Logistic Outsourcing

Topics: Supply chain management, Logistics, Supply chain Pages: 12 (3920 words) Published: March 23, 2013
Impact of Outsourcing Logistics Levels on Logistics Service Performance Mr. Zaryab Sheikh (Corresponding Author) Email: justzaryab@gmail.com Ms. Shafaq Rana Email: shafaq_rana@hotmail.com Mr. Samiullah Email: sami.mgt@gmail.com Ms. Sadia Umar Email: sadiaumar@ciitlahore.edu.pk Address: Department of Management Sciences, COMSATS Institute of Information Technology, Lahore, Pakistan ABSTRACT The contemporary dynamic business environment is characterized by the short life span of the products due to high frequency of introducing new products in market. It has become a daunting challenge for the companies to introduce differentiated products to meet the customer demands using supply chain management as its objective is to share resources, line up goals and join up forces across company borders. Outsourcing of different levels of logistics plays vital role to make the logistics operations more efficient and has greater impact on performance of logistics service. The analytical portion of this article was done with the help of various theories of outsourcing, levels of logistics activities, impact of logistics service performance. Key words: outsourcing, levels of logistics activities, impact of logistics outsourcing, logistics service performance. 1. INTRODUCTION The study is based on the concepts related to the outsourcing and levels of logistic activities in the logistics service performance. In the current dynamic era which is described by market volatility, cycle times, constant change, and demand to reduce costs and attached with the globalization trend has drive the rising need to outsource the business operations (D’Aveni, Canger, and Doyle, 1995). The return on assets of user’s firm can be improved by outsourcing. Returns can be improved significantly through outsourcing by decreasing the not- insignificant investments in material handling, order picking, warehouse facilities, and information technology and transportation equipment. According to Stuckey and White (1993) a firm has to decide that what kind of activities they have to obtain from a third party provider “outsource” and what kind of activities they have to vertically incorporate and execute using internal resources “insource”. Gilley et al., (2004a) and Jian et al., (2006); Power et al., (2006) states that innovativeness and cost efficient has been positively influenced by outsourcing of non major business respectively whereas Salimath et al., 2008 state its impact on logistical flexibility and profitability by (Power et al., 2006) respectively. The process of controlling and implementing the cost effective and efficient storage and flow of in process stock, raw materials, finished goods and related knowledge for the purpose of confirming to customer necessities from origin point to utilization point is called logistics (Van Goor et al., 2003). Activities related to logistics ranges from execution activities to planning activities can be outsourced, such as (Level 1) warehousing and transportation, (Level 2) activities of value addition, (Level 3) activities related to planning and control and (Level 4) total outsourcing or distribution network management (Dapiran et al., 1996 and Wilding and Juriado, 2004).


The decisions to entirely or partially outsource activities are generally analyzed within a buy or make decision frame work that assesses the standing trade-off between the inefficiencies of internal production and the transaction costs of market activities. Logistics creates value in a cost effective way by helping customers delivery needs (Stank et al., 2003). According to Bowersox and Closs (1996), the service performance of logistics evaluates a supplier’s capability to deliver required goods at an acceptable cost and within the desired delivery time frame consistently. In today’s organizations, the process of taking the decisions for the entire delivery of services and products in the function of marketing with a vision to minimize cost and...
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