The Third-Party Logistics Group - Term Paper Example

Internship employment_3rd Party Logistics Group, Inc Introduction My internship employment was with The Third Party Logistics Group Inc. whose functions were varied but majorly in provision of logistic services. Third Party Logistics (3PL) is usually the function whereby the owner of goods often The Client Company outsources its various elements of the supply chain of its products and services to one 3PL Company. The resulting company then carries out the management function of the clients warehousing, distribution, inventory, price ticketing, and retailing needs, providing them to the customers (Cahill and David 21). Logistic services usually involve anything that deals with the management of the way products and resources are moved from one place to the other to where they are needed. These third party logistics providers normally get to specialize in an integrated operation involving warehousing and transportation of goods and services which can be tailored and customized according to the customers needs. This provision is also often based on the prevailing market conditions (Cahill and David 21). The Third Party Logistics Group, Inc has gone beyond the provision of the logistic service requirements and provided other additional services including some value-added services relating to the production or the procurement of the goods. In the current world, business environments have become very competitive. Therefore, for a company to become successful and sustainable, it has to venture and deal with more varied resources to be able to adequately and continuously satisfy its customers’ needs (Coyle and John J 49). In the recent years, the global market, due to its competitive nature has had an immense influence on the business market and has resulted into the creation of several logistics companies. These logistics companies, when adequately used by companies have been known to provide them with a competitive advantage (Coyle and John J 49). To involve these Third Party Logistics (3PL) providers is to outsource a company’s logistics or transportation. For a company to outsource for its logistics then it has to consider the following: The logistics cost. The company has firstly to determine its own logistics cost viz-a-viz that of hiring a Third Party Logistics (3PL) provider. On a comparable basis, the company can then decide on whether hiring these services would be necessary. It is often in the best interest of the company to determine the direct costs of each product and service it offers. This is because, basing upon this knowledge, it would help the company in deciding on whether it would be sensible to outsource all or specific parts of the logistics. Some products or operating procedures can be eliminated so that these logistics are dealt with. The task can be carried out by an internal logistic department of the company which could result into cheaper or/and affordable solutions (Kappauf, Jens, Matthias, and Bernd 48). The customer orientation of the 3PL providers; The Third Party Logistics (3PL) providers must have those structures that fit those of the client companies, in terms of their requirements and policies. This fit, as has been surveyed, is far more important than the pure cost savings associated with outsourcing. The kind of orientation is usually verified in terms of how these third party logistics providers are adaptable to the changing customer needs and whether they are reliable and flexible enough to deal with the variations in customer needs. In relation to the orientation of these service providers, their specialization too should also be considered an important factor before they are single out for outsourcing collaborations. It has been suggested that while choosing these service providers, those that have similar area of logistics as that of the company’s logistics department should be highly considered. In the internship employment, I was able to get a great deal of knowledge of the operations and functions of the Third Party Logistics Group, Inc. This including a couple of their benefits and the risks that were always involved to the outsourcing companies. The company carried out many functions, and these could be grouped under the following categories; Basic services provision. The basic services provided by this organization included: a) Warehousing services. This involves both the administrative and physical functions usually attached to the storage of goods and products. They include the receipt, due identification, inspection and verification of such goods and products. The Third Party Logistics Group Inc. does all these functions for several companies who outsource their logistics to them. b) Order processing services. The Third Party Logistics Group Inc. does this through its faster and immediate acquisition of customers’ orders. This service is a crucial link in any sales process because it ties up and helps in establishing stronger client relationships. It entails quicker responses to consumers’ queries and orders. A strong company-client relationship has helped in increasing the sales of the 3PL providers. Outsourcing order processing usually takes off the weight of managing and maintaining the order processing systems from the companies. This kind of outsourcing has helped in eliminating the need for the companies to recruit, train and use customer support. In addition, the companies have been limited