For Some Companies, it Might be the Natural Outcome of Centralizing Supply Chain Operations and Data into a Control Tower
As more organizations are moving toward heightened supply chain visibility, many are coming to realize that what they’re also doing is becoming their own fourth-party logistics (4PL) provider. What’s a 4PL? The term was coined by Accenture (when it was Andersen Consulting) and is defined as “an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, build and run comprehensive supply chain solutions.”
Essentially, a 4PL is like a general contractor for logistics. Typically, it is a neutral party that will help unify and reengineer supply chain processes, while coordinating the activities of 3PLs and other supply chain partners. However, companies that have embraced supply chain as a core competency are seeing value in assuming the 4PL role themselves to meet their specific supply chain goals. The activities are managed from centralized hubs of technology, people and processes – frequently called “control towers.”
The concept of a supply chain control tower has been gaining momentum over the past year. A control tower is a single command center for visibility, decision-making and action, based on real-time data. With a control tower in place, taking on the 4PL role allows organizations to accelerate collaboration and achieve higher levels of performance among their varied providers.
In addition, centralizing supply chain data and processes as a self-4PL gives companies the flexibility to plug in new logistics providers using standard interfaces and configurable processes. This eliminates lock-in with a particular 3PL or system and puts the company in a position to control interactions with trade partners. Control tower managers gain deeper visibility and can use data-driven analysis of service levels to objectively manage each provider.
Further, by collecting and analyzing data from supply chain processes, managers can measure performance according to standard metrics. With business intelligence tools, managers can perform “what-if” analyses to optimize sourcing or distribution decisions, pinpoint a process breakdown that results in excess inventory, and right-size inventory based on actual cycle times and variability.
Being a self-4PL may not be right for companies that don’t yet have the resources or expertise to manage all aspects of their logistics and supply chain. But for others, it might be the natural outcome of centralizing supply chain operations and data into a control tower.