Was the Term 7PL Simply Made Up by 3PLs?

Executive Summary

• 3pls made some enormous promises, but they were unable to meet these promises.
• 7PL is a fake term created by 3PL providers to undermine the term 4PL.

Introduction

A few years ago the term 4PL was popularized by Accenture. 4PL created the idea of a company that managed outsourced logistics but did not own assets.

A while after the introduction of the 4PL concept, 7PL logistics was then introduced as a concept by 3PL companies.

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7PL Logistics Definition

7Pl logistics is a concept that combines the 3PLs with 4PLs to make what they refer to as “7PLs.”

The advantages of this concept are the following:

“One service provider can now provide a client with both 3PL and 4PL services with a complete 7PL logistics solution to clients and can undertake turnkey projects for its clients where all services and activities are provided for under one roof.” – https://www.chillibreeze.com/articles/logistics-management.asp

This definition is the opposite of 4PL.

There is a major problem with this concept; it simply co-opts the concept of 4PL without adding any value to the concept. It is at its core a “me-too” concept.

How 4PL Was Originally Envisioned

4PL was originally envisioned to intermediate between different 3PLs and different carriers and places it back with the 3PL. 7PL, on the other hand, negates the concept of an asset independent 4PL before the idea has even had a chance in the market. The very reason for the 4PL concept is that 3PLs have been such a disappointment with the actual abilities to lagging the marketing hype.

The Failure of 3PLs to Transform into What Was Envisioned

And what can customers expect from this “new” concept? Clearly, nothing more than they were getting from their 3PL. This is yet another overpromise on the part of entities that like to spend more effort marketing how innovative they are then practicing innovation. To understand why it is critical to comprehend the history of the 3PL market.

What 3PLs Promised

3PLs promised shippers that they were going to receive all types of benefits through having 3PLs manage their freight and in many cases their warehouses.

The 3PLs were supposedly going to invest in all types of information technology that would keep their shippers up to date. What did shippers get? Well, they instead received a glorified carrier or low cost outsource shipping department.

“Many more 3PL arrangements were motivated by reducing the headcount at the shipper than any 3PL would like to admit.

The fact that so many people that work in 3PL are temps (but working full time) mean that it is very hard to obtain certain compensation or tenure statistics in the industry. The industry enjoys this because it makes the industry look more sustainable than it is. All the major names, Schneider Logistics, Ryder, etc.. All use temp agencies to perform work in their warehouses. Their shiny websites with pictures of computers and transportation equipment go hand in hand with labor abuses in their warehouse facilities, labor abuses for which they are not technically responsible, for, as they say, the subcontractor is responsible for the treatment of their temps, not Schneider Logistics. This is why the temp agencies are so important, to act as a legal buffer against any responsibility.

For a while, Dickerson worked according to “piece rate” — she was paid not by the hour but by the trailer — a stressful pay scheme meant to encourage her and her colleagues to work faster and faster, and one that the labor movement worked hard to abolish in many industries in the 20th century. Each paycheck was different than the last, and most of them were disappointingly low, she says. In her year at the warehouse, Dickerson says she never had health benefits, sick days or vacation days. If she didn’t unload containers, she didn’t get paid.” – David Jamison, Huffington Post

“As manufacturing jobs continue to head overseas, Americans need new sectors that can provide good, middle-class work for millions of people. Driven as it is by the consumer economy, the retail supply chain should be one of those sectors. But plenty of workers who are lucky enough to have jobs in the industry find themselves earning poverty wages.” – David Jamison, Huffington Post

The point here is not to criticize 3PLs. That would be a different article.

What 3PLs Actually Provided

The point is to use clues about the activities to 3PLs to determine what is happening Productivity is often linked to compensation. That is they do not add very much value to the supply chain process. Being a low-cost outsourced logistics provider is not what was promised regarding what 3PLs would become.  It is a far cry from the glossy marketing literature on 3PLs.

3PLs more often than not dropped the ball on their information systems implementation, on their integration with carriers, and on their ability to provide “a seamlessly integrated freight network.”

Really, beyond some exceptions here and there, none of this came true. Looking at the 3PLs, it is clear that the focus is very much more on “selling” the idea of 3PL benefits rather really implementing these ideas. Another factor that needs to be raised

Another factor that needs to be increased to the skill level in the 3PLs. Even now 3PLs have far too much lower skilled employees that are better suited to execution tasks rather than planning and strategic tasks. It is not a simple thing to design the solutions that the 3PLs aspire to build.

What is The Actual Usefulness of the 3PL Concept

Currently, the only 3PL that even meets the original definition of a 3PL is UPS. For this reason, it makes sense for the 3PL concept to go away and be replaced by something else. By doing this it is important to properly interpret what undercut the 3PL concept.

My view is that 3PLs were just a marketing term that carriers and outsourced warehouses used to increase the cache of their services. They simply were not interested in building the information system platforms ever to be true 3PLs, and they were unable to interoperate with other carriers and warehousing firms because the industry is overly focused on getting freight to move through their proprietary network.

The Promise of 4PLs

4PLs have much more conceptual logic to them than 3PLs as non-asset-based firms, such as software companies do have the ability to build platforms and do have the ability to work with various carriers and warehouses to stitch together integrated supply chains. However, I doubt it will be consulting companies that will ever be competent in this market, and this was an original idea why Accenture introduced the concept. Accenture can barely implement large systems at clients, much less build a platform and take the entrepreneurial leap to create this market. 4PL is a good idea, but Accenture will never have anything to do with it.

Conclusion

The 7PL logistics concept is not a real concept at all. It is simply propaganda disseminated by 3PLs that think they are best positioned to build virtual supply networks. They want to carry forward the broken promises of 3PL to 7PL logistics and don’t want to miss the boat by being “asset-based.”

The problem is that they are not, and they have had ample opportunity to prove themselves, and have failed to make a go of the 3PL concept in a real way. 3PLs have been hostile to the idea of 3PLs from the beginning. However, creating a false concept is not the way to address the idea of the 4PL.