The 4PL (Fourth Party Logistics) concept is a fairly new and interesting logistics model, yet most of the research tends to focus on the impact of 4PLs on larger organization. There is a significant lack of research on the viability of a 4PL model for SMEs (Small and Medium sized Enterprises). With so much information and case studies on larger organizations using the 4PL model, it begs the question: Is the 4PL model a viable solution for Small and Medium Sized Enterprises (SMEs)?

The value added proposition of the 4PL model is to provide a greater level of expertise and by completely outsourcing the logistics functions an organization can have greater focus on their core competencies. The 4PL will handle all logistics decisions within the supply chain and should help to add value to the chain. The 4PL should have a greater expertise in logistics and supply chain management, so in theory, the 4PL could help to decrease costs and improve efficiencies.

In reality, many larger organizations that have experimented with a 4PL model no longer manage their supply chain this way. Many failures have been attributed to the organizations inability to completely relinquish control of the supply chain. If you contract a 4PL service to handle your logistics, shouldn’t you in turn let your supply chain managers go? If you do not, you are left with additional Supply Chain overhead left to manage the functions that you have just outsourced. If the organization does not get rid of their own Supply Chain Managers, and those managers are still highly involved in the process, the company doesn’t really gain anything and is still running with additional overhead. Furthermore, it has been my experience that many of the larger organizations already have extensive supply chain and logistics experience, so how much additional expertise could a 4PL bring to the table? In the case of larger organizations it seems as if a 4PL is just getting in the middle of the 3PLs and the Supply Chain Managers. These are but a few of the issues that have lead to 4PL services not working with larger organizations.

The ideal candidate for a 4PL would lack expertise, have no supply chain professionals, and would also be willing to turn over control of the logistics functions to an outside entity. Who better fits this description than a Small Business? SMEs typically have managers that wear multiple hats, focusing on everything from Purchasing, Shipping, Logistics, Sales, IT, or whatever else might be required. SMEs are definitely in greater need of additional expertise. It has been my experience that most SMEs have very unqualified individuals managing their supply chains. This is probably a result of the fact that SMEs lack resources to pay for experienced supply professionals and also because most SMEs do not realize that they can create competitive advantage through the Supply Chain.

Given the many failures and evident lack of value 4PLs have to offer to larger organizations, maybe it’s time for SMEs to take a look at the value a 4PL might be able to bring to their organization?