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Governance of Supply Chains

Exploring New
in the Logistics Industry:
The Intermediation
Role of 4PL
François Fulconis Networking strategies continue to develop in most industries. They lead
Assistant Professor, manufacturing and/or retailing firms to specialize in a few core
University of Avignon & Pays de Vaucluse,
CRET-LOG & PRATIC competences and to become “brokers” who entrust external partners with peripheral activity management. This is one of the explanations for
the rise of logistics service providers (LSPs), described in all modern
Laurence Saglietto
textbooks dealing with supply chain management. Very recently, a new
Assistant Professor,
University of Nice Sophia-Antipolis, trend has emerged in Western countries: Some LSPs are becoming
GREDEG brokers, capable of organizing supply chain networks thanks to their
perfect command of information systems. The LSPs called fourth-party
Gilles Paché logistics (4PL) have taken control of the intermediation function,
Professor, positioning themselves at the heart of the networked economy. The use
University of Montpellier I, of the conceptual framework “transactional center” helps to better
ERFI & CRET-LOG understand 4PL governance, and more generally the evolution of the
logistics industry.

Over the past few years, logistics Among the various types of LSP
service providers (LSPs) have present in the market, a specific
become players whose role is category holds particular attention.
Supply Chain Forum
An International Journal
essential in explaining and This is the totally dematerialized
anticipating supply chain LSP, which, without any physical
© Copyright Bordeaux Business School
governance in most of the Western means, develops a customized
ISSN print 1625-8312
ISSN online1624-6039 countries. They are indeed supply for its customers by
omnipresent in product flow mobilizing resources and resorting
management, from supplier to different partners, then making
factories to store shelves, including sure of its consistency thanks to a
assembly units. The most efficient total control of information flows.
LSPs are far from restricting These LSPs are called by the
themselves to activities of consultancy company Accenture
transport and handling of finished “fourth-party logistics” (4PL), and
goods. On the contrary, they have their business is to design and sell
broadened their value-added global supply chain solutions
services, undertaking activities of coordinating the activities of
shelf display, of site installation, of carriers, storage operators,
Acknowledgements co-manufacturing, and of wrapping subcontractors, packaging companies,
The authors would like to express or co-packing (Roques & Michrafy, and other elements of the supply
their gratitude to Angel Diaz, as guest editor, 2003). This evolution has become chain. Quite obviously, the
and two anonymous reviewers of
well known and given rise to in- emergence of 4PL is a radical
Supply Chain Forum:
An International Journal for depth descriptive approaches in change in the LSP role within a
their valuable comments most of the textbooks intended for network organization. Indeed, it is
on a preliminary draft of this article. MBA students. no longer a matter of a mere

