Group Project (Written Report)
Outsourcing Logistics Services Including 4PL
Member Jing GE Li DING Namrin BUSSAYADILOKSKUL Lei ZHANG Binbin
HAN Zhongkai CAI
Unit of Study: Lecturer: Submission Date:
TPTM6155, Logistics Management Dr. Shams Rahman 20 May 2004
TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
SYNOPSIS Basically, people can do something best. Some people
can do everything but people cannot do everything best. Because of
this, thats why people outsource. Outsourcing logistics services is
the activity that a company passes its logistics functions to a
logistics provider to manage. Outsourcing logistics also created
the terms, insourcing, third party logistics, fourth party
logistics, and fifth party logistics. It is very useful to know
about similarities and differences of those terms. As for the
companies who realize that logistics tasks are not their core
competency, they should learn about the impacts of outsourcing
before making a decision to outsource. The impacts have both bright
and dark sides. The process to select a third party logistics
provider is not too complicated but there are many factors to be
considered. In contrast, success in outsourcing like Nike, Hitachi,
and General Motor is not simple and needs some strategies to build
it up. There are some signs to advise that the outsourcing is still
growing. Firstly, the logistics companies keep launching a new
technology or new service for logistics outsourcing. Secondly,
there are many reports about logistics partnership from time to
time. Although logistics outsourcing is in trend, the companies
that will use it should depend on whether they need it and it is
worthwhile to do.
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
TABLE OF CONTENTS 1. INTRODUCTION 2. DEFINITIONS OF LOGISTICS
OUTSOURCING 3. TYPES OF OUTSOURCING LOGISTICS SERVICES 4. IMPACT OF
OUTSOURCING LOGISTICS SERVICES ON COMPANIES 4.1 Advantages 4.2
Disadvantages 5. HOW TO SUCCEED IN LOGISTICS OUTSOURCING 5.1 How to
Outsource Logistics Services Providers 5.2 Barriers to Logistics
Outsourcing 5.3 Key Success in Logistics Outsourcing 6. FUTURE
TRENDS 7. CONCLUSION 8. REFERENCES 1 1 3 4 4 7 7 8 9 10 11 12
13
9. APPENDICES 18 Appendix 1: Levels of Logistics Outsourcing
Appendix 2: Four Components for 4PL Appendix 3: The Next Wave
Appendix 4: Most Frequency Used Third Party Logistics Services
19972000 Appendix 5: Fiat Auto Reverses Its Outsourcing Strategy
Appendix 6: Major Selecting Criteria Appendix 7: Percentage of
Growth of Outsourcing Globally Reference Attachment
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
1. INTRODUCTION In the past, a typical company will manage
everything from purchasing and sales to delivery and post-sales
service. The larger organisation can manage those activities better
because they gain the economies of scales from processing those
functions systematically. However, rivalry in business forces the
organisations to squeeze all the costs beginning with marketing,
production, human resources, and currently logistics. Hence,
outsourcing logistics began. From study (Berglund et al., 1999),
there are three waves in outsourcing logistics or third party
logistics (3PL/TPL) market. In the 1980s or earlier, the first wave
emerged is traditional logistics service providers (e.g. Exel in
the UK). The second wave is, in the early 1990s, some network pla
yers like DHL, UPS, and FedEx started to provide 3PL services. The
third wave began in the late 1990s. The companies from other
industries such as information technology and financial services
entered the market and joined with the first and second wave
companies. Nowadays, in the USA, the big 370 companies out of the
countrys 500 largest manufacturers outsource (Barlas, 2002). The
percentage has been developed from 65% in 2002 to be 83% in 2003
(Blanchard, 2003). The value of outsourcing including fourth party
logistics (4PL/FPL) is around 3.5 percent of US$2 trillion
(Morrison, 2001). The paper aims to present: 1) the holistic view
of outsourcing logistics services; 2) the impact of outsourcing
logistics services; and 3) how to succeed in logistics outsourcing.
To clarify the readers understanding, outsourcing company, or
company, or organization means the company who is looking for or
using a logistics provider. Apart from part 2.2, the term, a
logistics (service) provider, in this paper is used as a logistics
provider, 3PL and 4PL. After introduction, in part 2, the
definition of the logistics outsourcing is described. In part 3,
the types of outsourcing logistics services are discussed. Then,
the paper presents the impact of outsourcing logistics services in
part 4. In this part, it is divided into 2 sections; advantages and
disadvantages. In part 5, it is divided into 3 sections to
elucidate how to succeed in logistics outsourcing. Future trends of
logistics outsourcing are illustrated in part 6. The final part is
the conclusion of this paper. In additions, there are logistics
outsourcing examples inserted in each part on occasion. 2.
DEFINITIONS OF LOGISTICS OUTSOURCING Outsourcing is a decision of a
company about make or buy goods or services. As for logistics
outsourcing, if the company operates logistics activities more
cheaply than hires someone to manage it, the company should
insource. However, if the company operates those activities more
expensively than hires someone to do it, the company should
outsource (Zineldin and Bredenlow, 2003). According to Stank and
Maltz (1996), outsourcing logistics is the decision to buy
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
logistics services from external sources rather than operate
in-house. Another explanation by Murphy and Wood (2004) is the
process when an organisation allows a specialist company to provide
its non-core activities. To understand profoundly in the
outsourcing, there are five levels of logistics outsourcing (Bade
et al., 1999). See Appendix 1. 1) In-house logistics, or insoucing
logistics, or reverse outsourcing means that the company operates
its logistics activities in-house. The company owns transport,
warehouses, handling equipment, and others including staff to
process the logistics functions. This traditional way can perform
effectively and efficiently if the company pays attention (Langley
et al, 2001; Wong et al, 2000;
http://www.hoyer-group.com/logistikE/html/3pl4pl.html, n.d.). 2)
Logistics service provider (LSP), or asset-based logistics (2PL) is
the management of traditional logistics functions such as transport
and warehouse. The company who does not own or have enough
facilities and infrastructure may hire the LSP to provide the
vehicles or the basic service. The major reason is to reduce the
cost or capital investment
(http://www.hoyergroup.com/logistikE/html/3pl4pl.html, n.d.;
Langley et al, 2001). 3) Third party logistics (3PL/TPL), or
forwarding logistics, or contract logistics. TPL in the original
term means that using external organisations to perform logistics
functions that can be the entire logistics process or selected
activities (Lieb et al., 1993 cited in Skjoett-Larsen, 2000).
