Question

Critical Thinking

The purpose of this assignment is to identify and apply Logistics and Supply Chain Management concepts/tools to suggest logistics performance priorities. To this purpose, you should review about these companies through secondary available information.

Logistics outsourcing has attracted the attention of lots of Supply chain industrialist in recent years. As firms enlarge their global reach, they often find that they need to reconsider their internal capabilities in managing the global supply chain. In many cases firms decide to outsource this function in whole or in part to agents or outsourcing firms (Trent & Roberts, 2009).

Using this concept of outsourcing you should answer the following questions by taking any Multinational company of your choice.

Question:

1. What are outsourcing firms?

2. Assess the reasons for using outsourcing logistics service in any company of your choice? Using some good examples.

3. Reasons why outsourcing logistics arrangement are not always successful?

The Answer must follow the outline points below:

• Outsourcing Companies
• Their Main functions
• Any local example
• Reasons with suitable Examples
• Reference

Answer 1

1.) The outsourcing firms usually connect to both the Manufacturer and customers, such 3 PL firm act as shipper, they can provide various services but such services can be varied depends on the outsourcing functions, below stated are the services rendered by outsourcing, those are :-

They provide dedicated shipment services and transportation procurement and contracting,
They allow for effective Inventory management, logistic management and consulting and advisory services for effective shipment
They also help to allow for shipment tracking and providing expected delivery date, as well as providing others essential information, those needed by Manufacturer and customers,
They provide Freight related consulting and Freight auditing
They also keep options for reverse outsourcing and help to enable value added services
Again outsourcing firms or 3 PL Firms can manage all the aspects of transporting or shipping products/ goods from the location of manufacturers and distributors to the location of customers, this kind of firm can help manufacturer reduce liability and cost related to taxes, Insurance cost and payroll expenditures, cargo insurance, there are various 3 PL firms or third party outsourcing firms available in Saudi Arabia, those are Integrated outsourcing services, Platinum shipping services Imbad Logistics Etc,

2.) Following are the reasons for using outsourcing service in most of the organizations, those are :-

3 PL firms can reduce transportation cost by at least 3% to 30 % as compared to the manufacturer, those are having their own logistic services, thus manufacturing company can save associated cost to an Extent,
As outsourcing related activity need to comply with various associated regulations like for United states Federal transportation regulations and for Saudi, the kingdom has its own practices and National and international standards, thus 3 PL outsourcing firms maintain such regulations and take responsibility and risk for managing compliance to such regulations, thus manufacturer can send their products or goods to various location of their choice and even they can send their products and goods to various countries,
3 PL firms can manage various issues with the outsourcing system like defining product line and road map, fixing requirement of shipment handling and fulfilling requirement of packaging, where Manufacturer have to invest little or least amount, again they help to provide tracking and tracing of the shipments, they can fix the expected delivery time to reach the location of customers,
Again outsourcing have their own warehouse system, which can manage fulfillment across the domestic and International market, thus manufacturer can buy or take rental such warehouse spaces, reduce significant cost and time as associated,
For Example company Aramco, who uses 3 PL firms, can get benefit from the above points as mentioned, as we know they have product like LPG, Gasoline, Diesel fuel, Oil and Asphalt, those need to be transferred to the customers locations using such outsourcing, which can benefit them many way as stated above.

3.) Following are the reasons, that outsourcing outsourcing arrangement may not be always successful, those are :-

Using 3 PL firms by the Manufacturer can bring many losses in controlling the shipping activities, as the 3 PL help to make more impact on providing better experience to their customers and gain high rating and feedback from their customers, thus Manufacturer can lose the market knowledge, if any manufacturer wants to bring back their outsourcing and shipping function in near future, it will become highly difficult,
3 PL firms used by the manufacturer can be cost saving approach but not always same in all situation, for long term benefits, Manufacturer should keep their own and In house shipping departments, as Cost associated with 3 PL firms can go high and will become no longer cheaper.