Supply Chain Forum An International Journal Vol. 7 - N°2 - 2006 68

Governance of Supply Chains

logistical support, based on an specialize in a reduced core and tools. Faced with the recent
expertise in flow management. On of activities and that entrust growth of the LSP trade, however, a
the contrary, 4PL are developing a other firms with the management radical change in the LSP’s role
capacity for bringing competences #of complementary activities seems to be conceivable in the
together that, when combined, (including logistics). Sometimes, it medium term. For the past three
constitute the backbone of the is even possible to identify hollow years, we have tried to assess this
network organization. It is corporations, without any physical change on the basis of four case
henceforth possible to talk about a assets, which market products studies carried out in the European
new kind of intermediation mission, designed, manufactured, packaged, logistics industry.
which increasingly makes 4PL and distributed exclusively by a
systematically resemble network of partners. Thus, Methodological Framework
“transactional centers” as Gille networking reveals a dual
(1997) sees them. structure: The research program undertaken
by the authors aims at setting up an
The rise in power of 4PL • The network core consisting of a original method of analysis of
emphasizes the emergence of a firm running the entire system. It network organizations within a
network model that is has been designated by such supply chain management (SCM)
progressively replacing a supply terms as broker (Miles & Snow, structure. It tries to describe and
chain-type linear model (Gille, 1997; 1986), hub firm (Jarillo, 1993), or explain network governance
Nassimbeni, 2004). In other words, strategic center (Lorenzoni & through the interpretations given
the B2B exchange relationships Baden-Fuller, 1995). by the network members. The
now correspond to an inter- survey was carried out among
connection of networks in which firms belonging to the
the main function is to know how to
4PL are developing a manufacturing, retailing, and
monitor interfaces between supply logistics industry; in the present
chain players efficiently. For a
capacity for bringing article, we will use only information
long time, numerous observers competences together obtained from firms within the
have considered that primarily logistics industry. The research
manufacturers, and to a lesser that, when combined, program grants a special status to
extent wholesalers and large understanding the strategies
retailers, were capable of playing constitute the involved; the foreseeable nature of
this part. That is probably not true the knowledge is subjective and
any more, insofar as the 4PL seem backbone of the contextual (Thiétart, 2001). The
to be well-equipped to develop an investigation is based on a
intermediation activity as well. The network organization. qualitative approach, creating case
line of arguments follows three studies that permit the gathering
stages. In the first part, we will and collection of rich empirical
show that some LSPs find the • A relational space of quasi- data:
means to become network integration composed of
organization “brokers,” using “satellite” firms, situated above • The qualitative approach. Three
examples stemming from our field and below the network core reasons justify this choice. First,
studies. It will then be possible to within the same value chain the research program is
describe in the second part the (Miles & Snow, 1986; Fréry, 1998). exploratory. It does not try to
4PL, a peculiar element of the These satellite firms specialize in identify economic laws but
logistics industry, as an manufacturing a component, in instead tries to make a
interorganizational information selling a product, in carrying out phenomenon intelligible. Second,
system (IOS) player. In the third logistical services, and so forth. the central question refers to the
part, we will conclude by referring “how,” more specifically how
to the “transactional center” model The broker’s role is first and network members cooperate on a
to give an original conceptual foremost to manage a value chain. day-to-day basis once they have
framework explaining 4PL Fréry (1998:71) points out that “it decided to do so and have
governance. globally plays the same part as the implemented coordination
management of an integrated firm mechanisms to obtain a result.
The LSP at the Heart of as regards its operational functions Third, in epistemological terms,
Networking Strategies except that these are assigned to the objective is to have a better
financially autonomous firms.” In understanding of the studied
One cannot understand the recent such a vision of network phenomenon; hence, it is
evolution of the logistics industry organizations, LSPs have only the essential to conduct fieldwork
without referring to the networking role of satellites in charge of (Pettigrew, 1997).
strategies implemented since the carrying out logistical operations
1980s. Indeed, LSPs work nowadays for the broker, which is supposed • The research method. According
on behalf of manufacturing and/or to regulate all the flows using to Yin (1994:13), “a case study is
retailing firms that have chosen to specific techniques, procedures, an empirical inquiry that

Supply Chain Forum An International Journal Vol. 7 - N°2 - 2006 69

Governance of Supply Chains

investigates a contemporary four, on several on-site visits management)? What kinds of

