C. John Langley Jr., Ph.D. (jlangley@psu.edu) is Professor of Supply Chain Management at Penn State University’s Smeal College of Business and the Department of Supply Chain and Information Systems, and Founder of the “Annual Third-Party Logistics Study.”
The markets that logistics service providers (LSPs) serve are changing rapidly. (For a summary of some of the key trends and changes, see the associated sidebar.) In response, both users and providers have been on a relentless drive for innovation and for expansion of available logistics capabilities. As a result, third-party logistics providers (3PL) and fourth-party logistics providers (4PL) have been making significant additions to the range and scope of services that they offer to shippers and other customers.
The evolving roles of LSPs
As the term “supply chain” continues to advance, there have been noticeable changes in many of the terminologies that are used to define various types of logistics service providers. Some of the most widely recognized of these are summarized below.
It is generally accepted that the term “third-party logistics provider” came into being in the 1970s and 1980s. It’s not a coincidence that this timeframe coincides with the legislated deregulation of several transportation sectors in the United States, such as trucking (less-than-truckload and truckload), rail, and air. The deregulated business environment expanded opportunities for logistics service providers to become more market- and customer-focused and created more incentives for LSPs to craft service offerings that better fit their customers’ logistics and supply chain needs.
In response to customer requests and in pursuit of new market opportunities, 3PLs embarked on expansions of their business models beyond what may have been the more limited province of asset-based services. While there are still some identifiable “pure-play” 3PLs, most of today’s 3PL organizations represent an outgrowth and expansion of logistics services from more traditional providers of asset-based logistics services. A quick internet search will validate the large numbers of organizations that operate in the 3PL category. New entrants continue to emerge from former logistics divisions of shipper organizations, wholesalers and distributors, IT organizations, and various international enterprises, to name just a few.
In 1996, Accenture invented and trademarked the term “fourth-party logistics” (4PL) provider to describe “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 solution.” Many of these 4PLs are extensions of more traditional LSP organizations, while others have evolved from consulting organizations, firms specializing in data management and analytics, and former logistics divisions of shipper organizations.
In comparison with 3PLs, it is interesting to note that an internet search for 4PL organizations does not turn up much in the way of organized or comprehensive listings of primary participants in this sector. A logical explanation is that this is due to the significant breadth and diversity of the types of services available in general from 4PLs such as lead logistics provider (LLP), consulting/advisory services, advanced IT services, risk management, “control tower” services, and others.
LLP responsibilities are particularly interesting as they require 4PLs to use their high levels of visibility, real-time information, communication abilities, and broad knowledge to align 3PLs, customers, and service providers. A 4PL not only draws on the data it collects itself, it also can draw on data gathered from other supply chain partners. The visibility that is created from that data plays a crucial role in allowing customers and 4PLs to provide seamless supply chain services, manage exceptions, and remove costs and inefficiencies from the supply chain.
Now, some logistics service providers are expanding their offerings to offer the following innovative capabilities:
Develop and implement best possible supply chains or networks,
Plan, design, and implement complete logistics solutions,
Manage networks of supply chains,
Provide linkages to e-business,
Implement logistics solutions and technologies, and
Aggregate demand from 3PLs into more efficient volumes for lower rates.
These innovations and offerings are frequently accompanied by the introduction of a newer term: “5PL.” At face value, these example 5PL capabilities may appear to be similar to those that may be ascribed to many 4PLs. So, a logical next question is: What exactly is a 5PL, and how does it differ from a 3PL and a 4PL? More generally, where in the lexicon of LSPs does the 5PL exist, and how is it unique and different from other types of LSPs? Or, is it perhaps too soon to expect a more succinct and widely agreed upon definition of a 5PL?
The future evolution of LSPs also will be impacted by the current trend toward thinking of supply chains as “ecosystems” instead of linear systems or processes. (See Figure 1.) Essentially, supply chains are evolving into complex international networks that include interlinked companies that interact and collaborate with each other to ultimately create value for their end-user customers or consumers. In addition to including traditional supply chain participants such as suppliers, manufacturers, and distributors, these ecosystems are characterized by the alignment and convergence of digital and physical flows via the internet of things, sensing devices, blockchain, and overall digitization of the supply chain. As this new and innovative context for supply chain continues to gain acceptance, there will be significant opportunities for LSPs to respond and participate accordingly.
Logistics service providers and their clients are facing some very significant changes in their supply chain environments. Just a few of those include:
• “Blurring” of definitions. Over time, the distinctions between terms such as less-than-truckload (LTL), truckload (TL), and parcel have blurred or, in some instances, disappeared. In the past, these terms were suitable descriptors of specific types of “pure-play” service providers, but today most organizations have materially broadened the scope of their service offerings.