on fulfilling staff because the 3PL providers take over their functions (Kappauf, Jens, Matthias, and Bernd 53). c) Order picking services. This represents the process of removing products and goods from where they are stored in order to meet specific consumer demands. Often when this is done accurately and faster improves the consumer satisfaction. Third Party Logistics Group Inc. preference of an automated system improves on the speed and accuracy of these services. d) Transportation services. These services usually carried by the 3PL providers involve the movement of products from their clients to where they are required. Transportation services involve the shipment of such goods across expansive regions. Such logistic services are outsourced and become the responsibility of such companies to which they are outsourced to be able to carry them out effectively. Value added services. In addition to the basic service provision, the Third Party Logistics providers also have additional services to their customers that include; i) Case marking and labeling. This involves placing of labels and codes to the products that are usually on sale. The 3PL provider usually provides this as a value added service for easier identification and transportation services. ii) Specialized pick/pack operations. Specialized packing and picking is one of the value-added services that are offered by the 3PL provider, and this is done about their different customers. Another value added services offered by this 3PL service provider includes order consolidation, cross-docking, and management reporting. iii) Acting as logistics integrators; this is when third party providers take full control of the supply chain as needed by their clients and customers. It involves the distribution of goods and products and their delivery at their points of needs. The third party providers ensure uninterruptible flow of goods between their clients and customers, through its inventory management. They are also responsible for such operations as E-commerce/website fulfillment by their customers and either wholesale and/or retail distribution. To be able to perform these duties and functions, the Third Party Logistics Group Inc. has relied on its effective inventory management. Effective inventory management has also been necessitated by the creation of the supply chain management system (SCMS) the warehouse, suppliers, and manufacturers operations. The software technology has been able effectively to integrate all the systems that are needed in the overall security and management of the supply chains (Poirier 28). In performing a SWOT analysis of The Third Party Logistics Group Inc., all the forces of the business environment has to be considered. The SWOT analysis takes into consideration an internal analysis of the organization, accessing its strengths and weaknesses, and an external analysis that takes into consideration the threats and the various opportunities that faces the firm. In performing the internal analysis, the organizational resources, capabilities and core competencies become major inputs. This however should be done in line with the firm’s core objectives, mission and laid down strategies. All the company resources including financial, physical, human, intangible and structural-cultural resources have to incorporated in determining the firm’s strength and possible weaknesses. To build a sustainable competitive advantage and become a leader in the industry, the firm has to use its capabilities accordingly and concentrate on their core competencies in order to serve their customers properly with superior products and services (Blecker, Thorsten, Huang, and Eddy 78) . Strengths in an organizational perspective refer to those resources that a firm has and the capabilities that it has developed which can be made into use to and exploited to the firm’s advantage over its rival while weaknesses refers to those resources that are lacking and often works to the disadvantage to the firm (Poirier 18). The Third Party Logistics Group Inc derives its strength from its infrastructure and its logistic operations with regard to the warehousing they provide for their clients. A source of strength that has developed in the firm is its customer service through its integrated systems that has been able to cater sufficiently for the customer’s queries and complaints. A weakness that has threatened the firm in its entirety is the small space that often gets overwhelmed, especially during peak periods of business. Another area in which a specific improvement is required is the human management of the organization. With a solid and participatory human resource, the company would be able to boost of even more better services. In the external analysis with regard to the performance of the firm, the external environment plays a major role. This is done with the analysis of the opportunities and threats that bedevil the firm in its operations. This analysis focuses on the specific and general environment that surrounds the business enterprise. The specific environment involves those factors that directly affects the organizational decision making structures while the general environment are those that indirectly affects these structures (Poirier 22). All these often pose both opportunities threats to business firms. The specific environmental factors include such factors that affect the industry as a whole while the general environment compounds such