phenomenon within its real-life organized by the key informants. investments are made to improve
context, especially when the The construct validity relies on the interface management (specific
boundaries between phenomenon multiplicity of data sources (a large investments vs. standardized
and context are not clearly number of key informants hold investments)?
evident.” It is noteworthy that several positions in several
case studies are nowadays locations) and on a review of a draft • The third topic deals with the way
considered to be a particularly of the research results, carried out LSP trade is widening toward the
relevant research method in the by these key informants. Finally, specific functions of 4PL: Is it a
analysis of interorganizational external validity relies partly on the strategy currently under way
issues in logistics and SCM (Ojala fact that the LSPs studied are and, if so, at which stage is the
& Hilmola, 2003). involved in a large technical and LSP? What are the difficulties
cultural range of supply chains. All encountered in the process, in
• Data collection and analysis. the precautions taken during the technical, commercial, and
Gathering data can be divided case studies lead to results of a human terms? What are the new
into two phases: a first one to scientific nature, that is, results competences required to become
identify the supply chain that can be repeated, can be an efficient 4PL, notably
members and a second to meet generalized, and are cumulative. concerning interorganizational
many key informants (top information systems (IOS)?
managers from marketing, sales, The sample is made up of four
and logistics departments). Two European LSPs, all of them having The Emergence of 4PL
primary methods of gathering international activities. They were
data were used: individual semi- investigated over a period of three What conclusions can be drawn
directive interviews, lasting years. Two LSPs agreed to be from the survey carried out over
between 45 and 90 minutes, were named: Groupe Norbert the course of three years? Through
the main source, followed by Dentressangle (GND) and Geodis. the function of flow monitoring, the
studies of internal documents The two other LSPs preferred to LSP is no longer an underling but a
and press reviews as remain anonymous because they coordinator in charge of managing
complementary sources. Content are currently undergoing large- the supply chain completely. It
analysis was then applied to the scale strategic reorganizations. The must be able to advise the
empirical data collected, same interview protocol was used customer, choose the software
following the recommendations for each of the four LSPs. It is based solutions suited to each supply
of Miles & Huberman (1994). on open-ended questions on three chain function, integrate them, and
complementary topics discussed run them together. These functions
The research was carried out with the key informants: could make it a real “competence
following the basic rules used assembler” within network
traditionally in interview preparation • The first topic concerns supply organizations. Let us consider the
and result assessment. First, chain structuring in which the case of an LSP working for several
concerning interview preparation, LSP plays a part: What are the customers and imagine that it is in
we made the necessary checks to main business processes, a given supply chain, such as the
make sure of the way the main management components, and automotive supply chain. For
concepts were perceived by the key members of supply chains, example, the information it has
informants interviewed so as to according to the meaning given about this supply chain could lead
obtain their “critical feedback” on by Cooper, Lambert & Pagh it to put in touch two firms in order
the conceptual analysis. The aim (1997)? What are the dominant to deliver their own customers at
was to avoid any mix-up during the types of relationships between the same time. This is what
formulation and explanation of the the supply chain members Michelin (tire manufacturer) and
logistical strategies currently (cooperation vs. arm’s-length Exside (battery manufacturer) are
implemented by their firm. As a competition)? What flow testing out in the Benelux countries
basic requirement, we checked the monitoring procedures have through the intermediary of an LSP.
exactness of the phenomenon been implemented to improve Thus, the LSP makes sure that the
studied (4PL development) with supply chain efficiency? basis of its future as a broker is
the concepts used to define it in the solid because its action permits it
interview guide, in order to reach • The second topic deals with to generate a specific investment
appropriate external validity. managing the relationships network that is based on a critical
between the LSP and its clients: resource: information.
Second, concerning result assessment, How long do outsourcing
the points reported by Ellram contracts last, and to which A good illustration of this trend is
(1996) were used. The reliability is specific activities do they apply? the development strategies
more specifically based on How are technical and implemented recently by many
systematically reviewing the commercial interfaces managed firms with some LSPs that the
internal documents mentioned between the supply chain consultancy company Eurostaf
above and, in three cases out of members (key account considers as 4PL. Among them,

