Leasing activity among logistics providers in the Greater Los Angeles, Orange County and Inland Empire region increased 37% by square footage from 2013 to 2017, and 2018 is on track to exceed last year. The chart to the right demonstrates the increase in gross leasing activity by logistics companies over the past five years. A new type of logistics service emerged as the most active user, driven by changing competition. Long-standing third-party logistics providers, or 3PLs, have transformed into fourth-party logistics, combining elements of warehousing, distribution and transportation management to fulfill online orders.
What does 4PL mean for the region’s industrial sector? Adding 4PL capabilities fosters a collaborative relationship among a market’s logistics providers, allowing improvement of efficiencies and profits. 3PLs are leveraging services by 4PL providers to benefit clients, reducing shipping costs and helping coordinate supply-chain logistics, ultimately resulting in faster and more seamless deliveries to consumers.
In Southern California, 4PL service providers work in a few different ways. In a single interface between the client and multiple logistics service providers, an e-commerce giant can position itself as a 4PL provider by using its shopping engine and supply-chain services. It can fulfill orders for clients and partner with other providers to manage an end-to-end supply chain and deliver goods the same day or next.
In another scenario, a leading 3PL company can offer 4PL services via proprietary software, offering efficient and innovative solutions to reduce cost, maximize throughput and shorten delivery times. Another 4PL provider might combine key functions, and a 3PL company could act as a separate partner in a long-term contract between the primary client and one or more partners.
For shippers and e-commerce companies, 4PLs offer the ability to work smarter and more efficiently without the increased cost of purchasing services from multiple logistics service firms. The rise of 4PL services is projected to speed up in coming years in response to the increase of online purchases and higher consumer expectations putting pressure on supply chains.
— Analysis by CBRE Group Inc.
