Requesting 200 words response to the following post using at least three substantive peer-reviewed scholarly journal articles (different than in the below post) to provide those substantive replies. You may utilize only the main article as a reference.
The key term and why you are interested in it?
The key term that I have selected is third-party logistic suppliers, also known as the 3PL. (Satterlee, 2014) This term is interesting to me for one major reason. One week ago, I took over my organization’s 3PL, and am fully responsible for all product movement between my company and the purchasing customers. The company I work for not only utilizes 3PL for warehousing and transportation but also provides the following services order to cash, returns, and chargebacks. In the pharmaceutical industry, 3PLs are extremely common for middle to small-sized companies in order to decrease overhead, and gain access to shared services.
Explanation of the key term?
A third-party logistics supplier, “can contribute to nearly all aspects of an organization, including purchasing, finance, marketing, and operations” (Satterlee, 2014). Other service offerings that may be provided by a 3PL are warehouse, transportation, refrigeration, order to cash processing, returns, and destruction services. The third-party logistics suppliers’ global market was valued at $830 billion in 2019 and is forecasted to be approximate $1.7 trillion by 2027 (Grand View Research, 2020).
In an article by Antonio Rodriguez, he states that “economic growth increases the need for continuous improvement of logistics processes because customers seek better operational performance” (Rodrigues et al., 2018). This is a key link of the overall supply chain for most manufacturers. If the warehouse is not performing to the optimal level of performance, it causes delay in product, or missed shipments. An organization’s value in deploying a 3PL would lead to a primary focus on distribution operations. They also have the capability to provide shared services, decreasing the costs due to their efforts across multiple manufacturers.
Major Article Summary
In the article by Rodrigues et al., they look at the variables that play a role in the performance of a 3PL and their refrigerated services. Many 3PLs offer a variety of services and in order to remain competitive, they must improve the performance of their services for their customers. Technology and communication are important to service offerings of refrigerated or cold chain processes (Rodrigues et al., 2018). For a product to maintain its quality, the 3PL must retain the proper temperature throughout the storage, packaging, transportation, and delivery. Some of the technology that a 3PL may need to offer for a cold chain product includes temperature tales, refrigerated trucks, special coolers for shipping, and refrigerated pallet locations.
“Three reasons for outsourcing logistics are (1) service improvement, (2) cost reduction, and (3) a desire by the organizations that purchase logistics services to focus on their competencies” (Rodrigues et al., 2018). Though all three are respectable reasons for employing a 3PL, it can also have its drawbacks, which may include inconsistent staff, longer lead times for projects, lack of customization, or even disruptions due to other manufacturers in a shared space. Manufacturers must rely on KPIs, benchmark studies, and audits to maintain a high level of effectiveness and performance from their 3PL partner.
The outcome that Rodrigues et al. discovered was, “that in fact, pure, technical and scale efficiency levels are differently impacted by the type of technology adopted and the services offered” (Rodrigues et al., 2018). The specialization of the offerings that are necessary to meet manufacturer needs place the 3PL at a disadvantage because they are unable to standardize their service to decrease costs. This results in the 3PL not being able to offer efficient solutions to manufacturers. Rodrigues suggested specializing at a regional level to target efficiencies and cost savings.
Evaluating and choosing to utilize a 3PL can be difficult. How does one compare services from various providers that may or may not be identical in offerings? In research by Hadlar et al., they suggest utilizing the followings steps, “first DEA is used to segregate the 3PL vendors as efficient and inefficient; second, TOPSIS is implemented to rank the efficient 3PL vendors; and, finally, LP lets us calculate the quantities to be allocated to each selected 3PL vendor” (Haldar et al., 2017). By utilizing the three different models, a manufacturer can compare 3PL providers and make an informed selection for a provider.
In an article by Augusto Bianchini, he also suggests applying multi-criteria decision-making methodology (MCDM) when evaluating 3PL providers. His reasoning for this is, “finding an appropriate match can be challenging since every organization is unique, and sometimes, even a single, seemingly insignificant business requirement can make a huge difference in a particular provider’s ability to perform effectively” (Bianchini, 2018). An example may be the connectivity or compatibility of IT systems between the manufacturer and the 3PL, which could increase significant costs to the manufacturer or decrease efficiencies. He also suggests laying out specific criteria that will be weighted and compared for results, and then analyzed for the selection process.
During a research study, Shou et al. evaluated “relational resources’ influence on firm performance through the mediating mechanism of innovation capability” (Shou et al., 2017). They uncovered that relational resources did have a positive affect on innovation, due to the interactions with their suppliers and their customers. 3PLs have a goal to standardize offerings which decreases innovation. When a manufacturer requests a customization, the 3PL can provide that innovation to other manufacturers as an ongoing service to decrease its costs.
Lastly, not only are manufacturers looking to improve their efficiencies with their 3PL providers, but 3PLs are striving for efficiency as well. In an article by Baruffaldi et al., they research how to improve order picking within an Italian 3PL. Baruffaldi and team suggested that, “ the framework is articulated into five phases, extending from a preliminary data collection and manipulation to the assessment and benchmarking of improvement scenarios” (Baruffaldi et al., 2020). Through data collection, they could review how many times a worker went to a location in the warehouse to pick up an item order. After analyzing the workers’ movements, they could realign the way the orders were provided to the employee to decrease the movements taken and increase efficiencies of picking items.
Baruffaldi, G., Accorsi, R., Manzini, R., & Ferrari, E. (2020). Warehousing process performance improvement: a tailored framework for 3PL. Business Process Management Journal, 26(6), 1619–1641. https://doi.org/10.1108/bpmj-03-2019-0120
Bianchini, A. (2018). 3PL provider selection by AHP and TOPSIS methodology. Benchmarking: An International Journal, 25(1), 235–252. https://doi.org/10.1108/bij-08-2016-0125
Grand View Research. (2020). Third-party Logistics Market Size: Industry Report, 2020-2027. Third-party Logistics Market Size | Industry Report, 2020-2027. https://www.grandviewresearch.com/industry-analysis/third-party-logistics-market.
Haldar, A., Qamaruddin, U., Raut, R., Kamble, S., Kharat, M. G., & Kamble, S. J. (2017). 3PL evaluation and selection using integrated analytical modeling. Journal of Modelling in Management, 12(2), 224–242. https://doi.org/10.1108/jm2-04-2015-0016
Rodrigues, A. C., Martins, R. S., Wanke, P. F., & Siegler, J. (2018). Efficiency of specialized 3PL providers in an emerging economy. International Journal of Production Economics, 205, 163–178. https://doi.org/10.1016/j.ijpe.2018.09.012
Shou, Y., Shao, J., & Chen, A. (2017). Relational resources and performance of Chinese third-party logistics providers. International Journal of Physical Distribution & Logistics Management, 47(9), 864–883. https://doi.org/10.1108/ijpdlm-09-2016-0271
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