Another explanation of 3PL by van Laarhoven et al. (2000) is
activities carried out by a logistics service provider on behalf of
a shipper and consisting of at least management and execution of
transportation and warehousing for at least one year of cooperation
on or off contract. The paper refers to Murphy and Poist in 2000
(pp.121) who defined 3PL asA relationship between two parties or
more which, compared with basic logistics services, has more
customized offerings, encompasses a broader number of service
functions and is characterized by a longer-term, more mutually
beneficial relationship.
In some literature (Skjoett-Larsen, 2000; Moore, 1998), 3PL may
be described as the same meaning as logistics alliance or strategic
alliance that is a close relationship between a company and a
logistics provider not only to operate the logistics tasks but to
emphasize on sharing information, risks and benefits under long
-period contract. 4) Fourth party logistics (4PL/FPL), or supply
chain logistics, or lead logistics provider (LLP). FPL is an
evolutional concept of 3PL for better service response,
customisation, and flexibility (M2 Communication Ltd., 2004). FPL
manages and runs complex logistics operations including resources,
supply chain infomediary, control room, and architecture/integrator
function. See Appendix 2 (Schwartz, 2003). According to Appendix 2,
as a functional and operational integrator, 4PL is 2
TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
related to and developed from 3PL by covering the broader scope
including 3PL, Information Technology (IT) services, and business
process management (Bade et al., 1999). See Appendix 3. In this
paper, 4PL is defined as a single contact that manages and
integrates all kinds of resources and oversees 3PL functions
throughout the supply chain with the sense of global market,
strategic advantages, and long -term relationship (Morrison, 2001;
Bade and Mueller, 1999 cited in Skjoett-Larsen, 2000; Gattorna,
1998 cited in Sahay, 2003). 5) Fifth party logistics (5PL) is
developed to serve the e-business market. Those 3PL and 4PL
providers manage all the parties in the supply chain on ecommerce.
The key to success in this area is the information technology and
system (http://www.hoyer-group.com/logistikE/html/3pl4pl.html,
n.d.; Barlas, 2002) 3. TYPES OF OUTSOURCING LOGISTICS SERVICES
Logistics outsourcing has grown up rapidly during the last few
years, which improves the development of outsourcing logistics
services. Nowadays, there are many kinds of logistics services to
supply the diverse requirement from any business. It is different
from the past that not only have basic logistics services such as
transport and warehousing but also complex and profound services
been emerged. Learning about logistics services is useful for
companies to consider which services are now available and which
services they may need in the future. Outsourcing logistics
services can be categorized into several types because, at present,
no regulation specifies how many types of logistics services
actually are. Different industries have different logistics
management systems and they have different services to handle their
supply chain management. This is why the types of outsourcing
logistics services are not clear. According to Bask (2001), there
are four different types of outsourcing logistics services: 1)
general service, 2) routine 3PL services, 3) standard 3PL services,
and 4) customized 3PL services. As for 4PL, the companies like TNT
logistics or UPS Supply Chain Solutions can be a part of customized
3PL services (Schwartz, 2003). Meanwhile Berglund et al. (1999)
separated the logistics services into 2 categories. One is
value-added logistics service, and the other is basic logistics
service. Nevertheless, Shanahan (2004) provides the types of
logistics services in terms of practical use. The top five 3PL
services used during 2000-2003 are freight payment, shipment
consolidation, direct transportation service, customer brokerage,
and warehouse management (Shanahan, 2004). In the logistics market,
there are other services available. For instance, freight
forwarding, carrier selection, rate negotiation, product returns,
logistics information systems, contract manufacturing, order
fulfilment, consulting services and so on (Aghazadeh, 2003). See
Appendix 3. Thus, judging the types of outsourcing logistics
services should be based on a particular view or scope. For
example, if the boundary is the degree and depth of
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
logistics services, the types of logistics services by Bask
(2001) should be applied. If the scope is the practical use, the
types of logistics service by Shanahan (2004) should be selected
Today, especially in the business that is full of information and
technology, outsourcing is increasingly important to the success of
a company. Consequently, many logistics companies have emerged and
achieved huge success. For example, Redwood System (RS), as a
dynamic 3PL provider, has been a fast-growing leader in the field
of logistics management. As a full-service contract logistics
management company, RS provides services relating to transportation
management, inventory management, and value-added services. RS
collaborates with other companies who are specialized in technology
and software . The partnership pushes RS to be a leading 3PL
company in the market (Aghazadeh, 2003). Another example from
Joining a global network in 2001 is BOC Distribution Services (BOC)
provides the new logistics service called DeliveryNet Solution to
monitor the performance throughout the supply chain. However,
innovation in outsourcing logistics is not the only thing that
rapport the success of outsourcing companies but the quality and
efficiency from logistics providers really matter to those
companies. 4. IMPACT OF OUTSOURCING LOGISTICS SERVICES ON COMPANIES
There are some factors that drive companies to outsourcing
logistics services at the first beginning. Originally, the
companies would like to reduce cost in logistics activities, they
have limited investment for labours and equipment, and they are
required to improve level of logistics services (van Laarhoven et
al., 2000; Wong et al., 2000; Stank and Maltz, 1996) Outsourcing
logistics generates several impacts on companies. In other words,
those drivers are the advantages of outsourcing but outsourcing
bring other benefits as well. However, there are some disadvantages
that organisations should be aware. 4.1 Advantages 1) Cost
Reduction Saving cost is the initial benefit that an organization
will receive from outsourcing. Outsourcing logistics activities can
reduce the cost of operations, inventory handling, transport, order
cycle time and so forth (van Laarhoven et al., 2000; Jennings,
2002; Hannon, 2003). The logistics providers can save cost fo r the
outsourcing company because they have sufficient and modern
facilities and they gain the economies of scale by operating
logistics functions for many companies. From research, the company
can achieve average 9 percent for logistics saving cost (Jennings,
2002).
