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Management
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Chapter 12 Questions: Third Party Logistics
Essay Instructions:
1. Discuss the pros and cons of outsourcing and 3PL. Provide a discussion on the role transportation plays in 3PL operations. Substantiate your answer with referenced examples.
2. Discuss the basic types of 3PL firms and describe how they facilitate the planning and execution of freight transportation. Substantiate your answer with referenced examples.
3. Discuss the reasons why service integration is an important issue to the 3PL industry. Provide examples of companies that are developing these capabilities. Substantiate your answer with referenced examples.
4. 3PLs and their customers seek to improve performance and reduce costs. What are some of the challenges they face? Substantiate your answer with referenced examples.
Essay Sample Content Preview:
Third Party Logistics
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Third Party Logistics
It is important for a firm to evaluate the pros and cons of outsourcing and 3PL before entering into related commitments. This helps in the formulation of outsourcing and 3PL strategy. A major advantage of outsourcing and 3PL is that it allows the firm to focus on its core activities. In the case the core activities are more important compared to logistics, it is logical to use outsourcing services. Outsourcing and 3PL also allows a firm to reduce costs. 3PL providers have the resources to carry out their activities, and therefore they can offer services to a firm inexpensively. The firm does not have to incur costs for leasing a warehouse or transportation. It is for this reason that 90% of fortune 500 companies like Wal-Mart and General Motors are using the services of 3PL (Siegel, 2017). A major disadvantage of outsourcing and use of 3PL is the loss of control of part of operations. The firm may thus be unable to serve its customers as it would like. Another disadvantage is threats of confidentiality and security since information is shared with third parties.
In terms of resource ownership, the two types of 3PL providers are non-asset based and asset-based. The non-asset based are firms that do not own warehouse space or trucks that are needed for services. Instead, they partner with other firms to provide the services, and an example is KPMG. Asset-based are those that own the assets such as warehouse space and trucks needed to facilitate operations, and FedEx is an example. In regards to the primary services offered, there are five 3PL types: Information based, financial based, distribution based, transport based, and forwarder based. Information based 3PLs offer digitized services such as online cargo planning, scheduling, and routing and an example is Transplace. Financial based have their focus on monetary issues in the supply chain such as accounting, auditing, and freight payment. An example is CT Logistics. Distribution based firms have their fo...
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