Logistics Outsourcing
Principles and Advantages of Logistics Outsourcing
In the face of increasingly intensified competition in the emerging globaleconomy, manufacturing and retail firms are progressively turning to outsourcing of their logistics functions.
Outsourcing is a viable business strategy because turning non-core functions over to external suppliers enables companies to leverage their resources, spread risks and concentrate on issues critical to survival and future growth. One way of extending the logistics organization beyond the boundaries of the company is through the use of a third party supplier, or contract logistics services.
One of the most important reasons why companies outsource their logistics functions is the need to decrease the number of warehouses, vehicles and excess inventories and to reduce shrinkage, and labor costs. Such moves bring down fixed and working capital investment., Companies can therefore focus on their core business activities and share the risks.
Most firms direction considerable attention to working more closely with their channel partners, including customers and suppliers, and with various types of logistics suppliers. This has resulted in the development of meaningful relationships among the companies involved in the overall supply chain activity.
Third Party Logistics (3PL)
A third-party logistics (3PL) firm is an external supplier that performs all or part of the company’s logistics functions. The definition encompasses providers of services such as transportation, warehousing, distribution, financial services and so on.
The use of third party logistics providers has grown dramatically over the last several years and has increasingly become an effective way to reduce costsand spread risks for traditional, vertically integrated firms.
The economic advantages of using 3PL suppliers are: * Elimination of infrastructure investments * Access to world-class processes, products, services or technologies * Improved
In the face of increasingly intensified competition in the emerging globaleconomy, manufacturing and retail firms are progressively turning to outsourcing of their logistics functions.
Outsourcing is a viable business strategy because turning non-core functions over to external suppliers enables companies to leverage their resources, spread risks and concentrate on issues critical to survival and future growth. One way of extending the logistics organization beyond the boundaries of the company is through the use of a third party supplier, or contract logistics services.
One of the most important reasons why companies outsource their logistics functions is the need to decrease the number of warehouses, vehicles and excess inventories and to reduce shrinkage, and labor costs. Such moves bring down fixed and working capital investment., Companies can therefore focus on their core business activities and share the risks.
Most firms direction considerable attention to working more closely with their channel partners, including customers and suppliers, and with various types of logistics suppliers. This has resulted in the development of meaningful relationships among the companies involved in the overall supply chain activity.
Third Party Logistics (3PL)
A third-party logistics (3PL) firm is an external supplier that performs all or part of the company’s logistics functions. The definition encompasses providers of services such as transportation, warehousing, distribution, financial services and so on.
The use of third party logistics providers has grown dramatically over the last several years and has increasingly become an effective way to reduce costsand spread risks for traditional, vertically integrated firms.
The economic advantages of using 3PL suppliers are: * Elimination of infrastructure investments * Access to world-class processes, products, services or technologies * Improved
Links: between the components As services are customer-centered, the strategy, systems and people in the operations of service should also focus on the customer. Customers’ expectations are central to the design of service strategy of the firm. The line linking customer to people (service providers) signifies that people are extremely important in producing and delivering services to the customer. The customer to systems link shows that the service operations/delivery system should also be designed with the customer in mind. The strategy to system link means that the systems and procedures should follow from the service strategy. The systems should support the strategy. The strategy to people link means that all the service providers (people in the service organization) should be well aware of the organization’s strategy. The system to people link means that the service operations system and procedures should be people-friendly. The only criterion that counts in evaluating a service quality is defined by the customers. Only customers can judge quality. All other judgments are essentially irrelevant.