Logistics Essay

Logistics
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Compare and differentiate the functions normally associated with 4PLs to those of 3PLs.
Modern business practice make it possible for organizations to reach their customers anywhere in the world. The entire value chain system of modern business practice makes it possible for organizations to operate from any point on the globe. However, this ability comes at a cost. The emergence of logistical companies have enabled consumers access goods and services from anywhere in the world. 4PLs (forth party logistics) and 3PLs (third party logistics) are a common business tool around the world (Gail, 2009).
Modern businesses find it hard to classify and differentiate between 3PLs and 4PLs. 3PLs first emerged in the 1970s when private contracting logistical services first emerged. 3PLs companies specialize in a particular portion of a company’s logistical needs. These companies were referred to as Intermodal Marketing Companies (IMC). 3PLs provide packaging, and freight forwarding, warehousing, transportation, cross docking, and inventory management. The law defines a 3PL as an entity that "Solely receives, holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product". The emergence of modern business practices brought new demand for logistical services. Consumer needs dictated trends in the sector. 4PLs are organizations, which have an exclusive agreement with companies to provide and manage their whole logistical solutions. 4PLs can manage 3PL companies. A 3PL can form a 4PL with a company they work with.
What are the factors responsible for more and more companies relying on the services of 4PLs?
As mentioned above, the modernization of business processes created a new market for various logistical support services. 4PLs provide critical services to the value chain However, there are various factors that have made companies rely more of 4PLs for their logistical needs. The first and most important factor that has influenced more companies to employ 4PLs is globalization. The geographical set up between consumers and producers has made it essential for companies to employ 4PLs. The complex logistical needs of global transportation have created increased demand for services offered by 4PLs. Second, the limited nature of assets and resources has made organizations go back to their core competences. Companies have chosen to specialize on their core business and outsource services such as logistics and distribution to experts. Third, logistical partners are in a better position to effectively uti...