Logistics Outsourcing: Lessons from Case Studies

Topics: Logistics, Case study, Management Pages: 21 (7595 words) Published: May 13, 2014
Logistics Outsourcing: Lessons from Case Studies
Aldo Srabotiˇ
c
Mitja Ruzzier
This paper investigates key success factors in logistics outsourcing. A model is used to illustrate outsourcing relationships and then applied to three examples from the logistics sector. The model is presented as a tool which can help managers to minimize the chance of failure by explicitly addressing key issues prior to the implementation of a partnership. In order to fully capture the complexity of the outsourcing process, the model is refined by the analysis of implementation of outsourcing methodology and the analysis of the presence of outsourcing myths in each case. We find that the implementation of outsourcing methodology is critical to successful outsourcing. Overall, we find that the main common factors leading to logistics outsourcing success, after the right third party service provider has been selected, are improved service levels and commercial viability for both parties, joint vision and objectives of the partnership, clear roles, top management commitment and support, communication and trust. The results of the case analysis shed light on what is the key to a successful outsourcing relationship and indicate how the architecture of logistics outsourcing can be analyzed and improved. Key Words: third-party logistics, outsourcing, transportation service, service provider, partnership

jel Classification: l24

Introduction
In the global economy, every company must compete against customer choices coming from everywhere and anywhere. The single most visible result of this hyper-competitive environment is rapid commodization. Growth and profitability are expected and increased shareholder value is demanded. Doing the right thing is becoming more important than doing everything. Therefore, organizations are becoming better focused and more specialized. They evaluate each activity to determine if and how it provides a unique competitive advantage. The arAldo Srabotiˇ is a Member of the Board of Managers c

at Istrabenz plini, d. o. o, Slovenia.
Dr Mitja Ruzzier is an Associate Professor at the Faculty
of Management, University of Primorska, Slovenia.
Managing Global Transitions 10 (2): 205–225

206 Aldo Srabotiˇ and Mitja Ruzzier
c

eas that provide an advantage are likely to receive increased internal investment, while those that do not are likely to be either eliminated entirely or put in competition with an ever-expanding marketplace of external service providers, that is, they are considered for outsourcing. According to Corbett (2004), outsourcing is a management tool which is used to move an organization away from the traditional vertically integrated, self-sufficient structure; one that is increasingly ineffective in today’s hyper-competitive, performance-driven environment. Through outsourcing, the organization moves toward a business structure where it is able to make more focused investments in the areas that provide its unique competitive advantage.

Logistics outsourcing is one of the fastest growing areas. The number of outsourcing companies and logistics service providers has increased dramatically and competition has intensified. Both, outsourcing companies and service providers, face great challenges in their outsourcing venture. A better understanding of success and failure factors and the concerns involved is needed so that outsourcing companies can take better advantage of the outsourcing opportunity. Since the early 1990s, there has been a significant increase in the number of organizations that have decided to outsource all or some aspects of their logistics function. As a result, research into logistics outsourcing has also increased. A careful review of existing literature reveals a mismatch between theory and practice in outsourcing. Collectively, these studies suggest that outsourcing companies should take great care in what, how and whom they choose to outsource an activity. Such research papers have...

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