Market for 4PL or 5PL

The global logistics market is expected to register a CAGR of over 7% during the period
2018-2022. A key factor driving the market’s growth is the rapid growth in the e-commerce
retail market. Key factors leading to the operational success of this sector are efficient
inventory management and quick delivery. The growing demand for e-commerce has led
to an increased need for improved efficiency in delivery systems, inventory management,
and freight forwarding. In 2017, majority of the share on the global logistics market held by
3PL, followed by 4PL. The growing complexities in supply chain management is enabling
5PL to get recognized in the market. The global 5PL market is expected to grow during the
forecast period.

Supply Solution
Chain Optimiz
Manage ation/E-
4PL 5PL
ment business

4 PL: A fourth-party logistics provider is an independent, non-asset based integrator who

acts as the main point of contact for the customer in determining and assembling resources
and technology from both its own organization as well as other 3PLs to comprehensively
run the client’s supply chain. 4PL represents the manager of a network of 3PLs.

5PL: 5PL providers construct, organize, and implement logistics solutions and technologies
on behalf of or in close consultation with contracting parties. Essentially, a 5PL manages
networks of supply chains with an extensive e-business focus across all logistic operations,
other than 3PLs and the parent company.

The difference between 4PLs and 5PLs is that fifth party logistics providers have an extensive
focus on e-business solutions. 5PLs are committed to collaboration to achieve the minimum
cost. Therefore, they will aggregate 3PLs demands into bulk volumes for more favourable
rates.
4PLs and 5PLs have the opportunity to realize more alternative business models through the
concrete integration of consumer-centered businesses such as circular and sharing economy
solutions in their service portfolio to achieve further positive sustainability effects. A
prerequisite for such alterative businesses is that coordinated, and logistically integrated
supply chains are in place. Accordingly, growth and mergence strategies lie the basis for a
strategy development. Such a development allows for new solutions that include advanced
sustainability performance goals into conventional logistics businesses as well as empower
consumers for logistics presumption activities. In this line, a closing of business cycles has to
bridge the last mile as a crucial point to achieve supply chain and reverse logistics integration.
Possible practices in this direction are the sharing of existing infrastructure and the building
of alternative (transportation) systems such as the use of cargo bikes. This service paradigm
needs to ensure a balance between human input and technology, between cost and revenue, and
between customer perceived quality and productivity.

TECHNOLOGY AS A FORCE TO SHIFT TO 5 PL:

Besides a strategic approach to SCM leading to outsourcing, technological innovation and

change has also been a driving force behind businesses outsourcing the SCM function.
Technological impetus for change in SCM is also the most significant driver to the
outsourcing of SCM to the 5PL. Technologies have become critical to firms, and certain new
technologies are assisting to create competitive advantages. Technological change in
communications have improved operations, developed new business opportunities, and
created closer customer relationships. Significant price reductions in powerful computer
equipment and the quality of the accompanying software has helped bring about enhanced
inventory control, superior equipment scheduling that has resulted in dramatically more
efficient transportation movements. In essence, technological innovation has resulted in a
number of business context dynamics that have invariably impacted on SCM organizational
strategies and structures. These dynamics include the expansion of marketing channels, the
streamlining of operations, more efficient transportation modes, improved warehousing
technology, and more powerful information technology.