According to Maslow, every individual has different levels of needs. It ranges from the basic needs which includes food, clothing & shelter to the highest or the self-actualization needs. In the course of history, humankind has found out that it is very difficult to achieve these needs without the help of another, and more lately without the help of the institutions that specialize in providing the different needs of every individual. Today, this system of providing needs of every individual has become so complex just as how much the needs of every individual has also changed dramatically.
Today, humankind has developed an attitude of impatience. Everybody wants to be provided or served instantly. Everyone wants to be the first to use or receive everything. With this, these institutions need to cope to the needs of the people in order to survive and remain in the industry. Organizations have felt the increasing pressure from their customers. Due to the intensified demands of consumers organizations need to think hard not only on how to produce the needs of the consumers but also on how to make their products reach the consumers on time.
With today’s global economy, organizations should have the capability to distribute their products anywhere in the world and if possible at the speed faster than sound. To be able to do this, organizations, unless vertically integrated, passes on the pressure to its suppliers to deliver the parts on time before the production schedule. However, it does not end their, the organization may control production but the real question is how can they get their product to travel around the world fast and cheap.
These current dilemmas has lead to the development of the supply chain management concept. Supply chain management is where the series of activities and organizations that materials move through from initial suppliers to final customers is being managed.
For a supply chain to occur, it means that each organization involved requires to move materials into the organization from the supplier and out of the organization to the customers. Logistics is a function responsible for the flow of materials from suppliers into an organization, through operations within the organization, and then out to customers (Waters, 2003). Walters also emphasized in his book that logistics and supply chain management is one an the same. However, for this paper the researcher will use the term ‘logistics’ for the movement in one organization to another and will refer to supply chain management as the management of the interconnections of the entire logistics involved to provide the needs of the customers.
Again, with globalization, an organization may get its supplies from ten different countries and may deliver its output to one hundred countries spread within the seven continents. With this enormous requirement, organizations usually consider the use of third party logistics. Third party logistics or commonly known as 3PL, is a strategic alliance with another independent organization with long-term commitment to let that organization perform all or part of its materials or products distribution (Ghiani, 2003).
Companies usually use the service of 3PL, if they are not willing to invest in transportation or warehousing infrastructures, especially if it will just increase their operating costs. Using a third party for materials movement leaves an organization free to concentrate on its core activities. A 3PL organization may perform different roles in the supply chain management. The role could be a transporter, a “warehouser”, a purchaser and a materials handler (Waters, 2003).
One major role of 3PL organizations is to transport the materials from one supplier to another to all members of the chain. This is one of the most important roles and has been the original scope of third party logistics in the previous years, together with the warehousing role (Bowersox, 2002).
The for-hire transportation organization, most commonly known today as third-party transport specialist consists of thousands of carriers who specialize in product movement between geographic locations. Over the years, a comprehensive carrier network is being used providing shippers a broad assortment of services, utilizing all available modes of transportation and related services. Their value propositions are specialization, efficiency, and scale economies. Value is generated by the organization’s capability to provide shared transportation services for different clients. The transport alternatives for shippers are either to invest capital in transportation equipment and operations. Today, a large number of firms have developed transportation solutions that personally cater to the specific need of their clients (Bowersox, 2002).
Another traditional 3PL service is traditionally called public warehouses. These firms provide material and product storage supplemented with other specialized services. Two significant benefits are gained when organizations use public warehouses. First is elimination of capital investment in warehouse buildings. The second is the ability to consolidate small deliveries for combined delivery with products of other firms who use the same public warehouse. This consolidation achieves transportation efficiency not typically available when a firm ships from its own warehouse. Many firms combine private and public warehouses into a go-to-market distribution network (Bowersox, 2002).
After those traditional logistics role, came a shift in the third-party logistics industry. From single specialization being outsourced to another company it has developed to multiple specializations that include all work necessary to service customers, from order processing to product delivery. Today, there are two types of 3PL organization, the asset- or nonasset-based. Asset-based are those who owns transportation and warehouse facilities. The nonasset-based are those who specialize in providing significant and on-time information to facilitate supply chain arrangements (Bowersox, 2002).
In order for a 3PL organization to help align the supply chain, it has to provide the traditional perspective of value, which includes, economic, market and relevancy values. Economic value is based on the economy of scale in operation. A 3PL should be able to provide its customers the efficiency in terms of cost. Another value perspective is the market value. The customer’s take-away in terms of this is convenience and choice. Achievement of both economic and market value is important to customers.
Currently, however, more and more organizations recognize the value referred to as relevancy. The Relevancy value is the customization of value-adding services, over and above product and positioning that make a real difference to customers. It means the right products and services, as reflected by market value, at the right price, as reflected by economic value, modified and customized maximizing the value added for the customer (Bowersox, 2002).