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Governance of Supply Chains

Geodis, established in Romania developing, and since 2003 solution built from the integrated
since 1996, has been chosen by it has taken responsibility for capabilities and resources of its
Metro, a German cash-and-carry the operations of logistical partners” (Bedeman, 2001:13). The
specialist, to carry out its postponement provided by SFR to emergence of 4PL is perfectly in
optimized logistics. It won the its customers. GND says that line with the strategic model
logistical outsourcing contract in nowadays, it considers itself to be prevailing for about 20 years, the
2004, to the detriment of Dietrich, an organizer of flows and of one of external resource
Metro’s former Austrian LSP. The information system in the global management and coordination
outsourcing contract makes it clear value chain. Thus, as, in a few rather than the previous one of
that Geodis is in charge of years, it has acquired a real vertical integration (Levet, 2004).
implementing a cross-docking competitive advantage and a This coordination requires a
system of storage and delivery, as true expertise regarding the “leader” who put partners with
well as of providing a logistical management of interfaces in embedded competences in contact
service able to rationalize Metro’s radiotelephony, the LSP, which so as to create the best conditions
global supply chain in Romania. In remains only a mere satellite for the in which the supply chain can
order to reach this goal, Geodis moment, has favorably positioned operate.
focuses on the management of two itself to become a network broker
kinds of flows: (a) a flow of in the future. As Tran (2004) says, one of the
household electrical and hi-fi main challenges of academic
products coming from Asia and The examples of Geodis and of GND research related to management
Eastern countries and (b) a flow of clearly show that some LSPs turn and industrial organization is to
convenience goods from domestic out to be true 4PLs, according to wonder about the identity of this
suppliers. At the same time, it the definition of Accenture (see leader, capable of choosing and
subcontracts the transport to Table 1), and hold an important implementing the suitable tools for
about 20 local companies. Thus, position in the current a perfect monitoring of operations
Geodis is becoming an essential reorganization of supply chains. A (e.g., electronic marketplaces). It
partner for Metro, which leans on 4PL can indeed be likened to a would be a fatal error to consider
its competences to support its coordinating agency (or hub firm) that only manufacturers have the
international development strategy. that “need not have any specific means and competences necessary
Its success in Romania is crucial resources, capabilities or to play the role of hub firm. On the
because that is not only a country technology itself, so long as it has contrary, according to Tran (2004),
where the retailing sector is the ability to analyze the client’s supply chains are characterized by
structuring very quickly also is a requirements and take contractual a high degree of “plasticity”; that is,
real platform to the other central responsibility for delivering to the they split up and re-form quickly,
and eastern European countries. client an optimized supply chain under the pressure of dynamic new
Studying the relationships between
the French radiotelephony Table 1
company SFR and GND, its LSP 4PL: The Four Key Elements According to Accenture
since 1997, is also very instructive. (adapted from Christopher, 2005)
In charge of product warehousing
and transport (which it
subcontracts to Jet Service), GND
has in a short time coordinated the
activities between the company,
the mobile phone manufacturers,
(Ericsson, Nokia, Motorola, etc.)
and the distributors (Espaces SFR,
Carrefour, etc.). In this process, it
has implemented a dedicated
logistics to provide top-quality
services. Since then, it has been
constantly strengthening its role in
the functions of design, of
coordination, and of control of the
network created on SFR’s initiative.
GND focuses on activities that have
few good substitutes and that
create value for the company, such
as studying, designing, carrying
out, and organizing the supply
chain network. Following an SCM
approach, it has kept on

