Question

Critical Thinking

In today’s highly competitive, extremely variable and really dynamic environment, many firms are seeking solutions. Supply chain management becomes more sophisticated and the difference between what firms want to achieve and what they can do in-house continues to grow, firms begin to realize that doing the right thing becomes more interesting than doing everything. Accordingly, they are becoming better focused and more specialized by outsourcing and offshoring activities that are far from their core businesses. In many cases firms decide to outsource this function in whole or in part to agents or third party logistics firms.

Using this concept of offshoring and outsourcing answer the following questions by taking any Saudi Local company or any Multinational company.

Question:

1. What are Third party logistics firms?
2. Explain the motivational factors for going internationally?
3. On what ground companies choose developing countries location for offshoring? Use examples. (Mention the country and decisive factors)
4. Assess the reasons for using third party logistics service in Saudi Arabia? Using examples, Explain

The Answer should be 2- 3 pages in length including and reference.

The Answer must follow the Key word/ outline points below:

• Outsourcing ,offshoring ,Third Party logistics
• Their Main functions
• Motivational Factors /Drivers
• Any local example
• Reasons with suitable Examples
• Reference

Note: You can support your answer by reading chapter 4 of your book.

          You can use secondary source available on internet. Please use APA-style referencing.

Answer 1

What are Third-party logistics firms?

The third-party logistic firm is a type of organization that provides any number of services related to supply chain to any conglomerate or firm including transportation, warehouse storage, picking and packing, forecasting of inventory, order fulfillment, packaging, and freight forwarding.

Explain the motivational factors for going internationally?

Various motivational factors for going internationally are :

A. Growth and Profitability - Expanding sales to the international market can help the business to boost the profit.

B. Risk Diversification - Selling products in multiple countries reduce the firm's exposure to economic as well as political instability within a single territory.

C. Economics of Scale - International approaches helps an organization in the sharing of costs and risks between markets for the organization.

D. Resources and Ideas - The international approach helps to gain ideas and diverse skills from various markets.

E. The employee at lower cost - Some market offers the labor at a very lower cost which eventually helps the organization to increase its margin.

Factors must be considered for choosing countries for offshoring

A. Environment and Market Analysis – FIrst step to shortlist countries that present a potential concentration of my target market and analyze various things like Political factors, country risk, GDP growth, multiple international indexes, operational difficulties, market appeals, etc.

B. Analysis of the competition – Analyze the main competitor and study their economic evolution and sales over a few years, distribution channel, financial position, expansion strategy, development plans, etc.

C. Distribution channel analysis – Track the supply chain of my product, from its origins to its final customer via international distribution, local distributor, internet, etc.

D. Demand analysis –  Analyze the current and potential demand of my product in its source market, as well as its profile and expected evolution.

Reasons for using third-party logistics service in Saudi Arabia

1. Reduced Back-office Work: Most 3PL outsourcing service providers have sufficient manpower and the desired systems already in place. They can process thousands of bills and audit them appropriately within a short time. Outsourcing logistics back-office tasks to professional vendors, therefore, frees up your time and increases productivity

2. Enhanced Customer Satisfaction: Most service providers specialize in logistics services only. They know the domain better than others and can come up with innovative ideas and strategies to further reduce costs for their clients, as well as deliver a better experience. This leads to enhanced customer satisfaction and builds partnerships which can last a lifetime

3. Reduced Liabilities: The logistics service providers help to manage all inter-connected carrier contracts, safety ratings, and insurance certificates. More often than not, they have a back-office staff ready to work with invoicing variances, carrier vetting processes, etc. This means you stand to face zero liabilities as all the grunt work gets taken care of by the service provider

4. Efficient Handling of Petty Expenses: Small expenditures like insurance costs, docking costs, transportation, or fixed warehouse costs are all taken care of by the logistics service providers. You do not have to deal with petty expenses, thereby freeing up your accounting department's time

5. Economies of Scale: You might end up spending a lot on trying to scale up your existing team to perform logistics services in-house. However, a third-party logistics service provider can help you achieve economies of scale as they specialize only in providing logistics services, thereby being able to ramp up or ramp down services within short intervals

6. Efficient Real-time Tracking: Most 3PLs are technologically adept and allow for real-time tracking and visibility of loads. Some of the more popular service providers even provide integration with WMS and ERP. By being able to track your shipments with ease, you spend less time worrying and more time focusing on other core areas.