Logistics Service Providers

A logistic service provider is a company which provides services which include management on the flow of goods as well as the materials between the points they come from to the end-user. The provider is in most cases involve din handling shipping, inventory, warehousing, packaging, as well as the security needs for the shipments (Blecker & Aldarrat, 2013). Such a company, therefore, involves itself with customizing these services to the client’s specifications.

The Various Types of Companies that Provide Logistics Services

Some of the reasons why firms outsource can be explained by the application of some theories. These include the Network Theory which establishes that a firm outsources the third party logistics so as to take advantage of the third-party relationships. The Resource Based Theory (RBT), on the other hand, identifies that the firms outsource from the third party logistics so as to have a wider range of resources (Abdul & Oei, 2006). According to the Transaction Cost Economics (TCE), the firms use the services of the third party logistics with the aim of minimizing the transaction costs. In order for the shipper or the client to identify the company which is most suitable to hire for the logistics services they should consider the requirements. This is important as it helps them in deciding the best company to hire. This, therefore, is done and selection is made amongst many different types of logistic providers. These companies are classified according to the services provided, and include:

  1. Transport based third party logistics services-Some of the logistics providers are involved in pure transport services. Here, the companies offer a comprehensive set of logistics offering. Some of these companies are leveraged, and in this case, they use the assets of the other firm in performing the transport tasks (Wagner, 2008). Those which are non-leveraged, on the other hand, make use of the assets which belong to the parent firm. Examples of this kind of logistics companies include UPS Logistics, FedEx Logistics, Ryder, and Schneider Logistics.
  2. Warehouse or distribution based third party logistics services-These are the companies which are involved in the provision of warehousing facilities, as well as the distribution services. Most of these companies are efficient because they possess the experience from past service provision. As such, the client should consider the experience of such a company before getting into business with it to ensure effectiveness of the business. Exel, Caterpillar Logistics, DSC Logistics, as well as USCO, are some of the companies which are involved in the provision of this type of service.
  3. Third party logistics services which are forwarder based-This type of service is provided by companies which have middlemen who are independent, and have the forwarding role. In this case, the companies are not the asset owners, but are involved in the provision of many types of logistics services. Examples of this type of service providers include Hub Group, AEI, Circle, Kuehne & Nagle, as well as the Fritz.
  4. Third party logistics services which are based on the shipper or the management- The Company providing this type of logistic services is involved in all the management functions from the beginning to the end (Peng et al. 2009). Here, services such as transport management systems are provided with the application of technology. The integrated freight management services are also provided, which help in the elimination of the tiresome and lengthy features including claims, as well as accounting (Cahill, 2013). The companies also provide the management of the carrier relations, which are based with the rate maintenance currently, as well as the negotiation. The information needed by the client is provided, which includes the freight data and the matrix reports. This is important as it ensures better visibility, as well as improved control on the outcome son the future logistics. The companies which provide these services include GlobalTranz, AFS Logistics, Worldwide Express, as well as Cerasis.
  5. The financial based third party logistics services-The companies in this case are involved in the maters on the finances of the client. As such, they provide freight payment, cost accounting, monitoring and control, inventory management, booking, tracing, as well as auditing (Wang, 2007). These companies include CTC, FleetBoston, Cass Information, and GE Information Service.
  6. Information based firms third party logistics services-There has been a major progress as well as expansion in the market for the category of business-to-business services that are based on the internet. This also involves the electronic markets that are rising for the transportation, as well as the logistics services. Some examples of these companies include Nistevo, uShip, Transplace, as well as the freight Quote.com.

Role of Fourth Party Logistics

Fourth party logistics providers are companies which do not own assets but are involved in buying, as well as selling of the logistics.  These companies have the responsibility of integrating or assembling all the resources, as well as the capabilities and technology of the organization to build comprehensive logistics systems (Gracht, Jahns, & Darko, 2008). The fourth party logistics providers provide the information systems, as well as the requirements for ensuring all resources are obtained. As such, the users of the 4PL or the fourth party logistics are involved with obtaining the best competencies of the organization so as to manage the assets of the company in a more effective manner. One of the most significant elements of the 4PL is the information and communication technology (ICT). This is important because the type of ICT used is the determinant factor on the nature of the company interactions with its customers, as well as the suppliers. A high quality IT capability provides a clear competitive advantage and hence better performance for the company. 

