop shop for
all your logistics needs.
 The differences between 3PL and 4PL

 3 PLs offer a la carte services that can be customized to meet your needs, whereas 4PLs
offer an end-to-end solution that integrates multiple service providers into a single network.

 While 3PLs focus on the execution of logistics services, 4PLs focus on the strategic
management of the supply chain.

 3PLs are more transactional in nature, whereas 4PLs take on a more consultative approach.

 3PLs usually own warehouse and/or transportation assets, and 4PLs usually don't own assets
and outsource to 3PLs.

 A 3PL is just a link in the supply chain, whereas a 4PL is the single point of contact in the
supply chain.

 With a 3PL you have more control over the shipping process and a 4PL takes complete
control over it.
The differences between 3PL and 4PL
 When to use a 3PL vs and when to use a
4PL?
 The size and scope of your operation - if you have a small business with relatively simple
logistics needs, a 3PL may be a good fit. However, if you have a large or complex operation,
you may need the comprehensive services of a 4PL.

 Shipping volume - if you have high shipping volumes, a 4PL may be able to provide a more
efficient and cost-effective service.

 Shipping destinations - if you ship to multiple destinations, a 4PL with a global network may be
able to provide better service than a 3PL.

 Budget - in general, 4PLs tend to be more expensive than 3PLs. However, the increased cost
may be worth it if you need the comprehensive services of a 4PL.

 The amount of control you want over your supply chain - A 3PL offers less visibility and control
than a 4PL, which gives you complete visibility into every step of your supply chain so you can
make real-time adjustments as needed
Examples of 3PLs in Namibia
 Examples of 4PLs
1. DHL Supply Chain is a division of Deutsche Post
DHL Group that specializes in contract logistics
and supply chain management, providing tailored
logistics services across various industries.

2. UPS International Shipping provides fast,

reliable, and cost-effective solutions for sending
packages worldwide. Learn about UPS shipping
rates, express services, customs clearance, and
package tracking. Get the best shipping quotes
and discover ways to save on international
shipping.
 Examples of 4PLs
3. DB Schenker offers a web-based platform to
manage all stages of the shipment process, from
land, air and ocean freight to contract logistics.

4. Kuehne+Nagel provides supply chain

management, e-commerce solutions and customs
brokerage..
 Private carriers
 A private carrier is a company that owns its own vehicles to transport its
own goods, rather than offering transportation services to other
businesses like a common carrier.

 Private carrier refers to a company that owns the vehicles used to

transport its own goods. A private carrier does not transport goods as its
primary business and, thus, does not seek to transport the goods of other
companies like a common carrier does. In this sense, a private carrier is
not a for-hire carrier and does not carry the goods of other companies as
its primary business.

 Some companies that own their own transportation fleets may use
contract carriers in certain situations, such as when a large amount of
goods needs to be shipped and all its fleet vehicles are in use. For
example, a retail store may expect to make a large number of shipments
during the holiday season and will use contracted truckers to add to its
capacity so that deliveries are made on time.
 Freight forwarders
 A freight forwarder organizes shipments for individuals or corporations. Freight forwarders assemble and
consolidate shipments and provide for break-bulk and distribution of shipments.

 A freight forwarder is a company or an individual that specializes in the logistics of moving goods. They
function as intermediaries between shippers and carriers, arranging the transportation of products. By doing
so, they handle critical components such as negotiating shipping rates and ensuring compliance with
shipping regulations.

 Unlike brokers, freight forwarders assume responsibility for the transportation and may transport the freight
itself. Therefore, they are involved directly or indirectly with the cargo.

 Freight forwarders assemble consolidations. This involves combining shipments from multiple shippers
headed for the same destination into a single load. When they travel by ocean freight, they’re called less-
than-container load (LCL).

 Freight forwarders may also transport freight themselves using their own fleets. Forwarders who own
resources like fleets, warehouses, and distribution centers are called asset-based freight forwarders.

 Finally, some freight forwarders may also register as non-vessel operating common carriers (NVOCC).
 Freight forwarders vs. 3PLs
 Scope of services: 3PLs manage a spectrum of operations
including warehousing, distribution and order fulfilment, while
freight forwarders focus primarily on moving goods from one
location to another.

 Logistics Management: 3PLs handle the entire fulfilment

process, including inventory management and returns, whereas
freight forwarders coordinate shipping logistics, custom and
paperwork.

