苏州科技学院经济与管理学院专题论文写作
RISKS ANALYSIS IN LOGISTICS OUTSOURCING
The benefits of outsourcing logistics services in some cases can be considerable. For example, 3PL's have made \computer industry where there would have been otherwise infeasible. The automotive industry often relies on a third party logistics provider to perform functions associated just in time operations. Rapidly changing markets suggest that the industry should see continued growth in the next several years. Persson and Virumidentified the more frequently sited reasons for logistics outsourcing. For many companies, increasing demands for new information systems, resources and real time visibility into production and other status often can be met most efficiently through outsourcing.
Boyson et al examined the reasons why some logistics outsourcing partnerships are successful and how best to manage a third party logistics relationship. In particular, their research identified the most effective means and methods for evaluating and selecting third party logistics providers from outsourcing users perspective, and identified the most effective means for organizing, operating, and monitoring third party logistics relationships. Sink and Langley (1997) presented a conceptual model of the third party logistics purchasing process, which, according to their analysis, consists of five distinct steps or phases.
Analysis of the disadvantages of outsourcing has been performed over the last few years in other applications. For example, Earl examined these issues related to information technology (IT) outsourcing. Earl's perspective is based on an analysis of eleven risks of outsourcing identified in discussions with both buyers and vendors in the IT outsourcing marketplace. Barthelemy discussed the hidden costs of IT outsourcing from outsourcing users’ perspective. Cavalla and Piachaud presented perceived disadvantages of R&D outsourcing in pharmaceutical industry.
However, we know of no published research focusing specifically on the risks of outsourcing logistics activities. Drawing from research in other industries we explore potential risks in third party logistics. Please note that when we reference research in these other industries we are providing a reference to the main ideas examined by those researchers related to outsourcing-not referencing a discussion related specifically to logistics outsourcing.
Latent Information Asymmetry
There exists an information asymmetry in logistics outsourcing. The third party logistics provider rarely has complete information about the contracting company;
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苏州科技学院经济与管理学院专题论文写作
similarly the contracting company may have incomplete information about the third party logistics provider. For example, if a third party logistics provider has incomplete information about the contracting companies’ cost structure, the price it will offer (and therefore its profit level) may not be well matched to that cost structure.
Loss of Logistics Innovative Capacity
If a firm has outsourced its logistics services, its logistics innovative ability may be impaired. In the long run, if a firm wants to maintain its comprehensive competitive competences, it will have new ways of providing logistics services for the business. External sourcing does not guarantee innovation. During outsourcing contract periods, the third party logistics provider may not recognize an opportunity to innovate as its focus may be primarily on costs.
Hidden Costs
Drawing on a recent study of IT outsourcing by Bartholomew, who examines hidden costs, we can make the following observations about logistics outsourcing:
Benefits can be eroded by costs that firms' managers cannot identify a priori. Many firms underestimate the costs associated with selecting a third party logistics provider, and negotiating and drafting a contract. Additional time and expense early on helps avoid problems later, such as having to renegotiate the contract or constantly monitor the logistics provider to get the needed performance. Estimating transition costs can be very difficult. Switching in-house logistics activities to a third party logistics provider presents probably the most elusive hidden cost. Most firms do not realize how much they have spent until the transition is complete. Managing the effort probably represents the largest category of hidden costs because it covers three areas: monitoring to see that logistics providers fulfill their contractual obligations, bargaining with logistics providers, and negotiating any needed contact changes. Vendor-management costs for logistics outsourcing are not readily apparent either. Management often does not consider these costs because they only become visible when overall outsourcing costs have noticeably escalated.
Dependence on the Third Party Logistics Provider
A firm that outsources its logistics activities to a third party logistics provider runs the risk of becoming dependent on that provider. By contracting out logistics activities to the same third party logistics provider over a long period of time, the firm may find itself in an increasingly vulnerable position and may even lose control of part of its logistics activities.
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苏州科技学院经济与管理学院专题论文写作
Loss of Control over the Third Party Logistics Provider
All collaborative projects result in some loss of control. In outsourcing arrangements, partial control of a project inevitably passes from the sponsor to the collaborator Piachaud. The extent to which the firm may effectively control an outsourced logistics business will greatly determined by the information received and the early detection of problems. Since the information available to the logistics manager would be less comprehensive than it would be if the logistics business were conducted in-house, a lack of effective communication could ensue as a result. This could lead to problems of quality and to delays, as well as to misunderstandings and even mistrust. Because of misunderstandings and mistrust, third party logistics providers also have to build slack into their operations. Lack of visibility of shipment and demand schedules may result in the creation of excess capacity and excess shipping expenditures. It can also lead to the use of uneconomic modes of transportation (package vs. less-than-truckload; less-than-truckload vs. truckload for example).
Conflicts of Firms Culture
In logistics outsourcing arrangements, the goals of each party are often different so the factors that determine the commercial merit of the partnership are being considered from different perspectives. Management styles and degrees of bureaucracy within firms may also be different. Consideration of these factors is essential to ensure the viability of the collaborative venture and the future success of the partnership.