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Governance of Supply Chains

entrants. These hub firms draw on do so, we will turn back to and carries out risk management
their command of information academic literature in the field of requiring a high level of trust
systems to make connections IOS; this will help us better between its members. In the end,
easier and to manage interfaces understand the informational the 4PL represents an elaborated
between partners, which are dimension of the hub function form of outsourcing, one in which it
manifestly some of 4PLs’ main managed by LSPs. is no longer in charge of the
know-how. Can we conclude that physical distribution of a product
they will be new entrants in the Intermediation Perspective but runs the global supply chain
brokerage market Tran (2004) talks and carries out an activity of
about? In a general sense, intermediation planning and coordinating the flow
is an economic process that of information. It thus provides an
4PL: From Intermediation consists of finding, among all the engineering service, giving advice
to Info-Mediation different products and services, the about flow organization and
one that best meets customers’ management (see Figure 1).
The evolution of LSP trade needs. It is provided by mediators
highlights the fact that the offerings or middlemen—players able to A 4PL can be considered as the
of these logistics specialists has detect the suitable components to representative of a new category of
recently become wider and richer. design an attractive offer, at the players who act as an interface
A 4PL can be in charge of running same time minimizing transaction between producers, distributors,
part or all of the supply chain and costs (Dang Nguyen, 1999; Volle, designers, and carriers. Because
can have a single customer and 1999; Vidal & Lacroux, 2000). they do not have any physical
work in one sector. Even if its According to Hackett (1992), means to manufacture logistical
definition has still not been intermediation can be carried out services (neither trucks nor
determined, this designation by two categories of mediators: (a) warehouses or other assets), their
comprises entities dedicated to “merchants,” who buy and then sell role can be reduced to that of a
managing physical and information goods according to a process kind of logistical consultant having
flows, LSPs set up exclusively for facilitating exchanges between the to manage logistical flows and
one customer, or even “no asset buyer and the supplier, whose choose the most appropriate
companies” (NAC)—that is, remuneration is a fee linked to the means for its customers. As such, it
companies without material assets incremental surplus; and (b) is a necessary intermediary that
that link together all the players in “brokers,” who also facilitate does not depend upon haulage or
a single supply chain. From a exchanges between buyers and warehousing companies, for
technical point of view, Kivinen & suppliers, but without buying or example, but which selects those
Lukka’s (2002) contribution gives a selling goods, and whose that provide the best price, the best
rather exhaustive picture of 4PL remuneration depends on the reactivity, and the best service.
activities and categories.1 It more outcome of the transaction.2 The Thus, a 4PL’s customers have less,
particularly lays stress on the 4PL first category corresponds to or even no, direct contact with the
considered as a point of interface in marketmakers, and the second one
companies, which, in the end, carry
supply chain networks, one that corresponds to matchmakers. Each
out the logistical operations. In
mobilizes various value-added of them refers to particular forms of
brief, logistical excellence
logistical support services in this exchange management according
definitely becomes the key element
aim. to the information gathering, the
of the transaction efficiency; to
negotiation process, and the
reach it, the mediator must both
The NAC corresponds unquestionably performance monitoring (Baritaux,
obtain specific information, among
to the most complex and 2005).
clients and among suppliers, and
accomplished form of 4PL; it can be
be able to mobilize quality
considered as the result of a The matchmaker intermediation
logistical assets (Dang Nguyen,
networking strategy similar to the can be likened to 4PL. An
one implemented by some intermediation cost is an initial cost
manufacturers (Miles & Snow, 1986; that results from experience
It is worth noting that it is mainly
Lorenzoni & Baden-Fuller, 1995; (design, negotiations, specification
Fulconis, 2004). In our analysis, we large firms that resort to 4PL
of contracts, and operating
put the emphasis on the latter. This methods) and from development because they absolutely need to
brings out the new 4PL’s role an expenses (organization and monitor their flow on an
intermediation specialist that implementation of projects
creates value by managing dedicated to customers). In 1. Kivinen & Lukka (2002) notably draw a dis-
information and tends to play the concrete terms, a 4PL can manage tinction between the pure 4PL (the conventio-
role of transactional center. The the commodity purchases, nal LSP that has features from 4PL) and the
conventional LSP/4PL, which also sells manu-
objective of the second part of this payment to suppliers, negotiation facturing services.
article is to set up a framework in of the contracts with LSPs, and just- 2. The merchants correspond to the definition
order to analyze recent changes in in-time delivery for a customer. It is of “broker” given by Miles & Snow (1986).
Hackett’s (1992) broker definition follows on
LSPs as they come out in the four then considered a crossroad at the the previous one but is more oriented toward
case studies referred to earlier. To heart of the network organization IOS.