The core value which is presented by the 4PL business is the administration, as well as the assimilation of the data, which involves the run amongst the associates involved in outsourcing, and the businesses which hire them. The 4PL combines the “economy of scale” with the matters which are getting involved in the planning, steering, as well as the controlling functions and processes. As such, the 4LP providers are the firms which possess the skill of managing resources, as well as the delivery procedures, and the outsourcing of the technology requirements of their clients (Hülsmann, Scholz-Reiter, & Windt, 2011). These providers aim at providing the best in class services for their clients, and this is achieved by leveraging the solutions which are availed by the third party logistic providers. As such, the 4PL have superior roles to play, rather than competing with the third party logistic providers. The 4PL, therefore, provide the administrative services which include export and import clearance, track and trace information, claims handling, financial services, and exception management. These services include order administration and customer service, operations of the customers’ logistics, as well as the design of individual setup of logistics. The 4PL is also responsible for the operations of the logistics that belong to the customers. The 4PL service providers help in facilitating the development of the logistics network in the functional, as well as the technical requirements for the information systems of the logistics. This role incorporates the database design, as well as the response of the customers to the systems (Gudehus & Kotzab, 2012).

Further, the supply, as well as the management of the information systems is developed, and so are the warehouse management systems and the logistics decision support tools. The 4PL service providing industry is based on adding value for the customers, since such are the activities which are either directly or indirectly involved with the application of ICT. In some cases, a 4PL service provider handles the activities of both the 3PLs and its subcontracts, and the activities which it is involved with. The 4PLs can also be involved with the process of benchmarking the customers on their current supplies chain performance, as well as be involved in suggesting the improvements that should take place. These companies also offer these services at a much lower costs. This is in line with the transaction cost economics (TCE) theory which states that the ownership decision of a firm is based on reducing the total production and transaction costs of a firm.

The Process Employed for Selecting Logistics Service Providers 

The field of logistics is filled with failed relationships between the logistics service providers and the manufacturing and other companies. Most of these cases take place as a result of a failure that originated from the early stages of the process. In fact, most organizations do not consider outsourcing as a legitimate option. However, for the organizations which consider this, it is important to consider some steps which will make the process successful. As such, a five-step procedure is outlined to ensure the success of this process:

  1. Outline areas of opportunity-One of the major reasons why companies consider outsourcing is to have the ability to penetrate into new markets, or even to adapt to forces which are competitive without increasing infrastructure costs. As such, the organization should establish a team which will be involved with assessing the ability to take up the activities internally. The team is supposed to comprise of members who are parts of the company’s logistics, as well as marketing and customer service. As such, the business will be in a position to establish the areas that need outsourcing and those that do not.
  2. Critically assess your strengths and weaknesses-The determination of the strong and weak areas is important since it helps the organization identify a partner who is complementary. The organization, however, needs to understand that the partner may possess their some strong points and flaws. Some 3PLs are good at warehousing, whereas others are good at transportation. As such, the firm should ensure that the selection of the company is done effectively. As such, the firm is able to ensure a robust result from merging its strengths with those of the partner.
  3. Decide what is on the table-After the identification of the opportunities gained from partnering with the 3PL it should determine what it intends to pursue. The logistics functions involving warehousing and transport may affect the way customers view the ability to execute for a company (Folinas, 2013). As such, the firm should ensure they change the mission on the critical procedures and need for a logistics partner. This is so since the success of the project also depends on how comfortable the firm is on the idea of operation of the firm’s activities by a third party.
  4. Identify a shortlist of the providers who meet the firm’s requirements- The business should develop a list of all the companies who meet the requirements after doing some research on the same. This can be done by identifying geographical, as well as other needs which the business may require. The list should then be narrowed down by identifying the service providers who are related to the industry (Lun, Lai, & Cheng, 2010). Before making the final decision, the firm should inspect the system structure of the other organizations. Finally, the business should establish the technological structure of the prospective partners, particularly the warehouse management systems, as well as the management systems on transport.
  5. Consider the human element carefully-The personnel from both sides should ensure they possess a good relationship (Dangelmaier, 2010). As such, the organization should ensure the cultures are compatible, and so is the individual capability for success. This is particularly significant for ongoing operations. It is important to put in mind the fact that the firm trusts this partner with its livelihood.