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
For example, Laura Ashley (LA) outsourced their distribution to
FedEx. For the first year, FedEx saved LA of US$ 3 million in
logistics and reduce LAs logistics cost by 10-12% approximately
(Wong et al., 2000). 2) Service and Technology Improvement
Sometimes, the qualities of logistics performance is the reason to
outsource because some companies cannot provide proper service or
cannot improve the service to their customers (van Laarhoven et
al., 2000; Wong et al., 2000; Stank and Maltz, 1996). From doing
so, the company also gain benefits from development of technology
and improvement in services during outsourcing contract (Hannon,
2003; van Laarhoven et al., 2000; Jennings, 2002). Especially 4PL,
it generates the superior management in supply chain and IT (Bade
et al., 1999). Currently, 3PL and 4PL provide a variety of services
from labour in warehouse to shipment monitor via satellite. For
instance, Exel, a UK logistics provider, developed e-business
application for Hitachis SAP R3 system to enable Hitachis customers
in Europe to receive the products directly from the factory
(Barlas, 2002). Another example is Menlo Logistics manages
logistics functions for Sears and insures the quality improvement
by agreeing to renegotiate theirs contract every year (Wong et al.,
2000). 3) Strategic Flexibility Strategic Flexibility is a benefit
that some companies overlook. Outsourcing logistics may increase
the supply chain expertise of both service provider and service
receiver. The receive r learns how to operate logistics while the
provider learns about the nature of various businesses for
potential customers in the future (Zineldin and Bredenlow, 2003;
van Laarhoven et al., 2000; Jennings, 2002). Moreover, outsourcing
improves and facilita tes the communication between manufacturer
and customers (Menon et al., 1998). In addition, logistics provider
is more flexible to support uncertainty in demand. As for 4PL, it
has an interesting advantage to better customize the logistics
service to suit a particular business (Celestino, 1999; Minahan,
1997). For example, Donaldson, a US manufacturer who wants to
expand its market in Canada, sometimes has to make a prompt
decision to complete its customers urgent requirements. The company
outsources rather than maintain its own corporate logistics
operations. Unicity Integrated Logistics was selected as its
partner, 3PL, to solve such problems. Donaldson finally provides
better delivery service and succeeds in Canadian market (Gooley,
1998). 4) Capital Investment Investment can be saved because the
outsourcing company pays for service rather than purchases and
maintains its assets. In some cases, the situation arises when
labours cannot be diverted to an urgent work. One of the solutions
is to increase the number of labours. However, the company may need
labours
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
temporarily but the company may have to train them and carry the
higher fixed cost. Sometimes, a company needs a unique asset for
important task but the equipment is hardly used (Stank and Maltz,
1996; Wong et al., 2000). Hence, outsourcing logistics is a benefit
to overcome limited budget problem and have an efficient and
effective logistics process (van Laarhoven et al., 2000; Zineldin
and Bredenlow, 2003; http://www.maxwell.co.nz/whyuse3.htm, n.d.).
For example, it may not be feasible for a company to invest in new
information systems or upgrade its existing systems (Simchi et al.,
1999). Therefore, outsourcing can be the advantage for the company
and the method to solve that problem. 5) Core Competency It is
another benefit from outsourcing logistics services. As for
manufacturers, retailers, and distributors, their core business is
to produce or sell products. The customers perceive logistics as an
adding value and competitive advantage activity only. Thus, finding
a firm who provides a specific service as its core business will
allow those companies to focus on their core competency (Mclvor,
2000; Boyson et al., 1999, Wong et al., 2000; Hannon, 2003; van
Laarhoven et al., 2000; Zineldin and Bredenlow, 2003; Jennings,
2002). For instance, Simchi et al. (1999) stated that Ryder
Dedicated Logistics and General Motors Saturn are a good example.
Ryder fully takes care of Saturns logistics while Saturn
concentrates on what it does best, that is, manufacturing. Another
case by Johnson (1997), as a successful outsourcing pioneer, Nike
only concentrates on four in-house areas: marketing, design,
development and sourcing. Other things go to outside contractors.
6) Sharing and Reducing Risks Sharing and reducing risks are also
the advantage for logistics outsourcing. The outsourcing company
transfers, avoids, and eliminates risks because the logistics
providers are specialists (Zineldin and Bredenlow, 2003; Hannon,
2003). They have experience to assess the uncertainty and
catastrophes for logistics operations, and they have sufficient
equipment and facilities to run logistics and supply chain process
efficiently. The provider shares risk because it has to manage
logistics function efficiently under limited cost. If providing
logistics service fails, the provider will be infamous in its
logistics market. Meanwhile the outsourcing company may lose and
receive complaints from customers
(http://accenture.ca/xd/xd.asp?xd=insights%5Cinsi_srsr.xml, n.d.)
However, EKOL Logistics (http://www.ekol.com/4thdimension.html,
2003) believes that 3PL provider takes risks proportional to the
quality of services undertaken while 4PL provider does not take any
direct risks. FPL immediately transfers the liabilities to some
3PLs, and it primarily shares and is responsible for the risk load
with binding contracts by acting as an intermediary only.
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
4.2 Disadvantages Although outsourcing logistics services
generates a large number of advantages to the organization, some
disadvantages are appeared in the outsourcing process. 1) Loss of
Control over the Supply Chain According to Howarth et al. in 1995,
the smaller the level of dependency, the less the potential loss of
decision-making authority. The company takes the risk of dependence
on the logistics provider and loses the control over the logistics
and service process when the logistics functions are outsourced to
the logistics provider such as 3PL, 4PL (Tagliapietra et al.,
1999). If there is an error or mistake on logistics operations, the
company will be affected directly but cannot fix the problem itself
because the company allocates the task to the logistics provider.
See example in Appendix 5 about reverse outsourcing of Fiat Auto.
