18. What is the role and functions of supply chain intermediaries?

Supply chain intermediaries at the very basic level are organizations which provide support, using their own assets and resources, on behalf of other companies. Having these intermediaries available is beneficial for shippers, allowing companies to focus on core competencies without having to deal with transportation and logistical issues.

Intermediaries perform (выполнять) functions as transportation, warehousing, consolidation, distribution, preparing the necessary paperwork, packaging, labeling and marking the goods and etc.

For example, intermediaries can save time and money for their customers by consolidating shipments together.

19. Identify a value-added evolution of individual logistical intermediaries? What are their duties? ( identify them individually)¹

A Value-added Evolution of Supply Chain Intermediaries

Custom Broker  Freight Forwarder 3PL 4PL5PL

Custom Broker

There has been a gradual evolution in the role for custom brokers. Duties that custom brokers provide its customer:

• Obtaining the release of imports

• Payment of applicable duty fees

• Obtaining, preparing the necessary documents and information

• Maintaining records

• Responding to any concerns after Payment

Where brokers simply arrange import and export documentations relating to Customs

clearance, freight forwarders additionally arrange services for transportation and

delivery of goods

Freight Forwarder

The basic duties of a freight forwarder are listed below:

• Negotiating and arranging the best method of transport for product to get to the target market.

• Coordinating the movement of goods to their destination.

• Preparing the necessary paperwork.

• Providing advice on packing, labeling and marking of goods

These firms can either act as an agent or as a transportation intermediary. “As agents,

forwarders simply arrange the services for a fee that includes an additional charge to the amount paid out on behalf of their clients. When acting as a transportation intermediary, the forwarder purchases cargo space on specific routes for a fixed price, which is resold to shippers.”

The greater capacity to provide services that a forwarder has over a custom broker is apparent. In essence, freight forwarders can remove the complexities of international shipping requirements from their customer while adding value by arranging the most cost efficient route for transportation. Freight forwarders can save

time and money for their customers by consolidating shipments together.  The active nature of the economy and the ongoing focus on cost savings meant that to be competitive these intermediaries and customers had to adjust further. With international trade, overseas outsourcing and globalization, companies, especially larger, dominant players, realized the importance of focusing on the movement of their products. These companies wanted more services at the lowest cost. Thus, some logistical intermediaries evolved to be able to offer virtually all functions of the supply chain to their customers. This resulted in the development of third‐party logistics providers.

Third‐Party Logistics Provider (3PL)

Many articles have been written on the importance of the third‐party logistics provider

(3PL) and how its services can contribute to a firm’s bottom line. With this in mind, the

3PL can possibly be the most widely used logistical intermediary in today’s economy.

While custom brokers and freight forwarders are still very important and prevalent in

today’s supply chain economy, it is the 3PL providers who are growing at the greatest

rate. The duties of the typical 3PL:

• Same duties as freight forwarder, but provides additional logistics services as well.

• Additional services include, but are not limited to, storage, cross‐docking, and distribution.

• Track shipments on behalf of customer.   

3PLs are described and characterized in many different ways. The following examples

are some of the more common interpretations. The Council of Supply Chain

Management Professionals defines the 3PL as “a firm which provides multiple logistics

services for use by customers. Preferably, these services are integrated, or “bundled”

together by the provider.

The fourth‐party logistics provider (4PL) and the fifth‐party logistics provider (5PL) are

the current terms hovering around the supply chain industry. These have similarities to

the 3PL, but also have major distinctions.

Fourth‐Party Logistics Provider (4PL)

The fourth‐party logistics provider (4PL) is not unlike the 3PL in that there seems to be

no general definition of it in the business world. However, there are real differences

between the 4PL and 3PL. Many articles describe it as a “lead logistics integrator” or a

“lead logistics provider” and that it is in some ways, depending on the opinion, superior

to the 3PL. Duties.

• Same duties as third‐party logistics provider, but is more strategic in nature.

• Focused on management and improvement of customer’s supply chain.  

The problem with using a 4PL:

• Loss of control. “You lose visibility in daily activities. You no longer own the

data.”

• Lack of expertise in house. “Many companies reduce logistics staff to bare

bones and cannot properly manage the outsourced relationship.”

• Head‐butting. “In many outsourced relationships, there is constant

disagreement over the interpretation of metrics.”

• Risk associated with long‐term partnerships. “Itʹs difficult to change partners

or bring the function back in house. Most companies donʹt begin outsourcing

with an exit strategy.”

Fifth‐Party Logistics Provider (5PL)

The next step in the evolution is the 5PL, or fifth‐party logistics provider. Information

related to 5PL’s is limited. 5PLs focus on technology. Similar to 4PLs, 5PLs do not have

physical assets and are focused on the strategic management of the supply chain, but are focused more on technology and information in their operations

Duties:

• Utilizes technologies to manage the supply chain and implement logistics solutions

• Strategic supply chain management focus