In order to improve operational efficiency, many companies have chosen to outsource part or all of their logistics activities to third parties. By doing that, company can focus more on its core activities. Green, Turner, Roberts, Nagendra & Wininger (2008) have found out that third-party logistics (3PL) companies typically offer services that cover warehousing, distribution, inventory control, packaging and transportation, such as contracting and procuring transportation procurement, managing inventories, consulting and managing logistics, auditing and consulting freights, tracking and tracing shipments and offering reverse logistics and other value added services.
As disadvantage for 3PL is loss of control in some activities in the supply chain, but it is overcome by the main benefit - 3PL knowledge and expertise in the field.
2.3. Supply Chain Collaboration
In the past few decades companies have been looking into how they could collaborate with their clients and suppliers in order to ensure that the supply chain is efficient and responsive to market current needs (Fawcett & Magnan, 2004; Lejeune & Yakova, 2005). Dependency on each other in the current world market has become that important that one organization cannot reach the required efficiency level alone (Mehrjerdi, 2009). Collaboration consists of developing strategies in which two or more independent external or internal actors with different roles in the supply chain achieve their common aim in a competitive environment. These aims usually cannot be achieved by working separately. (Kumar & Banerjee, 2012). Therefore we can conclude that collaboration in the supply chain is vital to achieve competitive advantage and to improve companies’ processes.
Managing supply chai...
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...mount of value-added services, strategic logistics services and know-how and ability to give advices on innovations and improvements (Bajec & Zanne, 2009). In order to have successful collaborations there should be common goals and objectives for each party involved and the collaboration must be mutually beneficial. Collaboration is based on companies’ willingness to share the information which is related to planning, management, performance etc. (Langley & Capgemini, 2009).
There are several factors that affect and lead to a successful relationship, for example, trust, commitment, openness, shared risks and rewards, communication, understood goals and objective between involved parties. Companies will achieve successful collaboration level if before mentioned characteristics will be taken in mind and implemented in companies’ business lives (Bajec & Zanne, 2009).
The cooperative game theory comes in picture when more than two players in the supply chain come together and form alliances to harness maxim...
The main problem that Excel is confronted with is should the company try to expand into supply chain planning. The main question on the table is does Excel have the ability to complete the entire task in a supply chain from planning to execution? As is, Excel is the largest provider of freight management and contract logistics, and has four teams to accomplish everything they provide. Their four teams include: business development, solutions design, implementation, and operations. With Excel’s great success and achievements in all their past contracts, the company would like to expand into supply chain planning with the help of Haus Mart since they have be in a long standing relationship and already know Haus Mart’s supply chain.
In the 1960s through the 1970s, companies realized strong engineering, design, and manufacturing functions were strong market strategy keys to create and capture customer loyalty. As the demand for new products rose in the 1980s, these market requirements were to increase their flexibility and responsiveness to adapt existing products and processes or to develop new ones in order to meet customer needs. As manufacturing improved in the 1990s, managers began noticing material and service inputs involving suppliers and their major impact on an organization’s ability to meet customer needs. As a result of these changes, organizations now find that it difficult to manage their own organizations. First, they must be involved in the management of their network of all upstream firms that provide directly or indirectly, as well as the network of downstream firms, which are responsible for delivery and market service of the product to the end customer. In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Although there are intrinsic and extrinsic risks that any organization faces. The supply center should begin focusing on the intrinsic factors to improve the SC within their organization because they are a unique organization regarding logistical efforts and the customers they serve. Improving collaboration depends greatly on providing incentives to employees for collaboration efforts, information sharing through both data and information technologies, and fostering business relationships in each
Outsourcing logistics, first of all, help businesses maintain valuable time. By freeing up resources within the organization, the more time can be allocated to focus on core competencies. It is also important to note that it has the necessary resources is no guarantee of success. 3PL providers exist because they have the expertise in providing logistical support and therefore can potentially add value to the supply chain business. Outsourcing to Third Parties Logistics Provider can also create shared responsibility for the
Rao, K., and Young, R. R. (1994) Global supply chains: Factors influencing outsourcing of logistics functions. International journal of physical distribution and logistics management. Vol. 24. No. 6.
It is suggested for any organization to review, reassess any existing supply chain management or any delivery techniques, before developing a new supply chain method so that any exposure to high risk of failure is reduced. Somerset as a company taken advantage of outsourcing and transferred it product manufacturing to China leveraging low cost labor and raw material. The labor cost and other cheap material reduce Somerset overhead cost, but there is always the risk of not delivering product on time due to the foreign country political climate, change in tax and tariff and local
‘Supply chain management integrates supply and demand management within and across companies. It encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, thir- party service providers, and customers’. (Web: Council for Supply Chain Management Pr...
Since mid-90, technology changed procedures for evaluating supplier’s relationships. Before technology, Suppliers relationships used to be an isolated activity disconnected from others companies’ activities highly influenced by conflict of interest. But when technology started to provide accurate data, companies begin the focus on inventory management activities increasing the importance of procurements departments’ evaluation as a way to reduce supply chain cost. With data, procurement can evaluate suppliers and their benefits for the company. In today business environment, the company dilemma is evaluating if the supply chain should be vertical, full outsourced of mix, considering industry maturity impact and price competition (Chopra & Meindl, 2007; Slack & Lewis, 2011).
Quickly becoming apparent after only a few rounds of play was in the absence of coordinating direction the individual supply chain links immediately focused upon acting in their own best interests much more so than the organization as a whole. Whether the end use customer was satisfied became secondary to avoiding stock outages for the next link in the chain, or their specific “upstream customer”. The real world application of this example is that focus on the end use customer must be consistent and maintained throughout the process up to and including delivery. Undoubtedly internal customers, such as retailers to wholesalers and distributors to production, must be serviced along the way for the transaction to ultimately occur. However, unless an end use customer is involved no profit can be realized by anyone.
The third party logistics still have immense demand in the market for producer and other shipping companies due to strong competition between simple logistics firms and dedicated firms. Further there are many reasons for 3PL companies to move towards 4PL market. Suppose increase profitability/returns, competition, value creation, and value added services, low capital investment, customization, and core competencies. Innovation, construct relationship between provider and client, information shearing and performance.
As pointed by Parsons A.L (2002), there was increasing dependent on the relationship and customers is demanding to receive high standard of products and services for them to sustain the business in the intense manufacturing environment. Besides, Xu et al. (2008) has highlighted that supplier is developing a long-term relationship with their crucial suppliers to increase the competitiveness and to establish an effective and efficient supply chain. Trend (2005) also mentioned that work closely in partnership with suppliers is the only way to survive in today’s competitive business environment.
The business environment is increasingly becoming competitive and challenging. In the recent past, manufacturers have found themselves facing the threat of dwindling profit margins due to unfortunate global events such as the 2007 global financial crisis and the on going Europe economic crisis. The need to improve operation efficiency so as to ensure current and future investment yield the highest rate of return has therefore become extremely important. Manufacturers are now actively engaged in, managing their costs, Research and Development, adopting best procurement strategies, among other Actions. While such actions might eventually lead to positive results, additional business value can be achieved through proper management of the supply chain (Waymer, Ivanaj & Mussa 2009; Krivda 2004).
Collaboration Matters. We do our best by working together. We will collaborate in ways that build on our strengths, celebrate our successes, and allow us to face our challenges openly and honestly.
Lee, H. L. (2004, October). The Triple-A Supply Chain. Retrieved April 29, 2014, from ftp.software.ibm.com website: ftp://ftp.software.ibm.com/software/emea/dk/frontlines/Tripple_supply_chain_Havard.pdf