Certified Supply Chain Professional (CSCP) Practice Exam

What is a primary risk associated with utilizing a 4PL?

1. Loss of operational control over functions

2. Improved decision-making on contracts

3. Increased efficiency in logistics

4. Reduction in overall logistics costs

The correct answer is: Loss of operational control over functions

Utilizing a fourth-party logistics provider (4PL) significantly impacts the control a company has over its logistics operations. This model involves outsourcing the management of the entire supply chain to a service provider that can integrate all logistics-related tasks, which can lead to a loss of operational control. Companies often rely on the 4PL to handle not just logistics but also coordination with multiple other service providers, which may result in less visibility and direct influence over logistical decisions and processes. With a 4PL, the company’s reliance shifts from managing logistics in-house to depending on the expertise and capabilities of the provider. This can create a sense of distance from day-to-day operational decisions, which may hinder a company’s ability to react quickly to changes or issues that arise in the supply chain. In contrast, the other options mentioned—improved decision-making on contracts, increased efficiency in logistics, and reduction in overall logistics costs—are generally seen as potential benefits of utilizing a 4PL rather than risks. Thus, the primary risk of losing operational control is a valid and significant concern when entering into such partnerships.