Fourth Party Logistics Market

Market Overview

The global fourth party logistics market was valued at USD 56,573 million in 2019 and is expected to grow at a CAGR of 4.6% during the forecast period, 2020–2027.

The rapid shift toward industry integration and innovation is one of the primary factors driving the growth of the fourth party logistics (FPL) market. FPL is rapidly emerging as the most innovative form of outsourcing and connecting a complex logistics structure for ease of operation. It handles the complete process-to-pay workflow, including the management of inbound raw material supply, dynamic logistics, demand-driven logistics, and global distribution. It also handles the storage, packaging, and timely delivery of crucial and perishable products.

Improved customer service, reduction in operating costs, and flexibility significantly drive the global fourth party logistics market. The emergence of a large number of manufacturers and regional logistics operators is propelling the demand for an effective supply chain management system, which drives the market growth. Complexities in the operational process and customer demand for customized solutions are boosting the deployment of 4PL service infrastructure. Government initiatives such as trade agreements and treaties, as well as public-private partnerships, are further bolstering the demand for 4PL and management networks around the globe.

The global shift toward dynamic logistics, especially in consumer goods, food and beverage, and medical equipment, presents a large-scale opportunity for the fourth party logistics market. The installation of 4PL SCM networks to manage air and ocean channels in Southeast Asia and South America offers lucrative opportunities for revenue generation, as a majority of their trade and transportation is carried out via land. Sophisticated demand-driven strategies, real-time order processing, and inventory optimization can open new opportunities in the upcoming years. The proper integration of technology can co-ordinate services on various levels, thereby reducing additional charges for low-income countries.

Segmental Analysis

Synergy Plus Operating Model Segment Dominates the Market by Type with a Little Less Than Two-Thirds of the Overall Value Share

The synergy plus operating model dominated the market in 2019 with a 63–65% value share. The synergy plus operating model is gaining popularity largely due to its ability to create intra- and inter-organizational synergies and supply chain fluidity at the lowest cost, which creates value for customers. Some of the additional services offered by 4PL to enhance 3PL in the entire SCM network include,

• Technology service,
• CM strategy service,
• Marketing entrance ability, and
• Project management service.

Over the last decade, Europe’s logistics industry has been undergoing profound changes in manufacturer and retailer SCM. Technological intervention has improved 4PL services, which has brought about a significant dependency for manufacturers and retailers on logistics specialists, entrusting them with managing activities such as transportation or warehousing.

Williams Haulage, an on-demand logistics company in Wales, provides fully integrated and flexible 4PL services at highly reduced costs and improved production efficiencies. The company operates in accordance with leading industry standards, including those set by the U.K. Warehousing Association (UKWA) and British International Freight Association (BIFA).

4PL’s role as an important link in the organizational supply chain network is rapidly increasing the demand for these services. Governance based both on the management of knowledge and specialization of architectural competencies is expected to boost the segment’s growth during the forecast period. Growing requirements of operational efficiency in the commercial, industrial, and logistical transactions of supply chain members will further drive the segment’s revenue as the addition of 4PL and 3PL can offer fresh perspectives to a stagnant mode of operation.

Manufacturing Segment by End-User Holds a Third of the Global Value Share & Expected to Observe Significant Growth in Coming Years

The manufacturing sector is estimated to hold a prominent position in the global fourth party logistics market. The manufacturing segment by end-user accounted for a 33–35% value share in 2019. Rapid industrialization and digitalization have increased the demand for 4PL in the manufacturing industry. Globally, automotive manufacturers are equipping their vehicles with smart telematics, sensors, and software that enhance their transport capacities and ability to compete in the carrier marketplace.

Stages of Manufacturing Managed by 4PL Providers

The penetration of 4PL in shipping systems is helping them communicate directly about shipping demand and transport capacity. The integration of smart systems has connected the entire supply chain network to meet the needs of the shipper; manufacturers can select their own suppliers accordingly. 4PL offers rating portals that have brought transparency in the quality of service providers and increased production efficiency.

Manufacturers around the globe have seen a marked increase in the dependency on outsourcing 4PL logistics providers. For instance, DHL, a division of the German logistics company Deutsche Post DHL, has been working for Airbus Group since 2009 to manage all Airbus relationships. DHL manages the Airbus supply chain by managing services, including transportation via air, sea, land, and rail, express shipments, aircraft on ground emergencies, and warehousing, which includes packaging solutions, breakbulk, and customs clearance. The partnership covers optimizing logistics flows, increased end-to-end supply chain visibility, and subsequently reduced logistics spend. The company is further investing in transparency, communication, planning, and innovation.

Regional Analysis

North America Dominates the Global Market, with the Rise of Industry 4.0 & Technological Advancements in Manufacturing Sector across the U.S.

Geographically, North America dominates the market, led by the U.S., which was valued at around USD 14,325 million in 2019. Rise of industry 4.0 and recent technological advancements in the manufacturing sector are bolstering the growth of Fourth Party Logistics (4PL) in the U.S. Digitalisation has paved way for FPL to emerge as an industry integrator and innovator. Early adoption of technology in the region has enabled market players to harness the power of digital technologies, integrating a complex network of supply chains across various industries to make a simplified centrally controlled network.

The rise of dynamic logistics in North American retail and consumer electronics sectors has surged the demand for inbound procurement. Therefore, industries are partnering with world-class logistics service providers, leveraging the option of choosing from the best of regional suppliers. There is also a demand for the provisioning of raw material suppliers in the industrial, automotive, and healthcare sectors in the U.S. Suppliers are, therefore, collaborating to meet the ever-increasing demand from their clients, helping them in their utility as well as packaging needs, which has further channeled the demand for 4PL solution providers to manage the entire procure-to-pay process.

Southeast Asia Expected to Record the Fastest Growth with a CAGR of 5.3%

Southeast Asia is estimated to grow at the fastest CAGR of 5.3% during the forecast period, 2020-2027. Southeast Asian governments have taken cognizance of the importance of technologically connected infrastructure that facilitates error-free logistics services, which has prompted many countries in the region to develop into key transport and logistics hubs for ASEAN and the wider Asia-Pacific. Additionally, funding by the Asian Infrastructure Investment Bank offers a number of possibilities for trade and partnerships and the emergence of new 4PL service providers in the region.

Southeast Asia’s 3PL market has accounted for a considerable share in the regional market in recent years, as its logistics space remains mostly controlled by 3PL service providers. Despite the high-end services, 3PLs have salaries, rent, and bills to take care of and machines to maintain, which has surged the demand for 4PL services that can offer a predictive analysis on the transportation infrastructure, taking care of a product’s production-to-distribution life cycle. Innovative technologies such as B2B trucking have led to the rapid emergence of new companies such as the Indonesia-based Kargo and Ritase.

Fourth Party Logistics Market Segmentation

By Type

• Synergy Plus Operating Model
• Industry Innovator Model
• Solution Integrator Model

By End-User

• Manufacturing
• Retail
• Healthcare
• Automotive
• Others

By Region

• North America
• Europe
• Asia-Pacific
• South America
• The Middle East and Africa