2) Cost Awareness Not only is it very difficult to estimate the
cost of outsourcing process but also the outsourcing company
underestimates the cost of that. The company often realizes about
the setup cost, researching and selecting process, timeconsuming
cost and so on when overall outsourcing costs have noticeably
escalated. These existing hidden costs should be considered and
compared with the benefits and cost reductions before starting to
outsource (Wang and Regan, 2003; Barthelemy, 2001). 3) Lack of
Improvement and Innovative Ability The innovative ability of
logistics in the company may be impaired because the company lacks
logistics skills by transferring the task to 3PL (Earl, 1996).
Also, during the outsourcing contract period, the logistics
provider primarily focuses on costs instead of the creativity (Wang
and Regan, 2003). Thus, the provider is likely to improve the
amount of cost rather than develop the total operations. 4) Human
Resource Issues Usually the outsourcing implies a reorganization of
the work and may sometimes not be accepted by management and staff
who see the logistics provider like 3PL or 4PL as an interferer
(Tagliapietra et al., 1999). Therefore, the contracting company
should train, educate, and help the employees to adjust themselves
to the new environment, the business strategies, and new
methodologies. 5. HOW TO SUCCEED IN LOGISTICS OUTSOURCING The first
factor that helps companies to be successful in outsourcing begins
with how to select the third or fo urth party logistics provider.
The second factor is to know the key success or management
techniques to operate the outsourcing successfully and maintain
that success. 5.1 How to Outsource Logistics Services Providers
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
The number of outsourcing steps is not as important as the
method of those. Based on Aghazadehs view (2003), there are five
steps of the logistics outsourcing process. Step 1: Making the
Decision First of all, the company has to decide whether it needs
to outsource logistics functions. There are some signs to tell the
company that it should outsource. For example, late shipments cost
the company and customers extra money, the linking problem occurs
among many departments, and the information technology fails to
track the shipment movement (Minahan, 1997). Also, the company has
to ask all departments to share their opinions. If the answer is
yes, the company has to evaluate and examine their strengths and
current operations in their suppliers, warehousing, distribution,
and so forth (Aghazadeh, 2003; Celestino, 1999). Step 2: Evaluating
the Operations and Developing Criteria and Objective After
evaluating the companys operations, the company will see their
weakness and set the objective and goal to improve their service
and operations. It is important to identify what the company wants
to avoid the risk of unwanted logistics services and cost
(Celestino, 1999; Minahan, 1997). In addition, the company needs to
establish the criteria that logistics providers should meet
(Aghazadeh, 2003). According to the research from Menon et al.
(1998), the five major selecting criteria that the company should
consider are: 1) on-time shipment and deliveries 2) meet or exceed
promises, 3) availability of top management, 4) superior error
rates, and 5) responsiveness to unforeseen problems (See Appendix
6). Nevertheless, the survey team was surprised that the cost
concern was out of the top ten criteria. However, it is believed
that low cost issue may take part if the company is in medium or
small size (Minahan, 1997). Step 3: Making the List and Sending
Letters Next, the company has to make the possible logistics
providers list. In this step, the listing may be founded on the
size of the potential provider and the company, the capability of
the provider, the specialty and timeframes of the provider
(Minahan, 1997; Celestino, 1999). Then, the company should send
their letters the potential 3PLs. Meanwhile, the company has to
prepare a request for proposal (RFT) to be sent to top 3 list. RFI
may take time to complete but the company should not invest too
much time on this step. Furthermore, the detail of RFI should
include the services required, the desire term of contract, the
company profile, customer information requirement, and other
relevant information (Is third party logistics in your future?,
2000; Aghazadeh, 2003). Step 4: Consideration and Selection
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
After receiving the reply from potential providers, the company
has to visit the 3PL, learn from those 3PLs customers experience
and their performance to the customers who have a similar business
to the company, and ask the questions to the logistics provider and
the company itself. For instance, does the provider understand the
companys industry?, who are the other customers?, does provider
inventory management meet the companys current and forecasted?, how
flexible are the providers?, and can the 3PLs provide customized
reporting? (Is third party logistics in your future?, 2000;
Minahan, 1997; Celestino, 1999; Aghazadeh, 2003). After considering
everything, the company chooses the logistics provider and sign a
contract. To start the first outsourcing, the company may begin
with a small part of logistics but not too small until it cannot
generate the saving scale (Minahan, 1997; Celestino, 1999;
Aghazadeh, 2003). Step 5: Beginning the New Partnership While the
company begins to work with the chosen logistics providers, they
should collect details, ask questions, communicate on a regular
basis, and ensure that both companies meet their satisfaction
(Aghazadeh, 2003). These steps are technically suitable for
outsourcing 3PL. To choose 4PL provider, the company might also
apply those stages. However, step 2 and step 4 may take longer time
to process because 4PL needs closer relationship to design and
manage all the process of logistics activities. Also, 3PL
relationship may begin at the first place, and then, it can be
developed to be strategic alliance relationship or 4PL later. 5.2
Barriers to Logistics Outsourcing Although the organisations follow
the steps of outsourcing logistics services and select the
appropriate providers, the organisation may fail after starting the
operations. The reasons why outsourcing strategy fails are: 1)
inadequate measurement, 2) insufficient information and
communication, 3) inadequate trust, 4) loose commitment, 5) fuzzy
goals and changes, and 6) dissatisfactory performance (Bowersox and
Closs, 1996; Ackerman, 1996). For instance, basically, the
logistics provider and the contracting company are two separate
companies. Thus, the information asymmetry inevitably exists in
outsourcing process. In some cases, if the logistics provider has
not completed information about the company, the provider might not
offer the cost structure that will be matched well with the
companys requirement (Wang and Regan, 2003). Also, the information
system that is provided to the outsourcing company cannot be
utilized properly because lack of training (Langley Jr. et al.,
2001). Therefore, the companies have to consider the other factors
to achieve the success during outsourcing logistics service. 5.3
Key Success in Logistics Outsourcing
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Although interest in logistics outsourcing is increasing,
companies and logistics providers face many challenges in
establishing successful logistics outsourcing (Moore, 1998). The
success keys in logistics outsourcing after selecting the 3PL or
4PL are as follows: 1) Trust Trust is the beginning and one of the
most significant factors to succeed in outsourcing logistics
because the companies have to share information, benefits, and
risks to each other (Tate, 1996). After trust is settled, the human
issues should be less troublesome. Because of trust, the logistics
company gains a chance to improve its service level and develops
the relationship for long period especially strategic alliance and
4PL (Schwartz, 2003; Murphy and Poist, 2000; Whipple and Frankel,
2000; Howarth et al., 1995; Jonsson and Zineldin, 2003; Tate, 1996;
Moore, 1998). 2) Performance Evaluation Performance measurement is
one of the major factors to measure the success and maintain the
achievement after outsourcing starts. The companies outsource
logistics services to improve their operations and service or to
reduce the cost. If the performance is not satisfied, the
outsourcing can be ceased or failed because the objective of
outsourcing is not achieved. To maintain the alliance and succeed
in the long term, it is necessary to measure or evaluate the
performance regularly (Jonsson and Zineldin, 2003; Whipple and
Frankel; 2000; Murphy and Poist, 2000; van Laarhoven et al., 2000).