 Integration: 3PLs offer a broader range of logistics support,

integrating various services under one roof, while freight
forwarders specialise in transport logistics.

 Functionality: 3PLs are more involved in the supply chain,

providing comprehensive solutions, while forwarders act as
intermediaries between shippers and carriers.

Hence, these distinctions can help businesses choose the right

partner based on their logistics needs.
 What does a freight forwarder do?
 Freight forwarders act on behalf of their customers to
move freight from one place to another.

Freight forwarders provide services that may include:

 Coordinating ocean, air, or over-the-road freight
transportation
 Simplifying multiple carrier invoices into a single invoice
 Assisting customers with choosing the right freight
modes to improve efficiencies, meet business goals, and
control costs
 Warehousing and storing freight
 Assembling consolidated/LCL loads to particular
destinations
 Tracking shipments for their customers
 Assisting with paperwork for international shipments
 Connecting customers with customs brokers as needed
 The distinction between a freight forwarder
and a shipper
 A freight forwarder is an agent that works on behalf of shippers – businesses that own the
goods that are being shipped.

 Freight forwarders organise the shipments, working with shipping carriers, intermodal
providers, and ports to ensure that shipments move smoothly through the logistics network.

 They act like a travel agent for your shipments, helping to reassure that transportation will be
an efficient process. Freight forwarders try to find the most cost-effective way to transport
cargo, including selecting optimum routes, times and costs.

 Many freight forwarders started out as customs brokerage experts.

 hey have a wealth of experience in the procedures, legislation, customs tariffs and rules
around import and export duties, all of which helps ensure that the administrative aspect of
organising international shipping run smoothly.
 How does freight forwarding work?
1. Export haulage
The process begins with the movement of goods from the shipper’s location to the freight forwarder’s warehouse or directly to the port of origin. This
step is often referred to as “first mile” transportation.

2. Export customs clearance

Before goods can leave their country of origin, they must clear customs. Freight forwarders assist in preparing and submitting the necessary
documentation to obtain export clearance from customs authorities.

3. Origin handling
Once the goods arrive at the port or airport of origin, they are unloaded, inspected, and prepared for international transit. This may involve
consolidating smaller shipments into larger ones to optimize space and reduce costs.

4. International transportation
This is the main leg of the journey, where goods are transported via sea, air, rail, or road (or a combination of these) to the destination country. Freight
forwarders coordinate with carriers to ensure the most efficient and cost-effective route is chosen.

5. Import customs clearance

Upon arrival in the destination country, goods must clear customs again. Freight forwarders facilitate this process by preparing and submitting required
documentation, paying duties and taxes on behalf of the client, and ensuring compliance with local import regulations.

6. Destination handling
After clearing customs, the goods are transferred to a local warehouse or distribution center. Here, they may be deconsolidated if they were part of a
larger shipment.
7. Import haulage
Finally, the goods are delivered to their final destination, often referred to as “last mile” delivery. This could be a retailer, warehouse, or end customer.
 Types of freight forwarding services
 Air freight: Ideal for time-sensitive or high-value goods, air freight offers the fastest transit times but is
generally more expensive than other options.

 Sea freight: Sea freight is the most common method for international shipping, offering cost-effective solutions
for large volumes of goods. It’s divided into two main categories:

 Full Container Load (FCL): The shipper books an entire container for their goods.

 Less than Container Load (LCL): Multiple shippers share space in a single container, ideal for smaller
shipments.

 Road freight: Used for shorter distances or as part of a multimodal transport solution, road freight offers
flexibility and door-to-door service.

 Rail freight: An eco-friendly option for long-distance overland transport, particularly useful for heavy or bulky
goods.

 Multimodal transport: Many shipments involve a combination of transport modes to optimize efficiency and
cost-effectiveness.
 Key documentations in freight forwarding

 Bill of lading (B/L): A legal document that serves as a

receipt of goods, a contract of carriage, and a document
of title.

 Commercial invoice: Details the goods being shipped,

their value, and other relevant information for customs
purposes.

 Packing list: Provides a detailed inventory of the

shipment’s contents.

 Certificate of origin: Declares the country where the

goods were manufactured or produced.

 Customs declaration: Used to declare goods to customs

authorities for import or export.

 Letter of credit: A financial document that guarantees

payment to the seller once certain conditions are met.
 Incoterms in freight forwarding
 International Commercial Terms, or Incoterms, are standardized trade terms that define
the responsibilities of buyers and sellers in international transactions.