To be able to have an aligned supply chain, the following are the criteria that may be used to determine or choose a 3PL organization: ( 1 ) responsiveness, (2) variance reduction, (3) inventory reduction, (4) shipment consolidation, (5) quality, and (6) life cycle support (Bowersox, 2002). The relative importance of each of this criteria is directly related to the firm’s decision of whether to outsource the logistical function or integrate it within the organization.
Responsiveness is the 3PL’s ability to satisfy customer requirements in a timely manner. With the use of information technology, it has never been easier for companies to fulfill this need. A11 operating areas of a logistical system are susceptible to and are highly affected by variance. Variance results from failure to perform any expected aspects of logistics operations. Thus, variance reduction, the elimination of system disruptions, and is one basic objective of integrated logistics management provided by 3PL organizations. To achieve the objective of inventory reduction, an integrated logistics system must control asset commitment and convert to high turnover rate (Bowersox, 2002).
One of the most significant and expensive logistical costs is transportation. Transportation cost is directly related to the type of product, volume, and distance. A 3PL integrates service objective should be to achieve shipment consolidation in an effort to reduce transportation cost. As a general rule, the larger a shipment and the longer the distance it is transported, the lower is the cost per unit. Consolidation requires innovative programs to combine small shipments for timely consolidated movement (Bowersox, 2002).
A fundamental operational objective of all 3PL organization is continuous quality improvement. Total Quality Management and other tools such as Six Sigma, etc. are major initiative and are considered very important throughout most facets of industry. Another is the life cycle support. Some items fail. It is also very important for a 3PL to be able to help its customers reverse the flow of materials (Bowersox, 2002). Since there will always be defective and damage-prone products, manufacturers’ operational and financial performance will depend in part on their ability to manage product and part returns, exchanges, repair, remarketing, and disposition (Aberdeen, 2004), the 3PL organization that can help them for this aspect, is a very good edge in this industry.
In order for a 3PL organization to be successful in the industry, with all the latest changes in the industry is to define the role that the company plays or wants to play in these supply chains. The questions necessary in order to align itself to the supply chain of its customers are “What kind of supply chain participant is the company? Is the company a producer, a distributor, a retailer, or a service provider? What does the company do to enable the supply chains that it is part of? What are the core competencies of the company? How does the company make money? The answers to these questions tell that organization what roles in a supply chain will be the best fit for their company (Hugos, 2003).”
With all these chaos and also development in technologies, business models of the 3PL organizations have also changed with time from anticipatory to responsive model. With the anticipatory model, because information concerning purchase behavior was not readily available and firms does not really care much about each other, did not feel compelled to share their plans, business operations were driven by guessing and maybe forecast. The typical manufacturer produced products based upon a market forecast.
Since the forecast nowadays are not that accurate anymore especially with the very short life cycle of products, considerable discontinuities and misalignment existed between among all the players. Companies have proven the high cost and risk associated with conducting business on an anticipatory basis, the prevailing relationship between trading partners was adversarial; each firm needed to protect its own interest (Bowersox, 2002). This has lead to the development of the response model, which is to make use of the partnership and collaborative processes.
The increasingly competitive operating environment is pressuring organizations to continually search for new ways of organizing their respective businesses. New business models such as 4PLs; Managed Supply Chain Operations (MSCO); Joint Services Companies (JSC); and Virtual Network Consortia (VNC), and/or combinations of these, are all potentially viable 3PL outsourcing models. This, however still needs a lot of research for the next couple of years be accepted and ready for use in the market (Gattorna, 2007).
Recent new business models in supply chain include the 4PL. In this model, the entire set of supply chain processes is outsourced to a single 4PL. A fourth party logistics provider is a supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization and other complementary service providers to design, deliver and run a unique and comprehensive supply chain solutions with the ability to unlock value in its principal’s supply chain by offering solutions to modern supply chain challenges (Gattorna, 2004).
But while these initiatives and future model considerations have high potentials in the further improvement of this industry. Current changes have only reengineered individual pieces of the total supply chain. Still missing is the holistic view of the supply chain that brings all of these pieces together. To be truly successful, supply chains, not individual organizations, truly collaborate to make these things happen.
The focus should shift winning companies to winning supply chains. Improving margin or market share at the expense of the consumer, regardless of the short-term benefit for any individual organization, will no longer be a sustainable business strategy. The new business model that will truly solve and achieve everyone desires in this industry is that it will be like an vertically integrated 3PL, despite it being independent, it should have the advantage of vertical efficiency (Seifirt, 2003).