3) Sharing Information and Communication It leverages the
efficiency and effectiveness in logistics outsourcing because both
partners know what they want and provide the relevant information.
Lack of information and communication can fail the outsourcing
especially in strategic alliance and 4PL (Murphy and Poist, 2000;
Whipple and Frankel, 2000). 4) Top Management Top management can
help the staff to overcome the reluctant situation by showi ng the
concrete goal and support. Lack of support from top management will
discourage the operations levels decision in management, sharing
information, and communication (Whipple and Frankel, 2000; Murphy
and Poist, 2000, van Laarhoven et al, 2000). 5) Clear Goal, Vision
and Roles Goal, vision and roles are required to protect confusion
between staff and staff, and between two organisations (van
Laarhoven et al, 2000; Whipple and Frankel, 2000; Murphy and Poist,
2000). Thus, the goals, roles, and vision should be clarified at
the early stage and updated from time to time to prevent the risks
that the partners may work in the different directions
(http://www.transportstudier.dk/udgivelser/pdf/3.part_sum.pdf,
n.d.)
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Moreover, other key success can be relationship commitment
(Moore, 1998; Tate, 1996), sharing benefits and risks (Murphy and
Poist, 2000; Tate, 1996), flexibility (Tate, 1996), etc. Both sides
may have to adopt these issues in their considerations. There are
some examples from companies who are successful in logistics
outsourcing. To begin with, Penske Logistics, the 4PL company that
sources suppliers for Nikes line of golf club, is the example of
trust. The company requires trust from Nike to manage and integrate
the flow of operations and information (Schwartz, 2003). As for 3PL
relationship example, Yamaha Motor Group has outsourced APL
Logistics as its 3PL to manage warehousing and transport for 10
years. The secret of long-term relationship is understanding and
support from top management and evaluating performance on the
regular basis (Trunick, 2004). Another case is the strategic
alliance between Laura Ashley (LA), a home furnishing company, and
Federal Express (FedEx). The top management of LA played an
important role to outsource its whole distribution department to
FedEx. The performance and relationship between them had been
satisfied until LA had the organisational change. This change
caused the different goals and the outsourcing alliance had to be
ceased before the contract was terminated (Wong et al., 2000;
Dornier et al., 1998). 6. FUTURE TRENDS Outsourcing logistics keeps
increasingly growing. As for 3PL market, Aghazadeh (2003) stated
that it is growing by 18-22 percent annually. Neverthless, Hamilton
(2003) assessed that 3PL market is in mature level and because the
cost saving and some strategic advantages do not highly affect the
total performance of the outsourcing companies. Similarly, Foster
(1999) agreed that outsourcing has not really improved logistics
activities substantially. Both authors including Schwartz (2003)
thought that the next wave of outsourcing is 4PL that will manage
logistics tasks, improve the service level of 3PL, and show how
much 4PL impact on (improve) the logistics performance.
Interestingly, the successful 4PL companies develop from 3PL
companies (e.g. Federal Express Supply Chain Services, TNT
Logistics, and UPS Supply Chain Solutions)(Schwartz, 2003). Foster
(1999) and M2 Communication Ltd. (2004) also asserted that 4PL will
grow up well if the outsourcing companies are successful with 3PL.
If outsourcing logistics to 3PL fails, it is more difficult to hand
more tasks and responsibilities to 4PL to manage. Logistics
outsourcing trends to grow much more in international market after
it has been expanded domestically for years (Morrison, 2001a; Wong
et al., 2000). Globally, in 2002, outsourcing grows for 43% in
North America and for 51% in Western Europe and in 2005-2007,
outsourcing is estimated to grow to 60% in North America and 74% in
Western Europe (Hannon, 2003). See Appendix 7. Not only does 3PL
grow up but 4PL is also likely to expand cross countries
(Skjoett-Larsen, 2000). It was expected that 4PL market in Western
Europe will increase from EUR 4.7 billion in 2002 to about EUR 13
billion by 2010 (M2
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Communication Ltd., 2004). Also, Armbruster (2002) interviewed
Kuehne & Nagels chief executive that 4PL trends to grow in
logistics business during this decade. FPL will be the next trend
because it implements up-to-date computer and information
technology especially visibility or real-time knowledge (Schwartz,
2003). Therefore, it can be controlled from any part in the world.
Correspondingly, 5PL trends will grow continuously because the
market is international in terms of cyber space. However, 5PL will
be highly affected if the computer technology and e-business are
not always in demand. 7. CONCLUSION Logistics outsourcing has
another name so called 3PL. Originally, outsourcing logistics is to
hire a logistics company to work for a company to handle
warehousing and transportation. TPL can actually manage more
functions including inventory and order processing or all logistics
activities and look forward to long -term relationship at least 1
year. Meanwhile 4PL requires longer period of cooperation and
trends to integrate the whole supply chain for a company. As for
5PL is a 3PL on e -business. New logistics services are appeared
now and then because the development of technology and computer
system. Also, the companies are likely to pay attention to what
they do best so they sometimes avoid operating some activities but
hiring a logistics provider to work instead. The company will be
benefited from outsourcing in terms of cost reduction, core
business focus, strategic advantages, investment saving, service
and technology improvement, etc. However, the company may lose
control and ability in logistics tasks, have to consider about cost
of outsourcing, and should be careful about human resources. To be
successful in outsourcing logistics, the company should learn and
consider how to select a logistics provider carefully. Next step is
working together. Both sides need support from top management and
have to share information, risk and rewards, mutually trust, always
update vision and goals, evaluate their performance regularly, and
so forth. With the development of computer and information
technology, it is useful for logistics providers to improve their
performance and potentially save operations cost in long run. Due
to the growth of society and globalisation, 3PL and 4PL are still
increasingly required (Morrison, 2001a). Next generation of
outsourcing seems to be 4PL. However, the growth of 4PL depends on
the achievement of 3PL because if people cannot work successfully
in small job, it seems impossible to do well in big job.
