Supply Chain and Logistics Service Providers Term Paper

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Total Length: 2496 words ( 8 double-spaced pages)

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Abstract

A highly efficient, cost effective and free flowing supply chain signifies the basis of every successful company. It permits every other operation of the company to get going and move forward devoid of any encumbrances or concern for a deficiency in materials, provisions or parts. There are various factors that have to be taken into consideration when selecting a logistics service provide and these comprise of cost, scalability, proven track record, innovativeness and financial stability and history of payment. Concerning the selection and use of logistics service providers, a key approach that is more often than not utilized by logistics managers is to give a big fraction of the business to one carrier, and the small fraction to a rival carrier. The advantages of this approach are twofold. One, in the event of existing problems with the primary carrier, then it is possible to change and shift traffic to the alternative carrier. Two, both of the carriers are at all times attentive and cannot become lazy of ineffective for the reason that they are aware there is an alternative available in the event that their performance begins to deteriorate

Logistics Service Providers Essay

Introduction

Logistics plays a pivotal role in the integration of supply chains within industries. Taking into consideration that the market has fast become more global and continues to progress in that direction, logistics is presently perceived as a significant area where industries can diminish costs and enhance their customer service quality. In the present day, several companies are in pursuit of outsourcing their logistics operations to what is referred to as third party logistics service providers to unveil product and service inventions rapidly to their markets. For this reason, there is a mounting inclination that manufacturing corporations outsource their logistics activities to meet their progressively more necessities for logistics services. This inclination has augmented significance of the notion of third party logistics service providers. In the contemporary economic setting, several entities name these logistics service providers as more proficient and cost effective in achieving their partial or full logistic requirements (Akman and Bynal, 2014).

The selection of logistics service providers is an intricate multi-criteria decision making issue that comprises of both quantitative and qualitative conditions some of which can clash with one another and is imperative in augmenting the competitiveness of companies. It is a significant function of the logistics departments as it leads to substantial savings for the entity. While selecting the suitable logistics service provider, logistics managers may be indeterminate whether the selection will gratify entirely the needs of the organization. The purpose of this paper is to discuss the various factors that have to be considered when selecting logistics service providers and how consignors make decisions concerning choosing logistics services.

Literature Review

There is a mounting trend for logistics outsourcing in the international market. In accordance to research conducted by Lambert, Stock and Ellram (1998), logistics outsourcing can be delineated as the utilization of a third-party provider for complete or partial firm logistics operations. In line with this delineation, Rabinovich et al. (1999) in their research study defined logistics outsourcing relationships as longstanding and temporary agreements or associations between manufacturing and service firms and third party logistics providers. What is more, Lieb (1992) pointed out that third-party logistics takes into account the utilization of external corporations to undertake logistics functions conventionally performed within an organization. Third party logistics service providers provide manifold logistics services to their clienteles for instance direct transportation service, warehouse operations and management, shipment planning and merging, management of logistics information systems, carrier choosing, rate conciliation, product returns, convoy management, cataloging, packing, order processing and fulfillment, product installation, inventory management, and customer spare parts (Akman and Bynal, 2014).

In the same manner, Sohail and Sohal (2003) delineated third-party logistics as the utilization of external corporations to undertake logistics functions that have occasionally been carried out within a company. In this regard, third-party logistics is deemed to encompass the activities implemented by an external company in the best interests of a client corporation and these activities comprise of at least the delivery of management of manifold logistics services. These activities are offered in an assimilated manner, not on a separate basis.

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In accordance to the Council of Supply Chain Management Professionals, third-party logistics is delineated as a company that offers manifold logistics services for use by consumers, and if at all possible, these services are assimilated together by the provider (Akman and Bynal, 2014).

In accordance to a survey conducted by Forrester Research, just about 80 percent of Fortune 500 companies have outsourced transportation service, approximately 55 percent of them have outsourced their distribution services and 46 percent of them have opted for outsourcing in their manufacturing activities. Taking this into consideration, the logistics sector has surpassed the $50 billion mark across the globe. Third party logistics service providers can be delineated as external suppliers which accomplish a portion or all of a corporation’s logistics functions of a corporation (ERP Academy, 2018). Logistic functions released to third-party firms are services like transportation, storage, distribution. It is important to note that these functions necessitate high level of business investment and therefore selection requires preceding thorough examination. Third-party logistics services largely lay emphasis on transportation and warehousing, and so forth and these third-party logistics service providers ought to have professional experiences in each service (Chen and Wu, 2011).

Factors to be Considered when Selecting Logistics Service Providers

The decisions linked with supply chain management encompass both the short-term and long-term periods. Strategic decisions contend with corporate policies, and examine general design and supply chain structure. Imperatively, operational decisions take into account that that cope with day-to-day activities and issues of an organization. These decisions have to take into consideration the strategic decisions that have already been put in place. For this reason, it is key for an organization to ensure that the supply chain is structured through longstanding examination and at the same time lay emphasis on the everyday activities. In general, companies are necessitated to make a decision regarding which logistics service providers they ought to make use of. It is imperative to note that the contracts or agreements made with logistics service providers can more often than not be worth substantial amounts of money and without a doubt encompass a significant part of an organization’s activities, and as a result it is pivotal to select the right and suitable partners. There are different factors that have to be taken into consideration when selecting logistics service providers.

Cost

One of the fundamental factors that has to be taken into account is the cost and service level of a logistics service provider. It is key to note that there is a small number of upright and dependable logistics service providers conducting business operations internationally who have varying cost structures for their clientele. However, not all of them have similar or even in the same way strong operation rates of satisfaction and contentment from their consumers across international expanses. Some may offer superior service from a particular port to the destination ports of choice, but set high prices whereas others may offer inferior service from one specific port to the end point that are preferred, but charge low prices. Therefore, taking this into consideration, in the selection of the logistics service provider, it is imperative to consider the competitive service and also the acceptable cost. It is considerably challenging to nominate solely one logistics service provider for an international operation. It is key to take into account what is necessary to reach the optimum level of the two tiers of cost and benefit (Satellite Trans, 2018).

Scalability

The most pivotal capability an international logistics service provider must offer is the ability to scale their operations to the growing and developing needs of a company. Significantly, bi-directional scalability will have a direct impact on the efficacy of a company’s supply chain. Without a doubt, every company endeavors to grow, perchance expanding internationally. Nonetheless, each firm also has its ups and downs. In the event that the demand deteriorates irrespective of the reason, a logistics service provider must be instantaneously responsive and scale down operations to curtail costs while sustaining efficacious flow of goods. In contrast, when demand increases, there is the need to have….....

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