The competitiveness of the supply chain has a close relation with its innate dynamics, with both positive and negative aspects. These make the supply chain not only flexible and agile, but also very complicated and unpredictable. To increase the supply chain profitability, synchronization of the players and minimization of information distortion within the supply chain is essential. To achieve these competitiveness requirements, commitment, coordination and information sharing should be thoroughly thought about by the players of this industry (Chan, 2004).
Commitment to the supply chain encourages all the players involved in the chain and even in the industry to recognize the overall strategy and to see the importance of their roles and contributions in the context of the whole complex web. Coordination is the basic issue to be resolved for the effective operation of a successful supply chain. Its is to embody commitment and to smoothen the collaboration of the players. To make sure that each player is unified in terms of its direction, sharing of the strategy, profits and risks is very useful to achieve the goals. In addition to the direction, adjusting the speed of all the players is also essential to collaboration within the supply chain. Even though some players are very agile, the final output is decided by the weakest link in the chain. So coordination of both direction and speed is the next step most important thing to consider (Chan, 2004).
Information distortion in the supply chain can start from and be amplified by independent decision-making of any player in the chain. To minimize information distortion, the coordination among the players becomes very important in the sharing of information effectively and efficiently and by use of an appropriate information system, which should not be a problem with continual development of the communication industry (Chan, 2004).
With all these future potentials for third party logistics organizations and the supply chain, many consultants have also been helping companies for the alignment assessment of the chain. To be able to really determine how aligned or how mess up the supply chain is, the following is recommended: determine the detailed, step-by-step, mapping of current, actual supply chain and compare the achievement with the goals set out for the supply chain the company is in.
With this, the organization and even all the payers in the chain will exactly how your current supply chain management works in detail; where &how the strategies fit; how and where the supply chain management differs from the “world-class” approach; and the specific factors that limit the chain’s ability to achieve a world class supply chain management (Scott, 2004).
Ghiani, G., Laporte, G. and Musmanno, R. (2004). Introduction to Logistics Systems
Planning and Control: Chichester, England JohnWiley & Sons Ltd
This book provides a comprehensive and modeling-based treatment of the complete distribution system and process, including the design of distribution centers, terminal operations and transportation operations. The three major components of logistics systems—inventory, transportation and facilities—are each examined in detail. For each topic the problem is defined, models and solution algorithms are presented that support computer-assisted decision-making, and numerous application examples are provided.
The book concludes with an extensive set of case studies that illustrate the application of the models and algorithms in practice. The authors are: Gianpaolo Ghiani is Associate Professor of Operations Research at the University of Lecce, Italy; Gilbert Laporte obtained his PhD in Operations Research at the London School of Economics in 1975; Roberto Musmanno is Professor of Operations Research at the University of Calabria, Italy. His major research interests lie in logistics, network optimization and parallel computing.
Waters, D. (2003). Logistics – An introduction to Supply Chain Management. New York
N.Y: Palgrave Macmillan.
The book gives an introduction to logistics. It can be used by anyone who is meeting the subject for the first time such as a student taking a course in business studies, or another subject that needs some knowledge of logistics – or you might read the book to learn more about a central area of management. The book gives a broad description of logistics, covering all the main concepts. It discusses the topics in enough depth to provide material for a complete course, but it does not get bogged down in too much detail. By concentrating on key issues, the text have been kept to a reasonable length.
Scott, W. (2004). Supply Chain Alignment Assessment: A Road Map. Waer Systems. May
2007 [Online] Available: www.waersystems.com..
This is the second in a three-part series created by Waer Systems. The series is designed to help OEMs and Tier I/II manufacturers – especially those involved in the supply and procurement of high volume low cost parts – better appreciate the value of a world-class supply chain. If the end user is a supplier or distributor, an assessment will look downstream (customer fulfillment process), if an end user, an assessment will look upstream (procurement process.) An assessment is therefore likely to involve at least two willing parties.
While an overview of the entire supply chain should be understood the focus of this document has a narrower and more specific scope, specifically the process of procuring incoming goods and the relationship with the upstream supplier. The links in this supply chain are depicted, highlighting the supply chain from supplier through OEM manufacturing.
Gattorna, J. Ogulin, R and Selen, W. (2004). An Empirical Investigation of 3rd- and 4th-
party Logistics Provider Practices in Australia. May 2007. [Online] Available:
This research reports on Australian industry characteristics and trends of logistics activities performed through outsourced partners, based on survey research of Australian Shippers and Logistics Service Providers (LSPs). This paper reports on the main findings in terms of customer satisfaction with, and future scope and use of, logistics services provided.
