Supply Chain and Logistics Service Providers

Abstract
A highly efficient, cost effective and free flowing supply chain signifies the basis of every successful company. It permits every other operation of the company to get going and move forward devoid of any encumbrances or concern for a deficiency in materials, provisions or parts. There are various factors that have to be taken into consideration when selecting a logistics service provide and these comprise of cost, scalability, proven track record, innovativeness and financial stability and history of payment. Concerning the selection and use of logistics service providers, a key approach that is more often than not utilized by logistics managers is to give a big fraction of the business to one carrier, and the small fraction to a rival carrier. The advantages of this approach are twofold. One, in the event of existing problems with the primary carrier, then it is possible to change and shift traffic to the alternative carrier. Two, both of the carriers are at all times attentive and cannot become lazy of ineffective for the reason that they are aware there is an alternative available in the event that their performance begins to deteriorate

Introduction
Logistics plays a pivotal role in the integration of supply chains within industries. Taking into consideration that the market has fast become more global and continues to progress in that direction, logistics is presently perceived as a significant area where industries can diminish costs and enhance their customer service quality. In the present day, several companies are in pursuit of outsourcing their logistics operations to what is referred to as third party logistics service providers to unveil product and service inventions rapidly to their markets. For this reason, there is a mounting inclination that manufacturing corporations outsource their logistics activities to meet their progressively more necessities for logistics services. This inclination has augmented significance of the notion of third party logistics service providers. In the contemporary economic setting, several entities name these logistics service providers as more proficient and cost effective in achieving their partial or full logistic requirements (Akman and Bynal, 2014).
The selection of logistics service providers is an intricate multi-criteria decision making issue that comprises of both quantitative and qualitative conditions some of which can clash with one another and is imperative in augmenting the competitiveness of companies. It is a significant function of the logistics departments as it leads to substantial savings for the entity. While selecting the suitable logistics service provider, logistics managers may be indeterminate whether the selection will gratify entirely the needs of the organization. The purpose of this paper is to discuss the various factors that have to be considered when selecting logistics service providers and how consignors make decisions concerning choosing logistics services.
Literature Review
There is a mounting trend for logistics outsourcing in the international market. In accordance to research conducted by Lambert, Stock and Ellram (1998), logistics outsourcing can be delineated as the utilization of a third-party provider for complete or partial firm logistics operations. In line with this delineation, Rabinovich et al. (1999) in their research study defined logistics outsourcing relationships as longstanding and temporary agreements or associations between manufacturing and service firms and third party logistics providers. What is more, Lieb (1992) pointed out that third-party logistics takes into account the utilization of external corporations to undertake logistics functions conventionally performed within an organization. Third party logistics service providers provide manifold logistics services to their clienteles for instance direct transportation service, warehouse operations and management, shipment planning and merging, management of logistics information systems, carrier choosing, rate conciliation, product returns, convoy management, cataloging, packing, order processing and fulfillment, product installation, inventory management, and customer spare parts (Akman and Bynal, 2014).
In the same manner, Sohail and Sohal (2003) delineated third-party logistics as the utilization of external corporations to undertake logistics functions that have occasionally been carried out within a company. In this regard, third-party logistics is deemed to encompass the activities implemented by an external company in the best interests of a client corporation and these activities comprise of at least the delivery of management of manifold logistics services. These activities are offered in an assimilated manner, not on a separate basis. In accordance to the Council of Supply Chain Management Professionals, third-party logistics is delineated as a company that offers manifold logistics services for use by consumers, and if at all possible, these services are assimilated together by the provider (Akman and Bynal, 2014).
In accordance to a survey conducted by Forrester Research, just about 80 percent of Fortune 500 companies have outsourced transportation service, approximately 55 percent of them have outsourced their distribution services and 46 percent of them have opted for outsourcing in their manufacturing activities. Taking this into consideration, the logistics sector has surpassed the $50 billion mark across the globe. Third party logistics service providers can be delineated as external suppliers which accomplish a portion or all of a corporation’s logistics functions of a corporation (ERP Academy, 2018). Logistic functions released to third-party firms are services like transportation, storage, distribution. It is important to note that these functions necessitate high level of business investment and therefore selection requires preceding thorough examination. Third-party logistics services largely lay emphasis on transportation and warehousing, and so forth and these third-party logistics service providers ought to have professional experiences in each service (Chen and Wu, 2011).
Factors to be Considered when Selecting Logistics Service Providers
The decisions linked with supply chain management encompass both the short-term and long-term periods. Strategic decisions contend with corporate policies, and examine general design and supply chain structure. Imperatively, operational decisions take into account that that cope with day-to-day activities and issues of an organization. These decisions have to take into consideration the strategic decisions that have already been put in place. For this reason, it is key for an organization to ensure that the supply chain is structured through longstanding examination and at the same time lay emphasis on the everyday activities. In general, companies are necessitated to make a decision regarding which logistics service providers they ought to make use of. It is imperative to note that the contracts or agreements made with logistics service providers can more often than not be worth substantial amounts of money and without a doubt encompass a significant part of an organization’s activities, and as a result it is pivotal to select the right and suitable partners. There are different factors that have to be taken into consideration when selecting logistics service providers.
Cost
One of the fundamental factors that has to be taken into account is the cost and service level of a logistics service provider. It is key to note that there is a small number of upright and dependable logistics service providers conducting business operations internationally who have varying cost structures for their clientele. However, not all of them have similar or even in the same way strong operation rates of satisfaction and contentment from their consumers across international expanses. Some may offer superior service from a particular port to the destination ports of choice, but set high prices whereas others may offer inferior service from one specific port to the end point that are preferred, but charge low prices. Therefore, taking this into consideration, in the selection of the logistics service provider, it is imperative to consider the competitive service and also the acceptable cost. It is considerably challenging to nominate solely one logistics service provider for an international operation. It is key to take into account what is necessary to reach the optimum level of the two tiers of cost and benefit (Satellite Trans, 2018).