factors as that of technology, economic situations, political affiliations and demography. The opportunities that have been able to be exploited by the firm include that of an increased market and that of an improved web based storage system of goods and products. The major threat that has bedeviled the firm and especially that of the industry is the perceived underperformance of these 3PL providers. This has lowered the general goodwill by the clients to outsource most of their operations to them. Another threat is the entrance of more firms in the industry thus increasing the competition for their services. To counter most of the threats, most of these 3PL providers have improved and enhanced their systems in order to offer quality services and appeal more to their clients. A summary of the SWOT analysis is tabulated as below: Internal Analysis Strengths Weaknesses Better firm infrastructure Better customer service Lack of enough space during peak periods Lack of better human resource management External analysis Opportunities Threats Increased market Improved web based storage system Decreased goodwill from clients Increased competition in the industry Outsourcing usually, coupled with all these analysis, has its pair of benefits and loopholes for both the clients and the 3PL providers. The benefits usually accrued includes among others; a) Lower capital commitment. Due to the fact that most of the operations involving warehousing and supply chain management are outsourced to the 3rd party logistics, the clients wouldn’t need to invest a lot of its resources in warehousing and/or providing transportation facilities. As a result, there is a low amount of capital and money that would be required from the clients from running their businesses. This is more significant to companies that have a high variation in warehouse capacity utilization. It would help in reducing the margins of the loss in profits with companies with particularly bad capacity utilization (Blecker, Thorsten, Huang, and Eddy 66) b) Cost and time savings for the client. These third party logistic companies and groups usually have a highly specialized knowledge and greater expertise as this is their core competence in the business field. They are better organized technically to carry out the operations given to them by their clients. This when particularly integrated with the global networks of the large sizes of companies often results into a greater time and cost efficiency. When looked into these 3PL groups, it is found that most of their systems and IT equipment are usually updated and advanced to meet the current requirements of their new customers adequately satisfying their needs as compared to the producing and selling companies who are their major clients. This is a crucial factor in the continuity in business. The client companies usually do not have as much time as these 3PL groups to constantly and quickly adapt their systems and equipment to the prevailing market conditions. These groups of logistic providers can thus help in the provision of these services. The services range from that of warehousing management to provision of transport in a more cost effective manner compared to the client companies (Blecker, Thorsten, Huang, and Eddy 70). Gives the clients the ability to focus on core businesses; the companies get the ability to be able to place more focus on their core business operations when they outsource their logistics departments. However, in cases where logistics form one of the core businesses, then outsourcing ceases to become necessary. In circumstances where logistics is not included in the core operations of the business, then it should be outsourced to a logistics provider. A business outlet or company, due to the increasing complexity of the business environment cannot become an expert in all its necessary fields. Therefore, there is a need to outsource some operations to other experts who are better placed than them on these operations. Outsourcing is particularly important to those operations that are not one’s core operations. The core competence is the only factor that usually contributes to adding value to the company’s product; hence particular attention should be placed on them before any other secondary operations. Companies become leaders in the fields when they emerge the best in their lines of production and producing such products. That is; the company resonates to its customers’ needs and the only way to achieve this is through concentrating more in the particular line of production (Farahani, Reza, and Shabnam 72). Proper production mechanism, thus, encourages the need to outsource particular departments more specifically the logistics department. 