Some common Incoterms include:

 EXW (Ex Works): The seller makes the goods available at their premises, and the
buyer is responsible for all transportation and associated costs.

 FOB (Free on Board): The seller is responsible for delivering the goods to the port and
loading them onto the vessel. The buyer assumes responsibility once the goods are on
board.
 CIF (Cost, Insurance, and Freight): The seller covers the costs of shipping and
insurance up to the destination port, but the risk transfers to the buyer once the goods
are loaded onto the vessel.
 DDP (Delivered Duty Paid): The seller is responsible for all costs and risks associated
with delivering the goods to the agreed destination, including duties and taxes.

Hence, understanding these terms is crucial for determining who bears the risks and costs
at various stages of the shipping process.
Incoterms in freight forwarding
 Risks of using freight forwarders
1. Communication Problems
Any form of miscommunication that occurs between the shipment owner and the forwarding company can create problems.
If there are gaps in the provided data this could impact on the efficiency of the shipment and delivery. Date deficiencies are
a major cause of delays in international shipping.

2. Unfair Pricing
If you take care of shipping yourself you can monitor the costs associated with the whole process. If you use a freight
forwarding company you may be unclear about what costs are being applied and how they’re being calculated. This is why
it’s important to get a number of quotes prior to choosing a service. The cheapest may not be the best however, and it’s
important to ask how the charge was calculated.

3. Lost Shipments
No matter what measures are taken to ensure the safe transit of goods, lost shipments do happen. There is always the risk
of lost goods, or problems with severe weather or shipping delays and failure. That said, even if you handle the entire
process yourself, you will still face these problems and run the risk of shipments being lost.

4. Freight Forwarding Companies aren’t Regulated

Although freight forwarding companies play a major role in facilitating global trade they are not all properly regulated across
the world. Be sure to check the background and credentials of every freight forwarding company you consider. Choosing
the right company to work with gives you all of the benefits of using a freight forwarding company while reducing the risks.
 Courier companies
 Courier services are streamlined shipping companies that deliver to
any address.

 Courier means they can pick up and deliver letters and parcels for all
types of businesses, even for employees who work remotely.

 The Courier Company is a 24-hour, full service, same day

courier/delivery/messenger company that serves the professional
business community.

Who uses courier services?

 Businesses that need important documents, especially legal
documents, rely on couriers for their speedy, safe, and reliable
services.

 These third-party logistics services differ from postal services because

they do not have size restrictions, and they offer several unique
features for signature, packing, return services, and tracking software.

 Postal services usually have size restrictions and limited additional

services. For example, logistic courier services can take care of last-
mile deliveries, secure payment processing, and time-sensitive
deliveries. In many cases, a shipping company will use both courier
and postal services.
Courier companies in Namibia
 Types of courier services
 Express courier services
Speedy courier services specialize in delivering packages and letters often with same-day services. This type of delivery service often
works within city limits for companies that need private communications. Tracking software helps in providing real-time updates and
ensuring the reliability of express courier services.
Law firms tend to use express courier services for the prompt delivery of legal forms and court orders.

 International courier services

Global shipping companies offer international shipping services. They usually have their trucks, buses, and jets to provide exceptional
shipping services with guaranteed deliveries. If they don’t have their jets and trucks, they work with other couriers that do.
International courier companies take all sizes of packages and help customers with tariffs, taxes, and duties. Tracking software aids in
managing international shipments and ensuring timely deliveries.

 Overnight courier services

Couriers that specialize in overnight delivery make good on their promises. They guarantee their services to provide peace of mind to
customers who need delivery service completed within 24 hours. Tracking software provides real-time tracking and proof of delivery,
ensuring peace of mind for customers using overnight courier services.

 Standard courier services

Standard couriers provide reliable delivery service, but with longer time limits. They usually deliver faster and more reliably when
compared with government post offices. Additionally, tracking software enhances the reliability and efficiency of standard courier
services by providing real-time intelligence data and proof of delivery.
3PLs Model
4PLs Model
Parties involved in the shipment of cargoes
Thank You!
 References

de Villiers, G. (2015). Inland intermodal terminals and freight logistics hubs. Land Use Management and Transportation
Planning. WIT Transactions on State of the Art in Science and Engineering, WIT Press, 86, 123-151.

Baruffaldi, G., Accorsi, R., & Manzini, R. (2019). Warehouse management system customization and information
availability in 3pl companies: A decision-support tool. Industrial Management & Data Systems, 119(2), 251-273.