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4PL
8. REFERENCES 2. English summary: Aim of the project in 1996 and
1997 Institut for Transportstudier carried out a study about third
party logistics in Denmark (n.d.), The Danish Transport Council and
Danish Freight Forwarders Association, pp.16-30. Retrieved: 4
April, 2004, from
http://www.transportstudier.dk/udgivelser/pdf/3.part_sum.pdf
Ackerman, K.B.1996, Pitfalls in logistics partnerships,
International Journal of Physical Distribution and Logistics
Management, vol.26, no.3, pp.35-37. Aghazadeh, S. 2003, How to
choose an effective third party logistics provider, Management
Research News , vol. 26, no. 7, pp. 50-58. Armbruster, W. 2002,
Cover Story: 4PL, JOC Week, 24 June 2002, vol.3, no.25, pp.11-13.
Bade, D., Mueller, J., and Youd, B. 1999, Technology in the next
generation of supply chain outsourcing - leveraging capabilities of
fourth party logistics, Ascet, 15 April, 1999, vol.1. Retrieved: 28
March, 2004, from http://www.ascet.com/documents.asp?d_ID=229 Bade,
D.J. and Mueller, J.K. 1999, New for the millinium:4PL, Transport
& Distribution, February, pp.78-80 in Skjoett-Larsen, T.
2000,Third party logistics-from an interorganizational point of
view, International Journal of Physical Distribution and Logistics
Management, vol.30, no.2, pp.112-127. Barlas, D. 2002, Outsourcing
logistics: As 3PL increases in importance, providers are expanding
e-business services, Line56 Magazine, February, 2002. Retrieved: 19
April, 2004, from http://www.line56.com Barthelemy, J. 2001, The
hidden costs of IT outsourcing, Sloan Management Review, vol.42,
no. 3, pp. 60-69. Bask, A.H. 2001, Relationships among TPL
providers and members of supply chains -strategic perspective,
Journal of Business & Industrial Marketing, vol.16, no.6,
pp.470-486. Berglund, M., van Laarhoven, P., Sharman, G., and
Wandel, S. 1999, Thirdparty logistics: Is there a future?,
International Journal of Logistics Management, vol.10, no.1,
pp.59-68. Blanchard, D. 2003, Balance of power, Logistics Today,
December Supplement, pp.4.
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Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Bowersox, D.J. and Closs, D.J. 1996, Logistical Management: The
Integrated Supply Chain Process, McGraw-Hill, NewYork. Boyson, S.,
Corsi, T., Dresner, M., and Rabinovich, E. 1999, Managing effective
third party logistics relationships: What does it take?, Journal of
Business Logistics, vol.20, no.1, pp.73-100. Celestino, M. L. 1999,
Choosing a third-party logistics provider, World Trade, July,
vol.12, no.7, pp. 54-56. Cifferi, L. 2004, Fiat Auto reverse its
outsourcing strategy, Automotive News, 9 February 2004, vol.78,
no.6079, pp. 24N. Dornier, P., Ernst, R., Fender, M., and Kouvelis,
P. 1998, Global Operations and Logistics: Text and Cases, John
Wiley, New York. Earl, M.J. 1996, The risk of outsourcing IT, Sloan
Management Review, vol. 37, no. 3, pp. 26-32. EKOL Logistics 2003,
4th Dimension. Retrieved: 27 March, 2004, from
http://www.ekol.com/4thdimension.html Foster, T. 1999, 4PLs: The
next generation for supply chain outsourcing?, Logistics Management
and Distribution Report, vol.38, no.4, pp.35. Gattorna, J.L. 1998,
Strategic Supply Chain Management: Best Practice in Supply Chain
Management, Gower Publishing, Aldershot in Sahay, B.S., 2000,
Supply chain collaboration: The key to value creation, Work Study,
vol.52, no.2, pp.76-83. Gooley. T.B., 1998, Logistics boosts
Donaldson's Northern Exposure, Logistics Management and
Distribution Report, May, vol. 37, no. 5; pp. 56-59. Hamilton, S.
2003, Has logistics outsourcing reached its limits?, Transport
Topics, 29 September 2003, pp. 7. Hannon, D. 2003, Outsourced
logistics merit a second look in down economy, Purchasing, March,
vol.132, no.5, pp.24S1-24S4. Howarth, C.S., Gillin, M., and Bailey,
J. 1995, Strategic Alliances: ResourceSharing Strategies for Small
Companies, Pitman Publishing, Melbourne. Hoyer, (n.d.), 3PL/4PL.
Retrieved: 5 April, 2004, from
http://www.hoyer-group.com/logistikE/html/3pl4pl.html
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Project (Written Report): Outsourcing Logistics Services Including
4PL
Is third party logistics in your future? 2000, Modern Materials
Handling, December, vol. 55, no. 14, pp. S3-S15. Jennings, D. 2002,
Strategic sourcing: benefits, problems and a contextual model,
Management Decision, vol.40, no.1, pp.26-34. Johnson, M. 1997,
Outsourcing in Brief, Butterworth-Heinemann, Oxford. Joining a
global network 2001, Frontline Solutions Europe, June, vol.10,
no.5, pp.26. Jonsson, P. and Zineldin, M. 2003, Achieving high
satisfaction in supplier-dealer working relationship, Supply Chain
Management: An International Journal, vol.8, no.3, pp.224-240.
