Logistics Outsourcing and 3pl Challenges

Logistics Outsourcing and 3PL Challenges
Michelle L.F. Cheong Singapore-MIT Alliance, N2-B2C-15, Nanyang Technological University, 50, Nanyang Ave, Singapore 639798

Abstract — Logistics has been an important part of every economy and every business entity. The worldwide trend in globalization has led to many companies outsourcing their logistics function to Third-Party Logistics (3PL) companies, so as to focus on their core competencies. This paper attempts to broadly identify and categorize the challenges faced by 3PL companies and discover potential gaps for future research. Some of the challenges will be related with the experience and information collected from interviews with two 3PL companies. Index Terms — Logistics, Outsourcing, Third-party Logistics, Challenges

provider sits in the middle between the manufacturers or suppliers (the buyers of the 3PL service, known as shippers) and the end customers (the consumers of the products). In this position, the 3PL provider will need to balance the dynamic pulls generated by the upstream and downstream entities, and thus faces challenges which are unique to its operations.

I. INTRODUCTION

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OGISTICS has been an important part of every economy and every business entity. Logistics cost average about 12% of the World’s GDP [1]. In Singapore, logistics cost accounts for about 11% of its GDP [2]. The worldwide trend in globalization has led many companies to outsource their logistics function to Third Party Logistics (3PL) companies, so as to focus on their core competencies. In a recent study [3] conducted by Cap Gemini Ernst & Young US LLC, Georgia Tech and Fedex, involving 400 representatives from North America, Western Europe and Asia Pacific, it is concluded that logistics outsourcing remains a growing business globally. On a smaller scale, Bhatnagar, Sohal and Millen [4] reported that the need for logistics outsourcing is also increasing in Singapore. The overall trend in logistics outsourcing is

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