chapter 4 - supply chain relationships

8/6/2019 Chapter 4 - Supply Chain Relationships

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Chapter 4 Supply Chain Relationships

Learning ObjectivesAfter reading this chapter, you should be able to do the following:

Understand the types of supply chain relationships and theirimportance.

Describe a process model that will facilitate the development andimplementation of successful supply chain relationships.

Recognize the importance of collaborative supply chainrelationships.

Define what is meant by third-party logistics (3PL) and knowwhat types of firms provide 3PL services.


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Learning ObjectivesAfter reading this chapter, you should be able to do the following:

Know what types of 3PL services are used by client/customerfirms and what types of 3PL providers are used.

Discuss the role and relevance of information technology-basedservices to 3PLs and their clients/customers.

Know the extent to which customers are satisfied with 3PLservices and identify where improvement may be needed.

Understand some of the likely future directions for outsourcedlogistics services.


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Logistics Relationships Types of Relationships

vertical relationships:

these refer to the traditional linkages between firms inthe 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 logisticsprocess.


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Range of relationship types Transactional:

Both parties in a vendor relationship are said to be at armslength

Collaborative: the relationship suggested by a strategic alliance is one in

which two or more business organizations cooperate andwillingly modify their business objectives and practices tohelp achieve long-term goals and objectives

Strategic: represents an alternative that may imply even greater

involvement than the partnership or strategic alliance.


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Figure 4-1 Relationship Perspectives

Transactional

Vendor Partner Strategic Alliance

R e lational


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Regardless of form, relationships may differ in numerousways. A partial list of these differences follows: Duration

Obligations

Expectations

Interaction/Communication

Cooperation

Planning

Goals

Performance analysis Benefits and burdens


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


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Figure 4-3

What Does It Take to Have an Area of Core Competency?


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Driversdefined as compelling reasons to partner; all parties

must believe that they will receive significant benefits inone or more areas and that these benefits would not be

possible without a partnership

Facilitators

are defined as supportive corporate environmentalfactors that enhance partnership growth anddevelopment; As such, they are the factors that, ifpresent, can help to ensure the success of therelationship


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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 togetherfor mutual benefit.

Collaboration goes well beyond vague expressions ofpartnership and aligned interests.

Companies leverage each other on an operationalbasis and creates a synergistic business environmentin which the sum of the parts is greater than thewhole.


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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 collaborativepartnerships

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 anexternal supplier that performs all or part of a companys

logistics functions.

Among these, multiple logistics activities are included, those thatare included are integrated or managed together, and they pro-vide solutions to logistics/supply chain problems.


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Types of 3PL Providers

transportation-based

warehouse/distribution-based

forwarder-based

shipper/management-based

financial-based

information-based firms


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

1996 1997 1998 1999 2001 2002 2003 2004 2005 2000

$100

$80

$60

$40

$20

$0


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Source: 2005 Tenth Annual 3PL Study, Georgia Tech and Cap Gemini LLC. Used with permission


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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 toOutsourcing


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Table 4-9 Future 3PL Industry Trends

Continued expansion, acquisitionand consolidation of 3PL industry

Expansion of global markets andneeded services

Continued broadening of serviceofferings across supply chain andbroad-based business processoutsourcing

Two-tiered relationship models

(strategic and tactical)

Growing range of strategicservices offered by 3PLs and4PLs

IT Capabilities to become aneven greater differentiator

Increased efforts to update,enhance, and improve 3PLprovider-user relationships

Emphasis on relationship

reinvention, mechanisms forcontinual improvement, andsolution innovation


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Summary

The two most basic types of supply chain relationships are vertical (e.g.,buyer-seller) and horizontal (e.g., parallel or cooperating).

In terms of intensity of involvement, interfirm relationships may span fromtransactional to relational and may take the form of vendor, partner, andstrategic alliances.

There are six steps in the development and implementation of successfulrelationships. These six steps are critical to the formation and success ofsupply chain relationships.

Collaborative relationships, both vertical and horizontal, have been

identified as highly useful to the achievement of long-term supply chainobjectives. The Seven Immutable Laws of Collaborative Logistics providea framework for the development of effective supply chain relationships.


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Summary (cont.)

Third-party logistics providers may be thought of as an external supplierthat performs all or part of a companys logistics functions. It is desirablethat these suppliers provide multiple services, and that these services areintegrated in the way they are managed and delivered.

The several types of 3PLs are transportation-based, warehouse/distribution-based, forwarder-based, financial-based, and information-based suppliers.

Based on the results of a comprehensive study of users of 3PL services inthe United States, over 70 percent of the firms studied are, to some extent,users of 3PL services.

User experience suggests a broad range of 3PL services utilized; the most

prevalent are warehousing, outbound transportation, and freight billpayment and auditing.


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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 asjustification for using a 3PL.

Customers have significant IT-based requirements of their 3PLproviders, and they feel that the 3PLs are attaching a priority torespond to these requirements.

Approximately two-thirds of the customers suggest 3PL involvementin their global supply chain activities.

Although most customers indicate satisfaction with existing 3PLservices, there is no shortage of suggestions for improvement.


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Summary (cont.) Customers generally have high aspirations for their strategic use of

3PLs and consider their 3PLs as keys to their supply chain success.

There is a growing need for fourth-party logistics relationships that

provide a wide range of integrative supply chain services.

chapter 4 - supply chain relationships

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