Logistics and Supply Chain Management
Table of Contents
Introduction and Background
1.0 Executive Summary
The globalisation of markets has increased customer demand and product differentiation. Higher quality products and shorter delivery times are essential for maintaining customer satisfaction in highly competitive markets like the consumer electronics industry. Consequently, supply chain management is an important process in all businesses, and if managed effectively, can give companies a competitive edge. However, it often requires a lot of time and resources. Businesses that manage the entire supply chain in-house will usually find this process almost impossible, especially when supply chain management is not a core competency of the firm. Therefore, a third party logistics provider (3PL) can take the pressure off these companies and allow them to focus on what they are good at. They can offer greater flexibility and access to more advanced supply chain technology. However, this does not mean companies can simply take the back seat. Businesses that are successful work together with their supply chain partners in a close relationship. Only then do they realise the full potential of a 3PL.
2.0 Introduction and Background
Supply chain management is a considerable source of competitive advantage in the global marketplace and is recognised as a key business driver by top managers (Mentzer, 2004). In competitive markets like the consumer electronics industry, there is a growing need to reduce costs and retain customer satisfaction (Silver, 2005). Consequently, it is vital that the electronics firm effectively manages its supply chain (Altay & Ramirez, 2010). Failure to do so can have a significant negative impact on the business (Altay & Ramirez, 2010). According to Bjurstrom (2008), successful supply chain management is a series of well-rehearsed, established tactical maneuvers. However, in a globalised world, managing a supply chain is often a complicated process which requires a lot of time and capital (Coyle et al. 2008). A great deal of strategy is involved in the pick, pack and ship functions required to distribute a finished product, ship a replacement part or process a return from a retail store or a consumer (Dean, 2009). If logistics is not the firm’s core competency, the decision to contract with a 3PL is an attractive alternative to keeping the process in-house (Dean, 2009). The choice between in-house and contract distribution is entirely strategic and both options present advantages and disadvantages for the electronics firm (Dean, 2009). The decision to outsource however has gained much more popularity in previous years as businesses have been driven towards greater flexibility and less risk (Dean, 2009). The need to reduce costs has become vital for the survival of many businesses and it remains by far the key driver of a company’s supply chain strategy (Silver, 2005). The electronics firm has previously relied on 3PLs to manage its supply chain but is now considering moving the entire process in-house. This raises the question as to which strategy is most desirable for achieving the firm’s ultimate goals in providing high customer service levels and securing long-term profitability. This report will discuss the impact that bringing its supply chain in-house will have on the business. It will be argued that although in-house supply chain management has its advantages, the costs involved in bringing the entire process in-house far outweighs these advantages. Consequently, the electronics firm should not pursue this strategy but rather, the firm should incorporate a mixture of in-house and contract distribution. The firm should also develop a stronger relationship with its supply chain...
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