By Clifford F. Lynch
A few weeks ago, as part of a supply chain course I teach at a local
university, I decided to introduce the class to the wonderful world of logistics
service providers. Almost immediately, we got bogged down in definitions. As an
experiment, I asked the 16 students to come back the next week with a definition
for "3PL," "4PL" and "LLP." They were allowed to
get these from any person or written source they cared to, except the class
textbook. The results: Five variations for "3PL," seven for
"4PL," and general confusion about what an LLP might be (except for
the three students who defined it as a "limited liability
Later that week at a meeting of managers from a logistics service provider, I
asked a similar question. And although the managers were able to agree on a
definition for "3PL," when it came to "4PL" and "LLP,"
they were even more confused than the students.
The term "3PL" was first used in the early 1970s to identify
intermodal marketing companies (IMCs) in transportation contracts. Up to that
point, contracts for transportation had featured only two parties, the shipper
and the carrier. When IMCs entered the picture – as intermediaries that
accepted shipments from the shippers and tendered them to the rail carriers –
they became the third party to the contract, the 3PL. But over the years, that
definition has broadened to the point where these days, every company that
offers some kind of logistics service for hire calls itself a 3PL.
The term "4PL" has generated even more confusion. The term is
generally considered to have been introduced by Accenture, which registered it
as a trademark in 1996. Accenture described the 4PL (or fourth-party logistics
provider) as an integrator, but today consultants, software companies and even
3PLs lay claim to being a 4PL. (And if Accenture decided to pursue every company
that called itself a 4PL in violation of its trademark, no courthouse would be
large enough to contain all the litigants.)
The term LLP, or lead logistics provider, is probably the most transparent of
the three. As the name suggests, a lead logistics provider "takes the
lead" in providing some functions and subcontracting for others while
providing one central control point. But wait, isn’t that a 4PL?
By now, you’ve gotten the idea. We desperately need some standard
definitions. If it were up to me, I’d adopt the definition of "3PL"
found in the Council of Supply Chain Management Professionals’ glossary, which
reads as follows:
"A firm [that] provides multiple logistics services for use by
customers. Preferably, these services are integrated, or "bundled"
together, by the provider. Among the services… [3PLs] provide are
transportation, warehousing, cross-docking, inventory management, packaging,
and freight forwarding."
Since the CSCMP definitions get a little fuzzy on 4PL/LLP, I’d suggest
using Accenture’s definition of 4PL, as follows:
"A supply chain integrator that assembles and manages the resources,
capabilities, and technology of its own organization with those of
complementary service providers to deliver a comprehensive supply chain
As for the LLP, I would suggest the following:
"An LLP (lead logistics provider) serves as the client’s primary
supply chain management provider, defining processes and managing the
provision and integration of logistics services through its own organization
and those of its subcontractors."
Of course, it’s also true that the whole semantic nightmare would disappear
if we simply dispensed with the "3," the "4" and the
"L." If we just called the company what it is – i.e., a logistics
service provider – the relationship would be clear. And for those who like
acronyms, "LSP" neither assaults the ear nor twists the tongue.
Personally, I’m not all that concerned how we define the terms – as long as
we all do it the same way.