Five years ago, I wrote a column in this magazine about the emergence of "4PLs"—or fourth-party logistics companies. The term "4PL," which has since been trademarked by my company, Accenture (formerly Andersen Consulting), was new at that time. It was based on the idea that achieving a supply chain transformation required capabilities that went well beyond effective transportation and warehouse management—the traditional strengths of third-party logistics companies, or 3PLs. Specifically, the 4PL concept held that deep information technology skills and deeper analytical skills were required in order to achieve supply chain leadership.

Those information technology skills included the ability to provide visibility across the supply chain, more effective supply chain planning and optimization functionality, and effective execution systems. Required analytical skills included the ability to develop new business models and supply chain physical architectures, and to redesign the way they operated.

I also challenged 3PLs to look beyond their own capabilities and assets when designing solutions for their clients. I proposed that combining the skills of 3PLs with those of consulting firms—thus creating the new "4PLs"—could allow them to develop more robust solutions for their clients. It also would create business environments in which continuous improvement and adjustments to cost structures, supply/demand patterns, and other factors could become an integral part of their service offerings.

Over the last five years, 3PLs have made significant advancements in their capabilities. Many—although not all—have deepened their information technology skills and service offerings, and are now providing more complete solutions for their customers (see the accompanying chart). Others have extended their analytical capabilities and are able to create more robust supply chain solutions for their customers.

Although there is still a clear opportunity for 4PLs to expand their influence in the market because of the depth and breadth of their capabilities, certain 3PLs have narrowed the gap between them. This healthy competitive environment will challenge all service providers to create more valuable and enduring solutions for their customers.

William C. Copacino is managing partner of the Global Supply Chain Practice at Accenture (formerly Andersen Consulting). A frequent speaker before business and professional groups, Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Accenture's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.