How effective are 3PL & 4PL partnerships in the South African logistics supply chain

Abstract

Outsourcing of logistical operations is becoming more and more frequent in order to address the needs of a company's supply chain as well as improving customer service and reducing operating costs. The main objective of this study was to provide a guideline to Logistics and Supply Chain Managers on how to successfully implement an outsourcing (3PL/4PL) partnership, as well as identify the pitfalls that should be avoided during the implementation process. To realise this objective an extensive review of the current literature was undertaken on the concept of logistics and the supply chain and how the concept of outsourcing has influenced this concept. The literature presented the following results: ~ Logistics is often perceived as non-core business function to a company and hence suitable as an outsourcing option. ~ Outsourcing of the logistics function should be a strategic decision that offers both a reduction in costs as well as improvements in sales revenue and customer service. ~ Outsourcing is able to contribute value for a company through reduced cost and increased revenue as well as improved service levels due to the specialist nature of the outsourcing partner. ~ Some competitive advantage is possible when choosing a 3PLl4PL to operate your logistics function. ~ The 3PL industry is currently in a state of transition, with many smaller 3PL's consolidating their business efforts to form Lead Logistics Provider companies. An empirical research on the South African perception of the 3PLl4PL industry was then conducted using a structured questionnaire. The results of the questionnaire providing an answer on the state of the 3PLl4PL industry in South Africa along with comments on how successful implementation differed from the failures. From the literature review and the empirical research it was possible to establish recommendation on how to establish a successful outsourcing partnership with a 3PLl4PL, as well as a tool was developed to aid those companies that currently experience problems with their outsourcing partnership. While the outsourcing process is unique to every situation the guidelines offer a generic approach that prevents the prospective outsourcing company from falling into common pitfalls that often lead to failure of the partnership.

Outsourcing of logistical operations is becoming more and more frequent in order to address the needs of a company's supply chain as well as improving customer service and reducing operating costs. The main objective of this study was to provide a guideline to Logistics and Supply Chain Managers on how to successfully implement an outsourcing (3PL/4PL) partnership, as well as identify the pitfalls that should be avoided during the implementation process. To realise this objective an extensive review of the current literature was undertaken on the concept of logistics and the supply chain and how the concept of outsourcing has influenced this concept. The literature presented the following results: ~ Logistics is often perceived as non-core business function to a company and hence suitable as an outsourcing option. ~ Outsourcing of the logistics function should be a strategic decision that offers both a reduction in costs as well as improvements in sales revenue and customer service. ~ Outsourcing is able to contribute value for a company through reduced cost and increased revenues as well as improved service levels due to the specialist nature of the outsourcing partner. ~ Some competitive advantage is possible when choosing a 3PLl4PL to operate your logistics function. ~ The 3PL industry is currently in a state of transition, with many small 3PL's consolidating their business efforts to form Lead Logistics Provider companies. An empirical research on the South African perception of the 3PLl4PL industry was then conducted using a structured questionnaire. The results of the questionnaire providing an answer on the state of the 3PLl4PL industry in South Africa along with comments on how successful implementation differed from the failures. From the literature review and the empirical research it was possible to establish recommendation on how to establish a successful outsourcing partnership with a 3PLl4PL, as well as a tool was developed to aid those companies that currently experience problems with their outsourcing partnership. While the outsourcing process is unique to every situation the guidelines offer a generic approach that prevents the prospective outsourcing company from falling into common pitfalls that often lead to failure of the partnership.