Langley Jr., C.J., Allen, G.R., and Tyndall, G.R. 2001, Third-Party
Logistics Study: Results and Findings of the 2001 Sixth Annual
Study Cap Gemini Ernst and Young. pp.1 -28. Retrieved: 18 April,
2004, from http://www.us.cgey.com Lieb, R.C., Millen, R.A. and
Wassenhove, L.V. 1993, Third -party logistics services: a
comparison of experienced American and European manufacturers,
International Journal of Physical Distribution & Logistics
Management, vol.6, no.23, pp.35-44 in Skjoett -Larsen, T. 2000,
Third party logistics-from an interorganizational point of view,
International Journal of Physical Distribution and Logistics
Management, vol.30, no.2, pp.112-127. M2 Communication Ltd. 2004,
Fourth party logistics: Fourth party logistics transforms logistics
from a cost proposition to a value proposition M2 Presswire, 24
February, 2004, pp.1. Mclvor, R. 2000, A practical framework for
understanding the outsourcing process, Supply Chain Management,
vol.5, no.1, pp.22. Menon, M.K., McGinnis, M.A., and Ackerman, K.
B. 1998, Selection criteria for providers of third -party logistics
services: An exploratory study, Journal of Business Logistics, vol.
19, no. 1, pp. 121-137. Minahan, T. 1997, Want to outsource
logistics? Heres what you should know, Purchasing, Oct 9, vol. 123,
no. 5, pp. 59-60. Moore, K.R., 1998, Trust and relationship
commitment in logistics alliances: A buyer perspective,
International Journal of Purchasing and Materials Management,
Winter, vol.34, no.1, pp.24-37.
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TPTM6155, Logistics Management Group: C
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Project (Written Report): Outsourcing Logistics Services Including
4PL
Morrison, M. 2001, Redefining 4PLs in the Global Marketplace,
Logistics Quarterly, Summer, vol.7, no.2. Retrieved: 15 April,
2004, from
http://www.lq.ca/issues/summer2001/articles/article04.html
Morrison, M. 2001a, Scope Needed for Global Supply Chains,
Logistics Quarterly, vol.7, no.4. Retrieved: 21 March, 2004, from
http://www.lq.ca/issues/winter2001/articles/article10.html Murphy,
Jr., P.R. and Wood, D.F. 2004, The supply-chain concept,
Contemporary Logistics, 8 th ed., Pearson Education International,
London. Murphy, P.R. and Poist, R.F. 2000, Third-party logistics:
Some user versus provider perspectives, Journal of Business
Logistics, vol. 21, no.1, pp. 121-134. Outsourcing - Shared Risks
and Shared Rewards (n.d.), Accenture in Canada
http://accenture.ca/xd/xd.asp?xd=insights%5Cinsi_srsr.xml Schwartz,
E. 2003, The logistics handoff, InfoWorld, November 10, vol.25,
no.44, pp.53-58. Shanahan, J. 2004, 3PL roles continue to grow,
Logistics Management, February, vol. 43, no.2, pp.39-42. Simchi,
D., Kaminsky, P. and Simchi, E. 1999, Designing and managing the
supply chain - Concepts, Strategies, and Case Studies, Irwin
McGraw-Hill. Skjoett-Larsen, T. 2000,Third party logistics-from an
interorganizational point of view, International Journal of
Physical Distribution and Logistics Management, vol.30, no.2,
pp.112-127. Stank, T.P. and Maltz, A.B. 1996, Some proposition on
third party choice: Domestic VS. International logistics providers,
Journal of MarketingTheory and Practice, Spring, vol.4, no.2,
pp.45-54. Tagliapietra, S., Platan, P., Li, N.S., and Schneider, R.
1999, Gaining competitive advantage through outsourcing, Business
Logistics, May, 1999. Retrieved: 24 April, 2004, from
http://www.peterplatan.com/DOC/Outsourcing.pdf Tate, K. 1996, The
elements of a successful logistics partnership, International
Journal of Physical Distribution and Logistics Management, vol.26,
no.3, pp.7-13. Trunick, P.A. 2004, The secret of your 3PL success,
Logistics Today, February, vol.45, no.2, pp.16-20.
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Project (Written Report): Outsourcing Logistics Services Including
4PL
Van Laarhoven, P., Berglund, M., and Peters, M. 2000,
Third-party logistics in Europe- five years later, International
Journal of Physical Distribution and Logistics Management, vol.30,
no.5, pp. 425-442. Wang, C. and Regan, A.C. 2003, Risks and
reduction measures in logistics outsourcing. Retrieved: 24 April,
2004, from
http://www.its.berkeley.edu/publications/ITSReviewonline/spring2003/trb2
003/regan-outsourcing.pdf Whipple, J.M. and Frankel, R. 2000,
Strategic alliance success factors, Journal of Supply Chain
Management, Summer, vol.36, no.3, pp.21-28. Why use 3 rd parties to
provide your warehousing, n.d., Retrieved: 27 March, 2004, from
http://www.maxwell.co.nz/whyuse3.htm Wong, Y., Maher, T.E.,
Nicholson, J.D. and Gurney, N.P. 2000, Strategic alliances in
logistics outsourcing, Asia Pacific Journal of Marketing and
Logistics, vol.12, no.4, pp.3-21. Zineldin, M. and Bredenlow, T.
2003, Strategic alliance: synergies and challenges , International
Journal of Physical Distribution and Logistics Management, vol.33,
no.5, pp.449-464.
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TPTM6155, Logistics Management Group: C
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Project (Written Report): Outsourcing Logistics Services Including
4PL
9. APPENDICES
Appendix 1: 3PL/4PL: Levels of Logistics Outsourcing Source:
http://www.hoyer-group.com/logistikE/html/3pl4pl.html, n.d.
