INTRODUCTION
Outsourcing: Contracting of the management functions and operational control of the logistics functions to unrelated third-party companies
• Began in 1990s
• Grown at an 25% annual rate since
INTRODUCTION
Reasons of Outsourcing:
• Turning non-core functions over to external suppliers in order to:
- Leverage resources
- Spread risks
- Concentrate on issues critical to survival and future growth
INTRODUCTION
Reasons for Outsourcing:
• Overcoming lack of internal capabilities
• Reducing inventory
• Improving service
• Improving operations
INTRODUCTION
Third Party Logistics (TPL) Providers:
• External providers who manages, controls, delivers logistics activities in behalf of a shipper
• The activities performed can include all or a part of the logistics activities but at least management and execution of transport and warehousing should be included
• Non-core functions are outsourced
• Core versus non-core differs by company and industry
• Non-core can be important and critical but does not define the company
INTRODUCTION
Functions usually outsourced:
• Inbound and outbound transportation
• Warehousing
• Distribution
• Information systems
• Reverse logistics
• E-commerce
INTRODUCTION
INTRODUCTION
Functions usually not outsourced:
• Supplier management
• Demand management
• Inventory ownership
• Strategic planning
• Cost control
• Lack of quantitative analysis
• Most conceptual and empirical
• Murphy and Poist give an extensive survey on the growth of TPL market
• Sheffi: reasons for the growth of TPL in USA: Core business, better transportation, cost saving, improved service, need for more professional logistics services
LITERATURE REVIEW
• Wang and Regan considered risks of using TPL providers
- Possibility of inefficient management
- Loss of logistics innovative capacity
- Hidden costs
- Dependence on TPL provider
- Conflicts of culture
LITERATURE REVIEW
• Leahy et al. Examined the determinants of successful TPL relationships from the provider perspective
• Roberts considered the choosing process for logistics provider: Cost, quality of the people and level of service provided
LITERATURE REVIEW
• Reverse logistics can be extremely complex
• Many companies with limited resources outsource reverse logistics
• NetReturn: An Internet system that FedEx has developed for reverse logistics management
LITERATURE REVIEW
• Companies using TPL for reverse logistics could reduce up to 10% of annual logistics costs. (Krumweide)
• K-Mart uses TPLs like GENCO Distribution System.
• Krumweide provides a decision making model for possible implementation of reverse logistics by TPLs.
LITERATURE REVIEW
• Spicer and Johnson considered TPLs as an approach for Extended Producer Responsibility (EPR).
• EPR: A policy to promote total life cycle environmental improvements of product systems by extending the responsibilities of the manufacturer especially to take-back, recycling and final disposal of the product.
LITERATURE REVIEW
• For many product categories TPL take-back is shown to be the most effective way to meet the goals of EPR programs.
• Third party warehousing has an increasing trend.
• Operational efficiency of TPW has important implications for the success.
LITERATURE REVIEW
• Chen et al. considered TPW as a space provider.
• Demand for space is a random variable
• Multi-period contracts - initial commitment on space
• Adjustment during the contract period according to realization of the demand
• Simple form solutions are found
LITERATURE REVIEW
• Goh et al. also considered warehouse sizing issues
• TPW usually lease in discrete chunks of gross floor area
• Piecewise linear total warehousing costs
• Closed from solutions for optimal warehouse size that minimize the total cost of ordering, holding and warehousing
LITERATURE REVIEW
• Cetinkaya and Lee considered a supplier and a TPW
• TPW holds inventory and responsible for outbound transportation cost
• For economies of scale TPW consolidates many small shipments into one large shipment.
• During this time customers wait
LITERATURE REVIEW
• Parameters that determine
- how often to dispatch a truck
- how often and in what quantities the
stock should be replenished at the
TPW
are tried to be found
• Closed form expressions are obtained.
LITERATURE REVIEW
• Need for quantitative analysis
• Quantifying benefits of using TPL providers
• Evaluating different TPL providers and selecting the best one to work with:
- Different lead times
- Different service level guarantees
- Different operating characteristics
FUTURE RESEARCH
Specific Problem to be Analysed:
• Supplier, retailer and TPW
• Third party is responsible for warehousing and outbound transportation
• For economies of scale TPW consolidates many small shipments into one large shipment
• Retailers use periodic review order policy
FUTURE RESEARCH
• Customers may wait for some time with penalty wr to the retailers
• For such cases retailers charge wt penalty to the TPW
FUTURE RESEARCH
FUTURE RESEARCH
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