Conclusion

The logistics service providers are an important aspect for most international businesses. As such, it is important to understand the different elements in their nature, so as to make the best choices. This is important as the choice of the logistics company could determine the success of the company’s operations. The firms, therefore, should do a lot of research on the types of the companies, as well as all the elements surrounding these companies. This will in turn help them make sound decisions which are good for the business. It is also important to have a good relationship with these companies, as this is another factor that influences the performance of the partnership between the firm and the logistics company. Where these factors are considered, the operations of the partnership have high chances of becoming a success, and hence impacting positively on the performance of the firm.

Bibliography

 Abdul, H, & Oei, C. (2006). The global supply chain: Challenges facing logistics  service providers : a business and legal perspective.

Blecker, T., & Abdelmalek, N. (2010). Innovative process optimization methods in logistics: Emerging trends, concepts and technologies. Berlin: Erich Schmidt.

Blecker, T., & Aldarrat, H. (2013). Key factors for successful logistics: Services, transportation concepts, IT and management tools. Berlin: Erich Schmidt Cahill, D. (2013). Customer loyalty in third party logistics relationships: Findings from studies in Germany and the USA. Heidelberg: Physica-Verlag Dangelmaier, W., (2010). Advanced manufacturing and sustainable logistics: Proceedings. (Advanced Manufacturing and Sustainable Logistics.) Berlin: Springer.

Folinas, D. (2013). Outsourcing management for supply chain operations and logistics services. Hershey, PA: Business Science Reference.

Gudehus, T., & Kotzab, H. (2012). Comprehensive logistics. Heidelberg: Springer.

Gracht, H.  Jahns, C., & Darkow, I. (2008). The future of logistics: Scenarios for 2025.Wiesbaden: Gabler.

Hülsmann, M., Scholz-Reiter, B., & Windt, K. (2011). Autonomous cooperation and control in logistics: Contributions and limitations – theoretical and practical perspectives. (Autonomous Cooperation and Control in Logistics.) Berlin: Springer.

Lun, Y. Lai, K., & Cheng, T. (2010). Shipping and logistics management. New York: Springer Innovative perspectives. Hershey, PA: Information Science Reference

Kersten, W. (2008). Global Logistics Management: Sustainability, Quality, Risks. Berlin: Schmidt.

 Liu, Q., & Goh, M. (2015). TA-Q-BIN: Service excellence and innovation in urban logistics Lun, V., & Curtin University of Technology. (2012). Adoption of electronic commerce bylogistics service providers in Hong Kong.

Peng, Q., Wang, K.  Qiu, Y., Pu, Y., Luo, X., & Shuai, B. (2009). International Conference on Transportation Engineering 2009. Reston, VA: American Society of Civil Engineers.

Straube, F., Ma, S., & Bohn, M. (2013). Internationalisation of logistics systems: How Chinese and German companies enter foreign markets. Berlin: Springer.

Wang, W. (2007). Integration and innovation orient to e-society: Seventh IFIP International Conference on e-Business, e-Services, and e-Society (I3E2007), October 10-12, Wuhan, China. New York: Springe Waters, C. (2013). Global logistics and distribution planning: Strategies for management.  London: Kogan Page.

Wagner, S. (2008). Managing innovation: The new competitive edge for logistics service providers.

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