Architecture/Integrator Change leaders -Supply-chain visionary
-Customer relationship manager -Deal-maker -Supply-chain engineer
-Project manager -Service, systems, and information integrator
-Innovator Supply-chain infomediary Information nervous system -IT
system integration -IT infrastructure provision -Real-time data
tracking -Data conversion -Technical support
Control room (Intelligence) Decision-makers -Experienced
logisticians -Multiple 3PL managers -Optimisation engines and
decision support -Neutral positioning -Continuous improvements
Resource providers Assets -Transportation -Warehouse, property
facility -Manufacturing -Procurement services -Co-packing
services
Appendix 2: Four Components for 4PL Source: Accenture cited in
Schwartz, 2003. 18
TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Appendix 3: The Next Wave Source: Bade et al., 1999
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Appendix 4: Most Frequency Used Third Party Logistics Services
1997-2000 Source: Northeastern University and Anderson Consulting,
cited in Aghazadeh, 2003
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TPTM6155, Logistics Management Group: C
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Project (Written Report): Outsourcing Logistics Services Including
4PL
Fiat Auto reverses its outsourcing strategy Luca Cifferi.
Automotive News Detroit: Feb 9, 2004. Vol. 78, Iss. 6079; pg. 24N,
1 pgs .Abstract (Article Summary)
Fiat Auto SpA is reversing a decade-long strategy of extensive
outsourcing in an attempt to gain more control over its
manufacturing process. From 1993 to 2002, Fiat Auto sold many
components plants, several stamping activities, and its suspension
operation. Under new CEO Herbert Demel, the company has rehired
3,071 people working on assembly line maintenance in Italian and
Polish car plants.Full Text (635 words)
Copyright Crain Communications, Incorporated Feb 9, 2004
TURIN, Italy - Fiat Auto S.p.A. is reversing a decade-long
strategy of extensive outsourcing in an attempt to gain more
control over its manufacturing process. In the last 14 months, Fiat
Auto has retaken control of some customer service, dealer training,
die construction and assembly line maintenance operations. It is
considering transferring more employees from Fiat group service
companies back into Fiat Auto. And it is negotiating with several
suppliers about repurchasing parts operations. A limiting factor
will be how much capital financially troubled Fiat Auto can
generate. The only area of operations that won't be brought back
in-house is the suspension business it sold to group subsidiary
Magneti Marelli in 1999 and 2000. From 1993 to 2002, Fiat Auto sold
many components plants, several stamping activities and its
suspension operation. It subsequently contracted to buy parts from
the new owners. Fiat Auto transferred 21,000 employees to 75 other
companies, according to the European Industrial Relations
Observatory, a network of European research institutes. Outside
services Fiat Auto also outsourced many functions on the services
side, including inbound and outbound logistics of assembly plants,
spare parts warehouses, plant maintenance and its administration
sector. As Fiat Auto CEO, Paolo Cantarella oversaw the automaker's
extensive outsourcing program from 1990 to 1995. Cantarella also
applied the philosophy to the Fiat group when he was promoted to
group CEO in 1996. Cantarella wanted every operating company to
concentrate on its core business only. He outsourced activities
wherever there was a specialist willing to take on the role. He
believed these specialists could do tasks faster and more
cost-effective than employees working within the larger
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
automaker. Cantarella's dream was to have independent suppliers
building complete bodies-in-white. Fiat Auto would be responsible
only for engine and transmission production and final assembly.
Cantarella also was convinced that creating single-service
companies serving the entire group could let them better focus on
their jobs - and attract new clients outside the group. That part
of the plan never materialized. Cantarella's central-service
companies attracted few outside clients and still work almost
exclusively for Fiat group subsidiaries. With Fiat Auto losing
money, control over its operations slipping and little value being
added by the network of supplier and service companies, executives
realized a change was in order. Giuseppe Morchio, who became Fiat
group CEO last year, favors more vertical integration within the
group. But Fiat Auto CEO Giancarlo Boschetti already had begun to
reverse the outsourcing strategy in late 2002 with what he called
"a selective insourcing." He strengthened Fiat Auto's r&d by
hiring 100 young engineers. And he regained direct control of the
customer call center as well as the dealer and service training
staff. 3,071 people rehired Under new CEO Herbert Demel, who took
over Fiat Auto last November, the company has rehired 3,071 people
working on assembly line maintenance in Italian and Polish car
plants in December. Between 1998 and 1999 those employees had been
transferred to Fiat group subsidiary Comau. Comau created a sister
company, Comau Service, to handle maintenance for Fiat. Fiat Auto
has not decided whether to also regain control of maintenance in
other foreign plants from Comau. In late 2003, Fiat Auto
repurchased from Comau its Mirafiori, Italy, plant die construction
operations. It did not disclose details of the internal
transaction. Fiat Auto is negotiating with suppliers to regain
control of stamping activities at the Rivalta, Pomigliano and
Cassino plants in Italy. Several suppliers including Stola and
Magnetto of Italy and First Alpin of Austria bought the operations
from Fiat Auto.Cantarella favored outsourcing. Demel brought
workers back. From 1993 to 2002, Fiat Auto sold many components
plants, several stamping activities and its suspension operation.
[Sidebar]
22
TPTM6155, Logistics Management Group: C Going in-house Fiat Auto
oversees Customer service call center Die construction Assembly
line maintenance Dealer training [Author Affiliation] Luca Cifferi
AUTOMOTIVE NEWS EUROPE
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Appendix 5: Fiat Auto Reverses Its Outsourcing Strategy Source:
Cifferi, 2004.
No. Items Factor 1 Factor 2 1 On-time shipment and deliveries
0.7200 0.2498 2 Meet or exceed promises 0.6554 0.2734 3
Availability of top management 0.6033 0.1732 4 Superior error rates
0.6015 0.3329 5 Responsiveness to unforeseen problems 0.3841 0.0922
6 Creative management 0.2059 0.8594 7 Financial stability 0.2008
0.6311 8 Meet performance and quality requirements 0.3486 0.4824
Factor 1 is the most significant criteria to select a logistics
provider. The factor 2 is the second most significant criteria to
select a logistics provider. Appendix 6: Major Selecting Criteria
Source: Menon et al., 1998.
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TPTM6155, Logistics Management Group: C
Group: AEIOU-- An Excellent Integrated Operation Unit Group
Project (Written Report): Outsourcing Logistics Services Including
4PL
Appendix 7: Percentage of Growth of Outsourcing Globally Source:
Hannon, 2003
24