Uber Freight bets on European 4PL services, as distinction with 3PL blurs
Uber Freight is stepping up investment in its European 4PL business, despite acknowledging that shippers increasingly care less about whether their logistics provider is labelled a 3PL or 4PL.
The company yesterday announced plans to expand its European fourth-party logistics operation, investing in technology, operations, and staff, and adding a second location, with a new control tower and operations hub in Krakow to open next year.
It has also appointed Mike Doucleff as head of Europe, affective 28 September.
Uber Freight said the number of new 4PL deals it won in Europe doubled last year, and it sees further opportunities among North American customers looking to reduce the number of logistics partners they use globally.
The investment comes as Uber Freight's wider business has returned to top-line growth, although it remains loss-making. Freight revenue jumped 25% year on year, to $1.58bn, in the second quarter, while the division reported a $24m operating loss.
But it remains committed to the European expansion. Uber Freight is investing further resources to managed transportation and 4PL, while its overall freight division is still working towards sustainable profitability.
Its first 4PL engagement, designed to span North America and Europe, is with chemicals manufacturer OXEA, covering transportation in the US, Canada, Mexico, and Europe.
Uber Freight's European 4PL operation was inherited through its acquisition of Transplace, and is separate from the European freight brokerage business it sold in 2020.
However, the expansion comes amid an increasingly blurred distinction between the traditional roles of 3PLs and 4PLs - something the company itself acknowledges.
"We're seeing the lines blur," a spokesperson told The Loadstar.
"Customers don't necessarily think about their problems as '3PL' or '4PL' - they're looking for partners that can solve more of their transportation needs and help them manage increasingly complex networks."
Indeed, 30% of Uber Freight customers now use two or more of its services, up from 24% last year, while more than 80% of its large managed transportation customers have also used its capacity solutions.
"The label matters less to the customer than the outcome," the spokesperson added.
It marks an interesting tension in Uber Freight's strategy: its European expansion is being explicitly marketed as growth of its 4PL business, while its wider proposition increasingly combines elements traditionally associated with both 3PL and 4PL services.
Just a week before announcing the European expansion, Uber Freight began promoting Gartner research entitled 3PL & 4PL: How to Combine for the Best Logistics Outsourcing Model, which, rather than presenting 3PL and 4PL as an either/or decision, examines how shippers can combine the two outsourcing models as their supply chains become more complex.
That commercial blurring can, however, create legal and contractual questions.
Matthew Gore, partner at law firm HFW, said there was already considerable confusion over the nature and scope of 3PL and 4PL roles.
"Broadly, 3PL means acting as carrier/principal, and 4PL is acting as control tower/agent," he explained.
"What also gets confusing is when the same LSP provides both services, particularly if this is done under the same contract, and with the same legal entity - flagging the neutrality/ethical walls issues we see."
Mr Gore said 4PL remained predominantly the preserve of larger shippers with high volumes and complex supply chains, and these companies often retained responsibility for deciding which 3PLs received particular volumes, leaving the 4PL to manage those allocations.
He also noted a wider trend towards shippers seeking to bundle logistics services, and LSPs offering them, under the same contracts.
Uber Freight stressed that it did not currently operate a freight brokerage business in Europe, and that carrier and capacity decisions made through its European 4PL operation were based on customer requirements, including service, cost, performance, and network needs.
But the picture is more complicated for global customers. Some European 4PL customers may also use Uber Freight brokerage or other transport services in North America.
The company said customers were not required to use its own capacity as part of a 4PL relationship, and that it had "operational firewalls" to govern how sensitive customer information was accessed and used.
That question could become increasingly pertinent as Uber Freight seeks to sell more services to the same customers - particularly given that more than 80% of its large managed transportation customers already also use its capacity solutions.
The company's European investment is, in part, predicated on that: extending relationships with North American customers into Europe, while offering them the prospect of managing more of their global transportation through fewer logistics partners.