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Governance of Supply Chains

systems, 4PLs develop tracing

Figure 1
processes (memorizing flows
The 4PL as Part of the Logistics Engineering Process
from the point of origin to the
point of destination) and tracking
processes (real-time location of
products in the supply chain), as
well as segmentation strategies
enabling a customized response
to customers’ expectations (co-
packing and co-manufacturing,
spatial postponement, etc.).

• The infoculture. The 4PLs take

part in the broadcasting of
common standards and the
implantation of logistical
services across several supply
chains: Controlling legal and
regulatory activities linked to
international scale and they resort information, taking the shape of flow management, but also
to several means of transport customized groupwares (internal carrying out administrative
(road, sea, and air), all the more so and external). The groupwares duties and customs formalities,
concerning handling and create electronic links between the taking into account exchange
warehousing. That is why logistical organizations and supply some rate risks, dealing with disputes,
outsourcing has been chosen support for interorganizational and so on.
recently by many manufacturers processes. These supports bring
and large retailers during their together the means • The info-mediation. Obviously,
acquisitions, mergers, and joint (“infrastructure”) and rules the 4PL mediator role tends to be
ventures. The 4PLs enable them to (“infostructure”) enabling the strengthened nowadays by SCM
take up the multiple challenges of companies, which have access to software package development
carry through common projects as dedicated to optimizing and
globalization, thereby avoiding the
long as they obey the customs running flows in order to improve
difficulties of incompatibility and
(“infoculture”) (Bressand & Distler, the planning of the supply chain
functioning variety of the supply
1995). network.
chains. It is therefore in this area
that 4PLs have found a
In the framework of network The 4PLs therefore are involved in a
development opportunity as
organizations, it is then possible to governance based both on the
mediators and in which, step by
hypothesize that 4PLs, through management of knowledge and on a
step, they have acquired a real
their role of mediator, gather the “specialization of architectural
legitimacy. To meet the challenge, it
three main IOS dimensions, to competences” that gives them a
is fundamental to establish
which we will add that of “info- nodal position in network
coordination and communication
mediation,” which is more organizations and, to a larger
across all the different service
specifically dedicated to extent, in the value creation
providers, geographies, time zones, process. It is indeed possible to
coordinating logistical operations
and business units. compare brokers to network
along the supply chain:
architects who, thanks to the
Info-Mediation Perspective • The infrastructure. To increase informational links established
their bargaining power, 4PLs between firms, “actively design,
To fulfill the mediator mission, 4PLs develop some barriers to entry build, and maintain transactional
create electronic links between the based on expertise in managing networks through their own
supply chain members. They base relationships and in carrying out strategic and profit-driven
the development of their activity on transactions (supply of an activities” (Pollock, Porak & Wade,
three key elements: (a) enlarged range of services, 2004:51). Generally speaking, 4PLs
consultancy, (b) logistical flow generating partners’ loyalty and doubtless can be considered as
monitoring (physical and above all increasing switching costs). network architects, as their
informational flows), and (c) According to Bakos & Treacy efficient functioning directly refers
dedicated software development. (1986), this practice, commonly to broadcasting an important mass
From this point of view, a 4PL’s used by IOS, relies on significant of information and knowledge. It is
intermediation activities can be investments in information therefore not at all surprising to see
likened to those of IOS (Choudhury, systems. that vendor-managed inventory
1991). We must bear in mind that (VMI) services in particular have
IOS enable, in real time, viewing • The infostructure. Relying on been developed by 4PLs over the
supply and demand and exchange sophisticated computerized past few years. Whenever a

