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Supply Chain and Logistics Management and strategy - Assignment Example

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Since, the warehouses of a large 3PL provider are spread widely, the distance from retail outlets to warehouses gets reduced and so lower levels of inventories need to be maintained at…
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Supply Chain and Logistics Management and strategy
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Download file to see previous pages Third party logistics companies have the capability to customize services according to the business needs of HP. While, it may not be possible for HP to internally deploy best resources for all supply chain operations, outsourcing the same to a good 3PL would ensure the same. In addition, there is a greater accountability and a willingness to please the client by the 3PL (Sullivan).
Third party logistics would also enable HP to concentrate on its core competency which is manufacturing or assembling of high quality computing technology products. Similarly, 3PLs whose core competency is in logistics would be able to better handle the logistics of HP. Therefore, a win-win situation is created for both the partners. However, due to a concentration on its core competency, there is a risk of HP losing control over its operations in the long term. Also, HP needs to make it sure that the 3PL provider should not have strategic alliances with a competitor as it would lead to conflict of interest (The Ultimate Logistics Guide).
One of the biggest advantages of using third party logistics vendor comes from the realization of economies of scale. Third party logistics vendors generally have large transportation fleet and warehouses since they provide these services to a number of companies. This results in effective cost management. In addition, there are also cost savings due to economies of scope. Economies of scope are realized because common resources can be used for many varieties of products within HP or between firms due to involvement of 3PL vendors (Nemoto, Tezuka).
Considerable costs are also saved in capital investments in warehouses, logistics and transportation. The 3PL providers can further spread the financial risks by outsourcing to subcontractors and Fourth party logistic providers (4PL).
Having mentioned a lot of savings, the probability of negative impacts can’t be ignored. If ...Download file to see next pagesRead More
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