Cited in the 2022 3PL Peak Season Playbook, Gartner research shows that 61% of respondents in the logistics and warehousing industry say technology is a source of competitive advantage in supply chain operations. This is further reinforced by increased spending in automation—both physical in the form of robotics and digital in the form of software—with sources expecting the warehouse automation market to reach $41 billion by 2027, at a CAGR of 15% between 2022 and 2027.
The digital transformation of the supply chain is well underway, and this investment in technology is only one aspect of the changes occurring in logistics and the global economy at large. With the help of new technology infrastructures, third-party logistics (3PL) warehouses can form integrated networks called 4PLs (fourth-party logistics) that coordinate large-scale logistics operations for a manufacturer, brand, or retailer using advanced order routing, computing, and automation.
In the wider economy, the “union between physical assets and advanced digital technologies” in manufacturing, warehousing, and beyond characterizes the Fourth Industrial Revolution, also known as Industry 4.0.
What is Industry 4.0?
Industry 4.0 is a term publicly introduced by the German Government in 2011 at the Hannover Fair and coined to promote the computerization of manufacturing.
Everyone is familiar with the original Industrial Revolution (Industry 1.0) from the 18th century, when steam power allowed the first mechanized factories to exist, but your high school may have glossed over subsequent iterations of the Industrial Revolution that have brought us to Industry 4.0 in the last decade.
To keep it brief, Industry 2.0 is the period between 1871 and 1914 when electrical power and mass assembly lines began revolutionizing manufacturing. Industry 3.0, also known as the Digital Revolution, started in the 1970s with computers, automated production, robotics, and IT systems. Industry 4.0 is still an aspiration for the future of industrial systems, and many operations are still working in the realm of Industry 3.0.
So what differentiates Industry 3.0 and Industry 4.0 if we are still seeing both in today’s economy? Industry 4.0 is even more intelligent and connected, utilizing technologies like 3D printing, the Internet of Things (IoT), artificial intelligence (AI), various robotics technologies including drones and autonomous vehicles, cloud computing, etcetera.
There are four main components to Industry 4.0: interconnection, information transparency, technical assistance, and decentralized decisions. These tenets build off each other. Interconnection refers to the ability of machines and people to communicate with each other via the IoT or Internet of People (IoP), which enables information transparency. This technological architecture and visibility then give technical assistance to human operators by assisting in comprehensive decision-making. It also allows for decentralized decision-making where the tech system makes decisions on its own.
In short, Machine Metrics defines Industry 4.0 as “an all-encompassing term to refer to the way computers, data and automation are evolving and coming together to change the way work happens, and in particular, manufacturing.” But Industry 4.0 extends beyond manufacturing; the enmeshing of physical systems and digital technologies also applies to warehousing, especially with the rise of 4PL providers.
Industry 4.0 and Logistics
The move away from error-prone, paper-based processes in the warehouse in favor of digital systems like warehouse management system (WMS) software that enable digitally automated workflows is an obvious example of Industry 4.0’s influence in warehousing and logistics. But Industry 4.0’s emphasis on transparency and operating large-scale systems with advanced technology very strongly manifests itself in the rise of 4PL networks.
According to Supply Chain Dive, a 4PL not only manages transportation, warehousing, and distribution like a 3PL but also other complex supply chain operations “including carriers, warehouses, reverse logistics and more, breaking down silos and providing end-to-end visibility and transparency.”
Whereas 3PL providers are singular nodes in the supply chain, 4PLs stitch together 3PLs to integrate, synchronize, and automate whole supply chains for manufacturers, brands, and retailers across geographically distributed networks. In many ways, 4PLs are an evolution of traditional 3PL services.
4PLs offer a one-stop, big-picture view of a brand’s supply chain operations by intelligently routing orders to 3PLs within the 4PL network based on factors such as inventory availability, proximity to end consumers, weather delays, and more. A critical factor in the rise of 4PLs has been the drive to cut final-mile delivery costs through distributing inventory and orders across the network with the help of digital automation.
Operating on this scale—4PLs often span the entire country but are sometimes multi-national—requires a substantial tech infrastructure that blends advanced tech and computing with physical assets, much like Industry 4.0. Traditionally, creating a 4PL involved significant investment in the advanced technology that would oversee the whole network, which has proven cost prohibitive for many 3PLs looking to evolve their services.
However, with Extensiv Network Manager, 3PLs that already use Extensiv 3PL Warehouse Manager can work together to create 4PL networks with the technology already in place and based on the WMS they are already using. Now, Extensiv 3PL Warehouse Manager customers can expand their geographic reach, increase service offerings, and improve SLAs to compete at scale without the massive upfront costs of investing in a more bespoke technological framework necessary for 4PL offerings.
The reliance on advanced tech will only become more crucial over the next decade to remain competitive both within and outside warehousing and logistics services. 4PLs are not only the future of logistics, but they are also a part of the wave of the future of how Industry operates as an example of Industry 4.0.
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