Fourth-Party Logistics Environmental Compliance Management: Investment and Logistics Audit

Abstract

To manage the environmental impact of logistics, we considered a logistics service supply chain consisting of a fourth-party logistics company (4PL) and a third-party logistics company (3PL), where the 4PL deputed the 3PL with the logistics tasks of a client. We examined the investment and pricing strategies adopted by the 4PL for the 3PL, and how factors such as logistics audits level and commitment to investment efforts affected the motivation of the 4PL’s strategy choice. The results showed that if the investment cost was low, the 4PL motivated the 3PL to make efforts by investment. Otherwise, the 4PL incentivized the 3PL by providing a high wholesale price or using a high investment level and medium wholesale price. In addition, when the rectification costs of the 3PL were sufficiently high, increasing the audit level could improve the probability of complying with environmental regulations.