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Governance of Supply Chains

manufacturer or a large retailer order sales, the retailing industry, whereas an electronic marketplace
uses the VMI technique, it entrusts and banking and insurance is merely in charge of putting
the management of its inventories companies. The emergence of players in contact and of giving
to a partner who then not only transactional centers has many its technical support to the
makes an accurate forecast but also elements in common with that of bargaining.
implements the logistical the 4PL, particularly concerning
capacities to meet the demand the relocation of the place where Even if they cannot be totally
forecast. In brief, an efficient VMI is power is exercised within likened to electronic marketplaces,
first and foremost an “informational industries. Indeed, by trying to we believe that 4PLs can be
process” requiring real-time develop an identity of competence considered as the supports of
visibility at the inventory level in assembler, 4PLs clearly are standard exchange, referring to
the supply chain. This is what 4PLs attempting to acquire an expertise Choudhury’s (1991) typology.
have managed to have, thanks to that leads them to widening their LSPs’ information systems have
their investments in information field of intervention in supply actually evolved from proprietary
systems. chains. The expert power refers exchanges, which are specific to a
here to the seminal work of French LSP but cannot be shared with a
Taking a leaf out of Tran & Zmiro’s & Raven (1959): It is derived from community of companies, toward
(2005) recent analysis of info- knowledge (or the perception of the standard exchange, which is
mediation features, it becomes knowledge) that one of the also called “electronic brokerage”
possible to state that 4PLs members of the network by Sheombar (1992). In that precise
probably are changing from a organization attributes to another case, the 4PL enables participants,
“relational mediator” status to a in some given area. buyers or sellers, to exchange
“transactional mediator” status. A information about all the activities
relational mediator only provides By appropriating the new of the supply chain. In fact, it is
to different stakeholders technological tools and combining possible to say that the information
information relating to the them with more conventional system has turned into an
environment of a transaction, or of means, 4PLs provide a more information analysis system. The
a succession of transactions, but informational orientation. They aim larger the number of partners
without actually concluding those at basing the string of logistical connected to the transactional
transactions. On the other hand, a decisions on an electronic center, the richer the information,
transactional mediator circulates management of transactions, the more precise the management
logistical and commercial implementing interfaces to connect of activities, and the more efficient
information essential for the the management systems of the the optimization of the different
transaction achievement and thus various members of the network flows (see Figure 2).
is in an ideal position to identify organization. Because the services
both the characteristics of a provided by 4PL are highly Briefly, the transactional center
product or service and the best customized, they increase the model, as illustrated in Figure 2,
possible partners. This privileged interdependence between the places the 4PL at the heart of
position enables the transactional partners, thanks to common information flows between
mediator to carry out a matching informational and organizational producers or distributors and
activity, which is unquestionably standards. According to the IOS transport companies. Of course, by
one of the hub firm’s core conventional nomenclature, definition, this is where the 4PL is
competences. By becoming a however, 4PLs are not strictly supposed to be. It is essential to
transactional mediator, or speaking electronic marketplaces understand that this new vision of
transactional center according to with universal standards. Indeed, reality brings to light a profound
Gille’s (1997) terminology, will the two main characteristics break in supply chain governance.
4PL completely change the distinguish one from the other: Indeed, our four case studies
evolution of the logistics industry? clearly reveal that LSPs, by turning
• In their intermediation function, into 4PLs, are acquiring much
The “Transactional Center” 4PLs bind their responsibility by wider responsibilities in terms of
Model making a firm commitment, flow monitoring. When a producer
whereas the electronic or a distributor resorts to a
According to Gille (1997), marketplace can be considered conventional LSP, it wants to
transactional centers are defined as as passive: It facilitates contacts remain in control of some of the
organizations able to manage a but, unlike the 4PL, it does not data, notably marketing data,
large number of complex take part in the choice of which it considers to be “strategic.”
transactions that are nested, stakeholders. In this case, the conventional LSP is
staggered in time and space, and just an underling who receives only
highly customized. Such centers • In their transactional center the technical data necessary to
are at the heart of the electronic function, 4PLs display their carry out the various logistical
management of many companies informational means to monitor activities for which it is in charge
functioning in a network pattern flows within the supply chain (transport, handling, stock
since the 1990s, notably in mail involving several companies, management, etc.). On the

Supply Chain Forum An International Journal Vol. 7 - N°2 - 2006 74

Governance of Supply Chains

allows them to stabilize the supply

Figure 2
chains over time, while the 4PL, as
The 4PL as Part of the Logistics Engineering Process
a dematerialized firm, can remodel
its service offer in a short time, but
then is totally dependent on the
external environment and on its
rapid changes.

