Only through good and constant communication between the customers and suppliers can 3PLs turn away doubts that customers may have of the logistics providers. 3PLs is a trend that has evolved over time, and will continue to have major impacts on the supply chain as discussed in this paper.
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Third Party Logistics are companies that engage in linking shippers with appropriate transportation services (Barratt 2004, p 30; Fulconis, Saglietto and Pache 2006, p. 69). Most 3PLs are in transportation and warehousing as others expand their service offerings to full-service supply chain management.
Evolution of the concept, historical background, current trends and context
Earlier on, third party logistics mediated shippers and asset providers in the supply chain (Palaneeswarann & Humphrey 2000, p. 661). However, the 3PLs concept has evolved from their focus on pure intermediaries on the supply chain, to brokers and value-added providers (Hertz & Alfredsson 2003, p. 141).
Description of the supply chain practice including its key elements
Brewer and Speh (2000, p. 78) affirm that third part logistics combines transportation, distribution, and optimized inventory to create a smooth supply chain. Christopher (2005, p. 23) adds that third party logistics mixes the elements of expertise, process efficiency, and technology to create a strong logistics operation
Supply Chain process map
Supply Chain analysis
3PL providers are able to support supply chain requirements across the product lifecycle of a company to the real results (Bolumole 2003, p. 94; Bermudez 2002, p. 16). The supply chain begins from outsourcing partners at a facility, and passes through the human and logistics level to give real results.
Key issues in designing and implementing the practice
Major issues in designing and implementing third party logistics include regulations, enterprise extensions, knowledge of logistics markets, and multimodal rates (Murphy & Poist 2000, p. 122; Bernon & Cullen 2007, p. 41). It is important to compile trade terms, international customs documentations before establishing operations.
Major benefits, risks/cost of the practice
A major risk of the 3PLs is that as the companies become more successful, foreign-based transportation conglomerates make them acquisition targets. A key benefit of 3PLs is that they consider logistics their core competence, a fact that explains their great expertise in producing or selling products (Nemoto 2001, p. 13).
Trends in UAE/GCC that are successfully using the practice including best practices
The few players who have great power in the logistics industry have increased the rates of operations in UAE (Murphy & Poist 2000, p. 123). Reduced requirements lower the amount of capital that businesses require to start up in the UAE/GCC region.
Companies that desire to create efficient supply chains need experienced 3PLs who are knowledgeable in the supply chain activities of the company. Managers are advised to seek only companies that they feel, can assist with the process in ways that will produce the best results across the value chain (Murphy & Poist 2000, p. 123).
In sum, suppliers only have few choices, with the availability of third party providers. 3PLs increase the efficiency of supply chain practice by assisting clients select the best model for leveraging business. Indeed, 3PLs provide warehousing solutions that are achievable through strategic locations on shared facilities. 3PLs have a unique advantage of being at the right place when clients need them.
Barratt, M 2004, ‘Understanding the Meaning of Collaboration in the Supply Chain,’ Supply Chain Management: An International Journal, vol. 91, pp. 30-42.
Bermudez, J 2002, ‘Supply Chain Management: More Than Just Technology,’ Supply Chain Management Review, vol. 62, pp.15-18.
Bernon, M & Cullen, J 2007, ‘An integrated approach to managing reverse logistics,’ International Journal of Logistics: Research and Applications, vol. 10, no. 1, pp. 41-56.
Bolumole, Y 2003, ‘Evaluating the supply chain role of logistics service providers’, The International Journal of Logistics Management, vol. 14, no. 2, pp. 93-107.
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Brewer, P & Speh, T 2000, “Using Balanced Scorecard to Measure Supply Chain Performance,” Journal of Business Logistics, vol.21, no.1, pp. 75-93.
Christopher, M 2005, ‘Logistics and Supply Chain Management: Creating Value Added Networks, FT Publishing, Prentice Hall, London.
Fulconis, F., Saglietto, L & Pache, G 2006, ‘Exploring new competences in the logistics industry: the international role of 4PL,’ Supply Chain Forum: An International Journal, vol. 7, no. 2, pp. 68-72.
Hertz, S & Alfredsson, M 2003, ‘Strategic development of third party logistics providers,’ Industrial Marketing Management, vol. 32, no. 2, pp. 139-149.
Kunmaraswamy, M., Palaneeswaran, E & Humphrey, P 2000, ‘Selection matters – in construction supply chain optimization,’ International Journal of Physical Distribution & Logistics Management, vol.30, no.7/8, pp. 661-680.
Maloni, M & Benton, W 2000, ‘Power Influences in the Supply Chain,’ Journal of Business Logistics, vol. 21, pp.121-133.
Murphy, P & Poist, R 2000, ‘Third-Party Logistics: some user versus provider perspectives,’ Journal of Business Logistics, vol.21, no.1, pp.121-133.
Nemoto, V 2001, ‘Impacts of Information and Communication Technology on Urban Logistics System,’ Working Paper Series, No 65, Hitotsubashi University.