• Asset- vs. nonasset-based services. Historically, the predominant model for LSPs was the “asset-based” model where the provider served its customers through use of its own assets and services. In recent decades, however, there has been significant growth and development of “nonasset-based” LSPs that rely on relationships with capable asset-based providers to serve their customers. Even though there are a growing number of products that have become digitized or otherwise electronically transformed (such as books, music, software, and 3D-printed parts and products), most supply chains still depend on capable asset-based services to manage the logistical flows of physical products.
• Greatly enhanced supply chain technologies. Supply chain practices have been greatly impacted by newer technologies such as cloud-based solutions, software-as-a-service (SaaS) platforms, advanced analytics, and 5G broadband networks. Findings from annual 3PL studies conducted by Penn State, Infosys, and Penske confirm that shippers overwhelmingly agree that information technologies are necessary elements of 3PL expertise.
• The “Amazon effect.” While there are many ways to define this term, it is clear that the presence of Amazon and the overall growth of the omnichannel phenomenon have had disruptive impacts on more traditional supply chains. In turn, this has created a need for individual LSPs to reconsider their operating strategies and to make appropriate changes.
• COVID-19. Regrettably, any discussion of the future of supply chains and the roles of 3PLs and 4PLs must consider the impacts of COVID-19. As the effects of this pandemic have become significantly intertwined with global economic and political issues, it is certain that there will be long-lasting and likely fundamental changes ahead for supply chains.
Business software vendor Cleo has acquired DataTrans Solutions, a cloud-based procurement automation and EDI solutions provider, saying the move enhances Cleo’s supply chain orchestration with new procurement automation capabilities.
According to Chicago-based Cleo, the acquisition comes as companies increasingly look to digitalize their procurement processes, instead of relying on inefficient and expensive manual approaches.
By buying Texas-based DataTrans, Cleo said it will gain an expanded ability to help businesses streamline procurement, optimize working capital, and strengthen supplier relationships. Specifically, by integrating DTS’s procurement automation capabilities, Cleo will be able to provide businesses with solutions including: a supplier EDI & testing portal; web EDI & PDF digitization; and supplier scorecarding & performance tracking.
“Cleo’s vision is to deliver true supply chain orchestration by bridging the gap between planning and execution,” Cleo President and CEO Mahesh Rajasekharan said in a release. “With DTS’s technology embedded into CIC, we’re empowering procurement teams to reduce costs, improve efficiency, and minimize supply chain risks—all through automation.”
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.
Even as a last-minute deal today appeared to delay the tariff on Mexico, that deal is set to last only one month, and tariffs on the other two countries are still set to go into effect at midnight tonight.
Once new U.S. tariffs go into effect, those other countries are widely expected to respond with retaliatory tariffs of their own on U.S. exports, that would reduce demand for U.S. and manufacturing goods. In the context of that unpredictable business landscape, many U.S. business groups have been pressuring the White House to pull back from the new policy.
Here is a sampling of the reaction to the tariff plan by the U.S. business community:
American Association of Port Authorities (AAPA)
“Tariffs are taxes,” AAPA President and CEO Cary Davis said in a release. “Though the port industry supports President Trump’s efforts to combat the flow of illicit drugs, tariffs will slow down our supply chains, tax American businesses, and increase costs for hard-working citizens. Instead, we call on the Administration and Congress to thoughtfully pursue alternatives to achieving these policy goals and exempt items critical to national security from tariffs, including port equipment.”
Retail Industry Leaders Association (RILA)
“We understand the president is working toward an agreement. The leaders of all four nations should come together and work to reach a deal before Feb. 4 because enacting broad-based tariffs will be disruptive to the U.S. economy,” Michael Hanson, RILA’s Senior Executive Vice President of Public Affairs, said in a release. “The American people are counting on President Trump to grow the U.S. economy and lower inflation, and broad-based tariffs will put that at risk.”
National Association of Manufacturers (NAM)
“Manufacturers understand the need to deal with any sort of crisis that involves illicit drugs crossing our border, and we hope the three countries can come together quickly to confront this challenge,” NAM President and CEO Jay Timmons said in a release. “However, with essential tax reforms left on the cutting room floor by the last Congress and the Biden administration, manufacturers are already facing mounting cost pressures. A 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally. The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs. These businesses—employing millions of American workers—will face significant disruptions. Ultimately, manufacturers will bear the brunt of these tariffs, undermining our ability to sell our products at a competitive price and putting American jobs at risk.”
