Stakeholder Advantages of a 3pl

Topics: Supply chain management, Logistics, Third-party logistics Pages: 10 (4031 words) Published: March 19, 2009
{draw:a} Executive Summary: Logistics outsourcing can make a significant contribution to the competitive advantage and profitability of a company through its role in reducing costs and improving customer service, promoting company growth and shareholder value. In a country such as South Africa, where companies are under increasing pressure from both customers and shareholders to improve performance, and where the growth strategy is aimed at exports, logistics outsourcing can have an important impact. The main purpose of this assignment has therefore been to investigate the advantages that accrue to stakeholders when outsourcing logistics practices to third party logistics providers (3PL) and a discussion follows as to other value adding services that 3PL organisations can provide. Table of Contents: Introduction: According to the CLM (Council of Logistics Management), logistics is that part of the supply chain process that plans, implements and controls the effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customer’s requirements. For many companies, logistics represents a strategic competitive advantage due to the gains from operational efficiency such as reducing costs and improving communications; innovation; revenue generation through increased productivity; and customer satisfaction through improved service. Effective logistics management is able to provide a major source of competitive advantage to a company by ensuring that it is able to continuously respond faster, more effectively and efficiently than competitors, to customer requirements. Management need to understand their internal costs, market, core business and identify the business’s core competencies before deciding to outsource a function. The risks involved must be given due analysis. Companies are under tremendous pressure to cut costs, and improve customer service and company profitability. One of the ways to achieve the above mentioned is to outsource non-core areas. For a firm or supply chain to gain competitive advantage over rivals it must perform some combination of value chain activities more efficiently or in uniquely differentiated ways that rivals won’t be able to imitate easily. The key issues for 3PL providers is to, “help their clients achieve reliability levels which will enable inventory cost savings or to increase transparency throughout the supply chain so as to enable their customer companies to meet or exceed the rising expectations for customer service,” (Coltmana,2008). There are many advantages of outsourcing and many different reasons to embark on such an initiative. These include areas such as: cost reduction, customer service improvement, increased competitive advantage and company profitability, as well as the opportunity to focus on the company’s core competence and to expand its markets. Many companies also find that due to a lack of internal expertise and capability, they are obliged to outsource certain functions. It has been found according to Gilley and Rasheed (cited in Lewis, 2006) that outsourcing the logistics function to a 3PL is positively related to firm performance for organisations that follow a cost leadership strategy and negatively for organisations that follow a differentiation strategy. The 3PL industry is relatively easy to enter and exit and consists of several different kinds of 3PL firms. According to, the types of 3PL’s today are: Standard 3PL provider {text:list-item} Service developer {text:list-item} The customer adapter {text:list-item} The customer developer {text:list-item} Non Asset-based Logistics Providers {text:list-item} This assignment has identified that in managing the supply chain with strategic outsourcing relationships (3PL) there are a number of driving factors that lead to this...
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