The Benefits of Outsourcing Logistics to a 4PL
Leadership | Luis Gómez, President – Europe | Feb. 28, 2022
Supply chain management has become more complex during the pandemic with a tight transportation market and rapidly changing COVID guidelines – especially when conducting business across multiple countries.
For large organizations with a considerable transportation spend, using a fourth-party logistics (4PL) provider could help maximize savings while keeping operations optimized across Europe.
3PL vs. 4PL: What’s the difference?
While a third-party logistics (3PL) provider performs the essential functions of distribution or fulfillment services, among others, a 4PL manages 3PLs, providing a single entry point into complex systems typically involving many carriers.
At XPO Logistics, Key-PL is our 4PL service – an offering that covers many verticals, including technology, automotive, chemical, building, food packaging and distribution. We manage client’s transportation plans, sourcing, procurement and freight payment as part of a tailored solution. Our Key-PL team of 200 employees and 1,400 subcontractors operate 180 loading points.
- Visibility into the performance of your logistics operations
The value we offer focuses on visibility: as companies expand and acquire other organizations, executives are often faced with trying to integrate multiple IT and process systems into one. When companies partner with a 4PL, they have a single entry point into everything related to their transportation: the total spend, performance metrics and any other associated flows. Using our inhouse IT solution, no IT developments are required from the customer except the implementation of a basic interface to our system.
We’re committed to our client’s success since we operate on a gain-sharing mechanism. For each client we partner with, we produce a detailed client charter defining the scope of the project, the relevant baselines and the expected savings. Based on our experience, savings can range from 1-10% based on the area of productivity and a savings opportunity scale based on FUM (Freight Under Management).
- A multi-regional reach
Here’s one example of our 4PL partnerships with large-scale organizations: a global leader in consumer packaging hired us to support its development to 50 sites in 17 countries. We launched a team speaking 10 languages to create a complex solution handling 110,000 orders per year. We continue to lead this customer’s global approach to logistics by managing its distribution flows with multicultural teams. We created a specialized web platform for this customer that allows it to view all its transportation operations in a single space – its carriers can use it, too. The platform is designed to make the user experience as seamless as possible (especially since users from different organizations will access it). We monitor the execution of all transport activity and make recommendations to enhance performance. This is a part of our continuous improvement approach.
For a customer in the automotive vertical, we helped managed 18 sites in 20 countries, yielding more than 300,000 transport orders in one year. For a chemical customer, we managed three sites operating in 11 countries with 6,000 transport orders annually.
For our clients to reach their full performance and savings potential, we enact change together. Often this means working in conjunction with engineers and employees in operational roles to understand what’s happening on-site and how it can be improved.
Despite the complexity of supply chain management during the pandemic, it’s possible to achieve better results than ever before via the use of a 4PL service. For more information on how our 4PL services can help your organization improve its performance, please click here.