Demand for 4PL services forecast to surpass $104B by end of 2030

“Companies are choosing to make products in different locations, which results in a different flow of freight from various different countries, and that increases complexity, but also the flexibility that companies want to retain in the way that they deploy their global supply chain networks. I think those two are the key reasons why we’ve seen an increase in demand for 4PLs,” Gonzalez said.

While 3PLs can help a company execute its logistics strategy, 4PLs help companies with strategy, orchestration and management of an entire supply chain, according to Gonzalez.

“The biggest difference is that a 4PL doesn’t necessarily have to execute the service themselves,” Gonzalez told FreightWaves in an interview. “A 4PL is about managing the day-to-day transactions and the day-to-day components of a logistics service, either through infrastructure provided by subcontractors or managing other organizations and being able to combine all of those individual notes of service into one end-to-end process.”

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Gonzalez said companies in the automotive supply chain were some of the earliest adopters of 4PL services.

“Automotive have been invested in 4PL for a while, and I think they’re probably one of the first movers in supporting this kind of service when I think it was first created back in the late 1960s, early 1970s, when 4PLs started to actually sort of become evident within our industry,” Gonzalez said.

Other industries that are increasingly looking for 4PL services are pharmaceuticals, energy and consumer products.

“Interestingly, with retailers, we don’t necessarily see significant growth in the retail sector towards 4PLs, but we don’t think that their global supply chains are really less complex than other vertical industries,” Gonzalez said. “I think retailers have been invested in logistics for a very long time, so they’ve almost created this capability internally, rather than have to buy it in from an outside company.”

In 2024, some of the biggest providers of 4PL services include companies like Maersk, DHL, Redwood Logistics, Bridgenet Solutions, C.H. Robinson, DSV and Kuehne + Nagel.

“These companies see 4PL as a value-added component to the service they want to give to the customers,” Gonzalez said. “The differentiator between them and a company that doesn’t own infrastructure is that infrastructure ownership. You can imagine a firm like DHL can leverage their own infrastructure as much as they can manage other people’s infrastructure.”

4PLs should operate from a neutral approach driven by customer value, rather than the 4PLs’ own vested interests, such as the existing network or resource locations and infrastructure leverage, according to the Gartner report.

“Shippers will have different opinions on the degree of neutrality that they want, but I would say even though shippers don’t put a tremendous amount of weight on the need to be neutral, they will always have an element of neutrality included in their 4PL selection processes, whether it’s highly influential or whether it’s not particularly influential,” Gonzalez said.

4PL contracts are typically multiyear and cost millions of dollars.

“I would say on average 4PL contracts would be probably pushing more towards five years than anything less,” Gonzalez said. “You would imagine that they need that longevity to be able to drive some of the value that they’re committed to.”

Shippers partnering with a 4PL have to be comfortable with “the notion of a highly outsourced relationship,” Gonzalez said. “The other thing as well that we always advise customers is, look for the technological benefits that you’re going to get from the 4PL. If the 4PL is just suggesting that they’re going to replace your people with their own people, that doesn’t make for a good 4PL. This is about being able to be more productive, be more efficient, be more integrated, and that requires a strong technological base from the 4PL.”