4PL Services

4PL Services Global Market Outlook:

The global 4PL market size was valued at $55.01 billion in 2021, and it is forecasted to grow at a CAGR of 5–6 percent and expected to reach $90.95 billion by 2030.

The key reasons behind the market expansion are the rising demand for inbound logistic services, which comes mostly from the manufacturing and consumer electronics sector, as well as the rising need for straightforward logistical processes from distributors and manufacturers.

The demand for a simple and effective supply chain system, as well as the increasing complexities in the operation process, drive the growth of the fourth party logistics market. Furthermore, an increase in demand for customized solutions is expected to drive market growth.

Supply Outlook:

• COVID-19 and capacity shortages continued to disrupt the supply side of the 4PL industry, with container availability and air capacity remaining tight, and wait times for vessels outside of ports remaining lengthy due to bottlenecks in landside transportation and warehousing. There will be no more supply gaps along long-distance and regional rail routes by 2026 at the latest.

Demand Outlook:

• Demand for logistics services moderated across global supply chains. Supply-side bottlenecks remained a problem, but there are signs of relief as demand slows and COVID 19-related restrictions in China ease. Strong momentum from trading and industries such as steel and construction boosted transportation demand.

Price Outlook:

• Freight and charter rates fell in Q3 2022 compared to the previous quarter as the expected normalization gained traction.

Input Cost Outlook:

• Ocean freight prices have fallen since the spring of 2022, with China-West Coast US rates recently reaching pre-pandemic levels. A drop in consumer spending, which had been responsible for increased sales among many importers over the last two years, is a major driver of falling logistics costs.

Procurement Centric Five Forces Analysis - Global 4PL Services Market

Supplier Power

• The market is fragmented with the availability of a large number of global and regional suppliers, which reduces supplier power

• The suppliers in the market have moderate buying power due to the pressure from substitutes

• The differentiating factor between these suppliers would be the investments and technological advancements made by them

Barriers to New Entrants

• The set-up costs and a market with settled existing players will create a huge barrier for new entrants.

• Presence of big global players in the industry make it difficult for new players to enter the market. The M&A strategy of global suppliers helps them maintain their foothold over the market and dissolve any rising competitions

Intensity of Rivalry

• With increasing globalization across the regions, customers are becoming selective and are likely to engage with a global supplier with international presence compared with a local supplier

• There is high intensity of rivalry in the industry. Companies compete on the grounds of price and quality of service

Threat of Substitutes

• If the new entrants launch innovative solutions for logistics operations like the use of drones, automated guided vehicles, and innovative software solutions, it can be an advantage for the new entrant. However, this threat is relatively low due to scalability issues.

Buyer Power

• Buyer power is higher in the North American region and lower in the LATAM, MEA region

• The buyer can opt for regional services providers who charge less but this will also have an impact on the quality when compared to the services offered by an established international service provider. This buyer power is hence medium.

4PL Model Overview

• 4PL, in addition to managing 3PL supply base, also offers direct logistics services such as warehousing, distribution, freight forwarding etc., to the buyer. Clients engaging with 4PL provider can leverage both management and execution functions in single point of contact thus increasing process efficiencySource: IE1, Supplier Interactions

• 4PL directly engages with the client and provides all the execution activities including logistics services and management services

• In most cases 4PL’s will be a lead suppliers from the client’s 3PL supply base, hence here clients don’t have to engage with a separate supplier for the 3PL management services

Pros of 4PL:

• 4PL provider has the ability to provide a range of services under one single point of contact, virtually eliminating the internal costs of supporting accounts for warehousing, fulfillment and transportation across multiple vendors. With greater visibility and process efficiency, a 4PL can help reduce logistics cost

• Value generated such as real-time visibility, track and trace, reporting, high-level information sharing to the client etc., through outsourcing managed services is higher due to high resource costs

• 4PL model is more beneficial in operations that are standard and the supply chain network doesn’t change more often. Since the execution services are offered by the same provider as management, it is a seamless flow of information as the system is already integrated

Cons of 4PL:

• 4PL model is existing across all regions. However due to less complexity in mode(air, ocean and land) usage, standard rules and regulations etc., the model is mostly prevalent in US, Europe, and some countries in Asia such as China, Japan and less adopted in other regions

• Less visibility as the 4PL players bundle the cost involved in logistic services and management activities; cost savings achieved through each subset of cost parameters in 4PL management is not transparent since both the operations are managed by the same player

• Clients will be highly dependent on the 4PL player and switching cost is higher providing less control over the suppliers.

Why You Should Buy This Report

The report on the 4PL services market provides an extensive analysis of the key price drivers, supply-demand trends, and trade dynamics of global manufacturers in North America, Europe, APAC, LATAM, Africa, and the Middle East. It further discusses Porter's Five Forces Analysis and presents an analysis of the 4PL procurement trends in the pre-set regions. Furthemore, the report includes an in-depth study of the top 4PL companies along with their Porter’s Five Forces analysis.

Beroe gathers intelligence through primary sources that include industry experts, researchers, and consultants, as well as current suppliers, producers and distributors. Secondary sources include business journals, newsletters, magazines, market research data, company sources, and industry associations. Following data collation, analysis, and strategic review, the Final Research Report is published on Beroe LiVE.