American Apparel & Footwear Association (AAFA)
“Widespread tariff actions on Mexico, Canada, and China announced this evening will inject massive costs into our inflation-weary economy while exposing us to a damaging tit-for-tat tariff war that will harm key export markets that U.S. farmers and manufacturers need,” Steve Lamar, AAFA’s president and CEO, said in a release. “We should be forging deeper collaboration with our free trade agreement partners, not taking actions that call into question the very foundation of that partnership."
Healthcare Distribution Alliance (HDA)
“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress. Distributors and generic manufacturers and cannot absorb the rising costs of broad tariffs. It is worth noting that distributors operate on low profit margins — 0.3 percent. As a result, the U.S. will likely see new and worsened shortages of important medications and the costs will be passed down to payers and patients, including those in the Medicare and Medicaid programs,” the group said in a statement.
National Retail Federation (NRF)
“We support the Trump administration’s goal of strengthening trade relationships and creating fair and favorable terms for America,” NRF Executive Vice President of Government Relations David French said in a release. “But imposing steep tariffs on three of our closest trading partners is a serious step. We strongly encourage all parties to continue negotiating to find solutions that will strengthen trade relationships and avoid shifting the costs of shared policy failures onto the backs of American families, workers and small businesses.”
In a statement, DCA airport officials said they would open the facility again today for flights after planes were grounded for more than 12 hours. “Reagan National airport will resume flight operations at 11:00am. All airport roads and terminals are open. Some flights have been delayed or cancelled, so passengers are encouraged to check with their airline for specific flight information,” the facility said in a social media post.
An investigation into the cause of the crash is now underway, being led by the National Transportation Safety Board (NTSB) and assisted by the Federal Aviation Administration (FAA). Neither agency had released additional information yet today.
First responders say nearly 70 people may have died in the crash, including all 60 passengers and four crew on the American Airlines flight and three soldiers in the military helicopter after both aircraft appeared to explode upon impact and fall into the Potomac River.
Editor's note:This article was revised on February 3.
GE Vernova today said it plans to invest nearly $600 million in its U.S. factories and facilities over the next two years to support its energy businesses, which make equipment for generating electricity through gas power, grid, nuclear, and onshore wind.
The company was created just nine months ago as a spin-off from its parent corporation, General Electric, with a mission to meet surging global electricity demands. That move created a company with some 18,000 workers across 50 states in the U.S., with 18 U.S. manufacturing facilities and its global headquarters located in Massachusetts. GE Vernova’s technology helps produce approximately 25% of the world’s energy and is currently deployed in more than 140 countries.
The new investments – expected to create approximately 1,500 new U.S. jobs – will help drive U.S. energy affordability, national security, and competitiveness, and enable the American manufacturing footprint needed to support expanding global exports, the company said. They follow more than $167 million in funding in 2024 across a range of GE Vernova sites, helping create more than 1,120 jobs. And following a forecast that worldwide energy needs are on pace to double, GE Vernova is also planning a $9 billion cumulative global capex and R&D investment plan through 2028.
The new investments include:
almost $300 million in support of its Gas Power business and build-out of capacity to make heavy duty gas turbines, for facilities in Greenville, SC, Schenectady, NY, Parsippany, NJ, and Bangor, ME.
nearly $20 million to expand capacity at its Grid Solutions facilities in Charleroi, PA, which manufactures switchgear, and Clearwater, FL, which produces capacitors and instrument transformers.
more than $50 million to enhance safety, quality and productivity at its Wilmington, NC-based GE Hitachi nuclear business and to launch its next generation nuclear fuel design.
nearly $100 million in its manufacturing facilities at U.S. onshore wind factories in Pensacola, FL, Schenectady, NY and Grand Forks, ND, and its remanufacturing facilities in Amarillo, TX.
more than $10 million in its Pittsburgh, PA facility to expand capabilities across its Electrification segment, adding U.S. manufacturing capacity to support the U.S. grid, and demand for solar and energy storage
almost $100 million for its energy innovation research hub, the Advanced Research Center in Niskayuna, NY, to strengthen the center’s electrification and carbon efforts, enable continued recruitment of top-tier talent, and push forward innovative technologies, including $15 million for Generative Artificial Intelligence (AI) work.
“These investments represent our serious commitment and responsibility as the leading energy manufacturer in the United States to help meet America’s and the world’s accelerating energy demand,” Scott Strazik, CEO of GE Vernova, said in a release. “These strategic investments and the jobs they create aim to both help our customers meet the doubling of demand and accelerate American innovation and technology development to boost the country’s energy security and global competitiveness.”