Both shippers and logistics service providers were subsequently compared in their views along dimensions of strategic alliances, partnerships and collaboration; cross-company integration and collaboration; customer alignment; geography and physical infrastructure; and recruiting, developing and retaining people. Important areas of alignment and misalignment are identified. The authors are J. Gattorna Professorial Fellow, University of Wollongong; R. Ogulin Ph.D candidate, University of Wollongong W. Selen Professor, Macquarie Graduate School of Management.
Gattorna, J. (2007). Supply Chain Thought Leadership. May 2007. [Online]. Available: [http://www.johngattorna.com]
John Gattorna is one of the few people who have been continuously engaged in the evolution of supply chain thinking, from the early days of ‘physical distribution management’ (1975), through ‘logistics management’ (1980s/1990s), to the current ‘supply chain management’ era (1990s/2000s).
Bowersox, D. , Closs, D., Cooper M.B. (2002) Supply Chain Logistics Management. New
York, NY: McGraw-Hill Companies, Inc.
This union of ideas presented in this text provides a new supply chain framework for the study of the field of logistics, serves to expand the treatment of integrative supply chain management, by placing it firmly in the context of contemporary business, and highlights the increasing importance of logistics in global competitive strategy. The authors are: Donald Bowersox is John H. McConnell University Professor of Business at Michigan State University where he has also served as Dean of the Business School.
He received his Ph.D. at Michigan State and has worked with industry throughout his career; David Closs is Eli Broad Professor of Logistics at Michigan State University. He received his Ph.D. in marketing and logistics from Michigan State. Dr. Closs is the author and co-author of many publications in journals, proceedings, and industry reports; M.Bixby Cooper is Associate Professor in the Department of Marketing and Supply Chain Management at Michigan State University. He is co-author of three texts on distribution and logistics.
Hugos, M. (2003). Essentials of Supply Chain Management. Hoboken, New Jersey: John
Wiley & Sons, Inc.
This book is written especially for two groups of readers. It is written for the senior executive who must decide what kind of supply chain their organization needs and how much to spend to get it. It is also written for the manager who is or soon will be responsible for building and operating some part of his/her company’s supply chain.
The concepts and techniques presented here serve to create a common frame of reference that both senior executives and line managers can use when communicating with each other about supply chain management issues. The author is Michael Hugos – Chief Information Officer of Network Services Company, a national cooperative of distribution companies who service national and local customers all over North America. For last several years he was able to help the company design, build, and deploy a suite of supply chain management and e-business systems.
Chan C.K. and Lee, H.W. (2004). Successful Strategies in Supply Chain Management. USA:
Hershey, PA: Idea Group Publishing
The topics are discussed with sufficient detail to enable the readers to follow the procedure and calculations quite easily. The book is directed toward graduate students interested in the conceptual, analytical and empirical analysis on SCM. To avoid the necessity of frequent and disruptive cross-referencing, the chapters are designed to be as independent of each other as possible, and are self-contained.
This book addresses problems of SCM from modeling, conceptual and practical perspectives such that researchers and practitioners in SCM can keep up with the development of this field and have a better understanding and collaboration among them. Review articles, conceptual and analytical and empirical analysis on SCM are also included. The authors are: Chi Kin Chan and H.W.J. Lee The Hong Kong Polytechnic University, Hong Kong.
Oliva, R. and Watson, N. (2006). Cross Functional Alignment in Supply Chain Planning: A
Case Study of Sales & Operations Planning (Revised).
Data were collected through 25 semi-structured interviews and reviews of archival data. We interviewed leaders, analysts and participants from all the functional areas involved in the S&OP process, as well as heads of other divisions affected by it. We conducted most interviews in the organization’s northern CA facility, but some follow up interviews were done by telephone. The authors are: Professor Rogelio Oliva Mays Business School, Texas A&M University and Professor Noel Watson Harvard Business School, Boston, MA
Seifert, D. (2003). Collaborative Planning, Forecasting and Replenishment: How to Create a
Supply Chain Advantage. New York, NY: Amacom.
This book describes a practical, yet intensive, thought-provoking business process that demonstrates how to implement CPFR and gain quantifiable results, to be enjoyed by all parties to the value chain. It promotes an understanding of how to overcome the barriers to CPFR, which are primarily cultural, ignorance, and a desire to maintain the status quo. It is focus is to emphasize that it will become clear that technology is not a barrier to implementa-tion and that CPFR is in fact flexible and adaptable to various business conditions and circumstances.
- Assignment status: Already Solved By Our Experts
- (USA, AUS, UK & CA PhD. Writers)
- CLICK HERE TO GET A PROFESSIONAL WRITER TO WORK ON THIS PAPER AND OTHER SIMILAR PAPERS, GET A NON PLAGIARIZED PAPER FROM OUR EXPERTS