The six aspects of risk mentioned above come in many different forms and can be classified into four categories. The first relates to financial risks. The second group relates to the \risks of logistics outsourcing, these chaos effects result from mistrust and information asymmetry. The third group relates to market risks, a firm cannot be responsive to changing market trends and customer preferences due to dependence on the third party logistics provider. The fourth group relates to management risks. (Table I)
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苏州科技学院经济与管理学院专题论文写作 Table I Categories of Risks in Logistics Outsourcing CategoryFinancial\AspectsHidden CostMarketManagementFeaturesMany firms underestimate the costs related to selecting a third party logistics provider, and negotiating and drafting alogistics outsourcing contract. Incomplete information and moral risks resulting from asymmetric information willLatent Information Asymmetry Losscause decision-making risk. The extent to which a firm may effectively counterpart some loss of control over the thirdof Control over the Third Partyparty logistics provider is greatly determined by the information received. A lack of effective communication couldLogistics providercause Market incomprehensive information and lead to problems of quality and to delays, as well as to misunderstandingand even mistrust. A third party logistics provider does not guarantee a firm to maintain long term comprehensivecompetitive competencies and to have new ways of providing customized logistics services. A firm may find itself in anLoss of Logistics Innovative Capacityincreasingly vulnerable position and cannot be responsive to changing market environment and customer requirements. ItDependence on the Third Partis difficult for a firm to manage logistics outsourcing. In some cases there will be a need for a more professional andLogistics Providerhighly trained purchasing and contract management group. Firms frequently overlook the task ofappraising third party logistics provider outcomes. The goals of each party, management styles and degrees of bureaucracy within firms are differentThe possibility of managementProblems of Evaluating managementgroup. And Monitoring Thirdparty Logistics ProviderperformanceConflicts of Culture RISK REDUCTION
To promote the service effectiveness for firms and operations efficiency for third party logistics service providers, and to minimize the uncertainties associated with logistics outsourcing, risks reduction measures should be implemented.
Performance Indices for Logistics Outsourcing
The performance assessment indices in logistics outsourcing should include both cost and service measures. The performance assessment indices should evaluate systematically the performance of integrated third party logistics operation, reflect accurately the relationship between third party logistics providers and firms and realize effectively the integration of third party logistics providers and users.
Information Sharing Encouragement Mechanisms
The most common risks in logistics outsourcing are probably decision-making risk due to incomplete information and moral risks resulting from asymmetric information. There is typically one participant with superior information and another participant possessing inferior information. In order to avoid potential problems, information sharing encouragement mechanisms must be developed. Information technologies can be used to establish these information-sharing mechanisms which can lead to win-win situations for both participating parties. In logistics outsourcing, key operational information such as costs, demands, shipment plans, capacities, etc., should be easily accessible by both participating parties. Such information should be accurate and timely, rendering it useful to both parties for planning and re-planning purposes. Thus, it is important that information sharing encouragement mechanisms are established so that any updates are made as timely as possible.
Suitable Performance Tactic
It is important for a third party logistics provider to design a suitable third party
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苏州科技学院经济与管理学院专题论文写作
logistics-performing tactic. Designing a suitable performance tactic, another valid measure to prevent performance risks, enables third party logistics providers to improve customer service levels and ensure that successful logistics partnership are developed. The performance tactic of a third party logistics provider should be centered on the characteristics of products or industries. Different products or industries have different requirement. In accordance with the characteristics of products or industries, there are innovative products or industries, which have high margins and unstable demands and functional products or industries, which are characterized by low marginal profit margins and more stable demands. Third party logistics performance tactics for innovative products or industries should be different from those designed for functional products or industries. Because of the difference between these two categories, different third party logistics services are needed to meet their requirements (Table II).
Table II Matching 3PL Services and Product or Industry Needs
Product or IndustryEffectiveThird party logisticsResponsiveFunctiaonalGood MatchGood MatchInnoativePoor MatchPoor Match Customer Relationship Management
For logistics outsourcing arrangements to be successful they must include a strong emphasis on customer relationship management. Here customer relationship management is different from what we typically think of as customer service. Relative to customer relationship management, traditional customer service is passive. Customer relationship management seeks to develop strong and lasting ties to customers by anticipating their needs rather than simply reacting to their dissatisfaction. Customer relationship management tries to provide a unified view of a customer across the firm by integrating the firm's customer-relations process and consolidating customer information from multiple communication channels so that the firm can provide a single coherent face to the customer. Customer relationship management relies on the integration of marketing and logistics customer service, and regards customer service as another marketing mode. Therefore, customer relationship management is sometimes referred to as \
Advanced customer relationship management aims at reducing logistics service costs, increasing gains, strengthening customer relation, increasing customer satisfaction and loyalty, improving information quality, reducing information
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