3PLs provide flexibility. Third party logistics providers like the 3rd Party Logistics Group Inc. can help in the provision of the much higher and needed flexibility especially with respect to the geographical aspects. In addition, the company can be used to help in the provision of a larger range and variety of products and services, much more that the clients would have been able to provide. These companies by outsourcing some of their departments have gained much flexibility about the size of their workforce and their resources. These third party logistics providers have also enabled a variation to existing in the logistic cost of these companies and propagated and improved their profitability. Improves risk sharing; enormous amounts of risks are usually associated with the company’s capital investments. With outsourcing from several client companies, a 3PL provider can share these risks across these many companies. It allows it lower its risk relative to that of a company running its operations. Other benefits often derived include; a) Freeing up resources; Outsourcing creates a very effective way for companies to conserve their capital and direct it mostly to those core activities that are more crucial in contributing to the profitability of the company. B0 Cash infusion; outsourcing at certain times incorporates the transfer of assets from the client company to the 3PL providers which may later be sold to them adding to the cash infusion sources of the company. Some of the disadvantages of outsourcing noted include; Loss of control. Clients often lose control in their logistics department especially by collaborating with third party logistics. The collaboration has been more significant in outbound logistics where the 3PL provider takes over the communication and interaction that exists between a company and its customer or supplier. However, by maintaining a good and continuous communication between its clients and the customers, most of these third party logistic providers have managed to diminish the effects of this problem. To effectively carry the images of their clients and to lower the confusions that usually exists; some of them have even painted the logos of their clients on their products. Dependency; businesses often require a reliable structure in order for the partnership with a third party logistic provider to function effectively. In fact, in most instances mishandling of the logistics has usually led to a huge loss in productivity and profitability. In circumstances where businesses have been forced to change their 3PL service providers due to disagreements or due to dissatisfaction, a huge amount of unforeseen costs has been incurred. When businesses eventually enter into a contract with these service providers, a significant amount of dependency is created. This could often put the businesses in compromising situations especially if the 3PL services are not offered as expected or required (Farahani, Reza, and Shabnam 72). Fixity in the pricing models; when companies enter into partnerships with the 3PL service providers, they get locked into a pricing model dictated by the business agreement. Companies usually forgo the possibility of developing cheaper and more effective internal solutions through its logistics department by outsourcing such services. Loss of voice in public policy issues; When certain aspects of logistics are outsourced to the 3PL providers, i.e. warehousing and distribution logistics, the client companies would not have any voice in championing their interests in case of policy changes in those sectors. Leakage of sensitive company data and information; the access to information that is normally accorded to these 3PL companies usually leave the companies vulnerable to their competitors. Some of the other notable disadvantages with the use of these third parties logistic providers include: a) Negative reputation to the company’s name and position in cases where the services fail to be managed nicely by these logistic providers. b) Cases of a suppliers’ failure could result into a lot of major interruptions in the operations of the company. The operations and the general structure of the 3PL providers also experience many challenges some of which include; Perception of underperformance; the general perception that most of the 3PL providers do not perform effectively according to their stated promises is a challenge that each of these companies must reverse in order to compete competitively. They should thus concentrate on strengthening their systems that would enable them differentiate the top successful companies from the package. They should sensitively work being concerned about their clients’ worry if losing control over some of their services to their customers by outsourcing. They must thus work to handle the move to external operations with due and diligent regard for their client’s internal staff and corporate operations and systems (Kappauf, Jens, Matthias, and Bernd 68). The 3PL provider, in order to sustain effective systems that would adequately meet the varied needs of its clients and customers should incorporate among its services others including; Data accuracy Competitive prices Scanning capabilities and Real time inventory information References Blecker, Thorsten, G Q. Huang, and Eddy Bajic. Rfid in Operations and Supply Chain Management: Research and Applications. Berlin: Erich Schmidt Verlag, 2008. Print. Cahill, David L. Customer Loyalty in Third Party Logistics Relationships: Findings from Studies in Germany and the Usa. Heidelberg: Physica-Verlag, 2007. Internet resource. Coyle, John J, and John J. Coyle. Supply Chain Management: A Logistics Perspective. Mason, OH: South-Western Cengage Learning, 2009. Print. Farahani, Reza Z, and Shabnam Rezapour. Logistics Operations and Management: Concepts and Models. Amsterdam [etc.: Elsevier, 2011. Print. Kappauf, Jens, Matthias Koch, and Bernd Lauterbach. Logistic Core Operations with Sap: Inventory Management, Warehousing, Transportation. Berlin: Springer Berlin, 2011. Print. Poirier, Charles C. Advanced Supply Chain Management: How to Build a Sustained Competitive Advantage. San Francisco: Berrett-Koehler, 2000. Print. Read More