Thus, a key informant from the

marketing department of one of the
two LSPs that preferred to remain
anonymous told us that his firm
decided not to become a 4PL for
the agri-food supply chains in 2005;
the top management had been very
hesitant on this matter for two
years. Indeed, the tracking and
tracing constraints have become so
restrictive, as a means of avoiding
health crisis development, that
governing too large a number of
supply chain players is now
extremely risky. The LSP would
rather retain the control of
contrary, when it turns into a 4PL, sectors, however, are also part of logistical assets complying with ISO
the LSP becomes a kind of 4PLs’ means to reveal their standards (more than 20
information hub that has access to trustworthiness (Visser, Konrad & warehouses), and it presents this
all strategic information so that it Salden, 2004). option to its main clients as an
can improve supply chain absolute guarantee of reliability. It
performance (sales in outlets, This is the reason why obviously would be necessary to
promotion campaign planning, interdependence does not imply persevere in this path to know
production runs, etc.). the absence of any arm’s-length which contextual factors would
competition. Indeed, if the help to better understand why
That is the reason why all the key technological advances developed some conventional LSPs have
informants we met stressed a by the 4PL are invaluable to adopted a 4PL approach while
crucial point: The reliability of the network organizations in many others have not.
mediations made by 4PL is based supply chains, it seems that the
on the trust partners have in the dependence of suppliers, To sum up, we think that the
mediator’s honesty and efficiency. producers, distributors, and acquisition of 4PL legitimacy as a
Benda (2003) puts special designers on 4PLs, the true experts broker (network architect) is linked
emphasis on that point, in the management of interfaces, is to a close correlation between two
distinguishing the ex ante becoming stronger. This leads to an phenomena: (a) the numerous
transaction from the ex post essential question: Will the 4PL be logistical outsourcing operations
transaction. Before carrying out the able to play the role of hub firm in involving 4PL prevent
transaction, the mediator will make the long term without misusing its manufacturers and large retailers
sure of the credentials of the status, a phenomenon that already from backtracking, and (b) the
various stakeholders (in this case, has taken place, for example, with 4PLs’ development of value-added
producers and distributors on one the global distribution system of services have led them to being
hand, and transport organizations the airline industry (Saglietto, more and more often “entrenched”
on the other), as well as the quality 2002)? Keeping in mind that pure in network organizations. This
of their products and services. 4PLs are totally dematerialized, this legitimacy is based on four key
After carrying out the transaction, could one day become a handicap factors: intermediation, switching
the mediator will accept bearing when 4PLs interact or compete and coordination between the
the commercial and financial risks with members of the network different players, market regulation
by implementing rigorous organization, some of whom, and “fluidification,” and value-
insurance and control mechanisms. having invested in important added creation. Without a doubt,
From this point of view, it is clear assets, might be able to take the 4PLs’ know-how has created
that trust in the 4PL as point of control of the hub function. That is irreversible changes in processes
interface is notably due to the probably why some conventional of governance of network
information system quality and LSPs partially turn into 4PLs, organizations. This phenomenon is
transparency. Investing in a good maintaining powerful logistical expected to spread worldwide as
track record and reputation and infrastructures (warehouses, European borders progressively
specializing in certain activities and handling equipments, etc.). This open up to foreign LSPs.

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Governance of Supply Chains

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52. Nice Sophia-Antipolis, France. She is a
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la recherche et de l’innovation, organizations, supply chain management, e-
Université Paris Dauphine.
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