Logistics Relationships

Types

of Relationships

vertical relationships:

these refer to the traditional linkages between firms in the supply chain such as retailers, distributors, manufacturers, and parts and materials suppliers

horizontal relationships:

includes those business agreements between firms that have parallel or cooperating positions in the logistics process.

Range of relationship types

Transactional:

Both parties in a vendor relationship are said to be at arms length

the relationship suggested by a strategic alliance is one in which two or more business organizations cooperate and willingly modify their business objectives and practices to help achieve long-term goals and objectives represents an alternative that may imply even greater involvement than the partnership or strategic alliance.

Collaborative:

Strategic:

Figure 4-1 Relationship Perspectives

Transactional

Relational

Vendor

Partner

Strategic Alliance

Regardless of form, relationships may differ in numerous ways. A partial list of these differences follows:
Duration
Obligations Expectations

Interaction/Communication
Cooperation Planning

Goals
Performance

analysis Benefits and burdens

Source: Copyright 2001, C. John Langley PhD Used with permission

Figure 4-3 What Does It Take to Have an Area of Core Competency?

Drivers
defined as compelling reasons to partner; all parties must believe that they will receive significant benefits in one or more areas and that these benefits would not be possible without a partnership

Facilitators
are defined as supportive corporate environmental factors that enhance partnership growth and development; As such, they are the factors that, if present, can help to ensure the success of the relationship
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Drivers & Facilitators**

Drivers: asset/cost efficiency, customer service, market advantage, profit stability/growth

Facilitators: Corporate compatibility; similar mgmt. philosophy; mutuality of commitment; symmetry of size, financial strength
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Figure 4-4 Implementation and Continuous Improvement

Ray A. Mundy, C. John Langley Jr., and Brian J. Gibson, Continuous Improvement in Third Party Logistics, (2001).

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Collaboration:
Collaboration

occurs when companies work together for mutual benefit.

goes well beyond vague expressions of partnership and aligned interests. leverage each other on an operational basis and creates a synergistic business environment in which the sum of the parts is greater than the whole.

Collaboration

Companies

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Seven Immutable Laws of Collaborative Logistics

Collaborative Logistics Networks Must Support:

Real and recognized benefits to all members Dynamic creation, measurement, and evolution of collaborative partnerships Co-buyer and co-seller relationships Flexibility and security Collaboration across all stages of business process integration Open integration with other services Collaboration around essential logistics flows

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Definition of Third-Party Logistics

Essentially, a third-party-logistics firm may be defined as an external supplier that performs all or part of a companys logistics functions. Among these, multiple logistics activities are included, those that are included are integrated or managed together, and they provide solutions to logistics/supply chain problems.

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Types of 3PL Providers**

transportation-based-UPS, FedEx, DHL, Ryder warehouse/distribution-based: DSC Logistics, Saddle Creek forwarder-based: Kuehne & Nagle, C.H. Robinson, Hub shipper/management-based: Caterpillar, Uniroyal financial-based: Fleet-Boston Financial, General Electric, Cass information-based firms: Transplace, Nistevo

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Figure 4-6 3PL Logistics Market Turnover Growth (US $Billion)

$100 $80 $60 $40 $20 $0

1996 1997 1998 1999 2001 2002 2003 2004 2005 2008

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Source: 2005 Tenth Annual 3PL Study, Georgia Tech and Cap Gemini LLC. Used with permission
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Figure 4-11Fourth-PartyTM TM Logistics*

+ Greater Functional Integration + Broader Operational Autonomy

Source: Accenture, Inc. Used with permission. *TM Registered trademark of Accenture, Inc.
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Figure 4-12 Current vs. Projected Logistics Expenditures Directed to Outsourcing

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Table 4-9 Future 3PL Industry Trends

Continued expansion, acquisition and consolidation of 3PL industry

Growing range of strategic services offered by 3PLs and 4PLs IT Capabilities to become an even greater differentiator Increased efforts to update, enhance, and improve 3PL provider-user relationships Emphasis on relationship reinvention, mechanisms for continual improvement, and solution innovation

Expansion of global markets and needed services

Continued broadening of service offerings across supply chain and broad-based business process outsourcing Two-tiered relationship models (strategic and tactical)

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Problem areas with 3PL*

Service level commitments not realized Time and effort spent on logistics not reduced Cost reductions not realized Inability to form meaningful relationships Lack of global capabilities *new slide

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Summary (cont.)

While nonusers of 3PL services have their reasons to justify their decision, these same reasons are sometimes cited by users as justification for using a 3PL. Customers have significant IT-based requirements of their 3PL providers, and they feel that the 3PLs are attaching a priority to respond to these requirements. Approximately two-thirds of the customers suggest 3PL involvement in their global supply chain activities. Although most customers indicate satisfaction with existing 3PL services, there is no shortage of suggestions for improvement.

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