Scalability
The most pivotal capability an international logistics service provider must offer is the ability to scale their operations to the growing and developing needs of a company. Significantly, bi-directional scalability will have a direct impact on the efficacy of a company’s supply chain. Without a doubt, every company endeavors to grow, perchance expanding internationally. Nonetheless, each firm also has its ups and downs. In the event that the demand deteriorates irrespective of the reason, a logistics service provider must be instantaneously responsive and scale down operations to curtail costs while sustaining efficacious flow of goods. In contrast, when demand increases, there is the need to have a logistics service provider that is able to manage the abrupt spikes flawlessly and devoid of any issues. Businesses face increasing pains from one time to another, but a proficient and experienced logistics service provider that provides holistic, wide-ranging services and has experience in dealing with sudden growth will facilitate added value to a supply chain (Flash Global, 2015).
Comprehensive Innovation, Warehouse and Transportation Options
Procurement and shipping might appear to be operations necessitating low technology. Nonetheless, logistics service providers must measure their performance by the efficiencies they provide. For this reason, it can be noted that the logistics service providers that embrace leading-edge technology provide the company with the utmost potential for optimization. In the contemporary business setting, technological aspects such as cloud-based platforms and Internet of Things (IoT) devices have become prevalent and imperative for successful operations. They provide logistics service providers with extensively augmented competencies and ability for control. A top logistics service provider will have the state-of-the-art systems that facilitate them to provide a company with instantaneous data and feedback on supply chain operations and freight. Furthermore, whether a company is examining a non-asset-based logistics provider or an asset-based international logistics service provider, it ought to be offered a wide range of warehousing and shipping choices appropriate to your operations. Options and alternatives generate prospect within a supply network. It is imperative to note that when a logistics service provider has wide-ranging relations with manifold suppliers, the company profits from their capability to select the lowest cost option. This makes having the top technology platforms all the more significant for managing those options, ascertaining the most effective and executing it without a glitch (Flash Global, 2015).
Financial Stability and History Payment
The unexpected death or desertion of your international logistics service provider can have adverse impacts on the business and consumers as well. Bearing this in mind, obtaining a partner with a past of financial stability and concrete payment history will alleviate the potential that the logistics provider will be unreliable therefore causing loss from their own mishandling. For this reason, when examining the potential logistics service providers, it is essential to request for a listing of their partners and make an inquisition regarding their payment history. It is imperative to examine whether at any given time they have missed payments and if there are solid reasons for such circumstances. The manner in which these 3PL handle their business partners is a suitable sign of the manner in which they will treat a new business and also being in touch with such partners can provide a more vivid perspective.
Details on the logistics service provider’s history and also client references
Aside from aspects such as the financial capability and stability of the logistics service provider, it is imperative to look into details of their past transactions and also references from their clientele, both present and past. Basically, an inquisition into their general track record should be made. Some of the aspects to be taken into account include whether they consider multiple corporations as longstanding consumers, their reputation as innovative, pioneering firm with the lasts technology and also their reliability and efficiency. Furthermore, the references for a third-party logistics provider ought to be exceedingly good or basically traversable. There ought to be exceptional and outstanding recommendations that this logistics service provider will be worth the time, and clients ought not to dilly-dally to rant about the outcomes they have experienced or regarding the safety, flexibility and dependability of the logistics service provider. What is more, references ought to go into the culture and personality of the international 3PL. Whether it is concerned with goods or service, the logistics provider ought to be conveying a much greater value proposal than simply efficiency. The capability to ascertain and capitalize on opportunities along the supply chain is a good example (Flash Global, 2015).
Decision Making in Selecting Logistics Service Providers
Decision making is a continuous and significant part of several logistics managers’ tasks and duties. For instance, there is attempting to make a decision regarding which routing to employ for a certain shipment, which carriers to utilize, and the amount of inventory to hold. Dissimilar individual, reliant on their role within the supply chain, will have differing opinions and standpoints regarding what the ideal decision is, and it is the duty of the logistics manager to bring together and resolve these contradictory views (Mangan, Lalwani and Lalwani, 2016). With respect to using logistics service providers, a tactic that is more often than not employed by logistics managers is to hand a major proportion of the business to one carrier, and the other minor proportion to a rival carrier. There are two fundamental benefits of undertaking this particular selection strategy. To begin with, if there are any issues with the number one carrier, for instance such as deferments and delays, then they can, if essential change and shift traffic to the alternative carrier. The second advantage of this strategy is that the dual tactic has the benefit of ensuring that both of the carriers are always alert an cannot get on their comfort zones for the reason that they are aware there is an alternative available in the event that their performance begins to deteriorate (Mangan, Lalwani and Lalwani, 2016).
References
Akman, G., & Baynal, K. (2014). Logistics service provider selection through an integrated fuzzy multicriteria decision making approach. Journal of Industrial Engineering, 2014.
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Rabinovich, E., Windle, R., Dresner, M., & Corsi, T. (1999). Outsourcing of integrated logistics functions: an examination of industry practices. International Journal of Physical Distribution & Logistics Management, 29(6), 353-374.
Satellite Trans. (2018). Choosing a Logistic Service Provider. Retrieved 25 August, 2018 from: https://satellitetrans.com/ChoosingaLogisticServiceProvider.html
Sohail, M. S., & Sohal, A. S. (2003). The use of third party logistics services: a Malaysian perspective. Technovation, 23(5), 401-408.