Examining logistics outsourcing practices in the United States: from the perspectives of third-party logistics service u
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ORIGINAL PAPER
Examining logistics outsourcing practices in the United States: from the perspectives of third-party logistics service users Hokey Min
Received: 14 March 2013 / Accepted: 25 September 2013 / Published online: 12 October 2013 Ó Springer-Verlag Berlin Heidelberg 2013
Abstract Ongoing global recession forced many firms to change the direction of their business strategic thinking. This change in a strategic thinking includes the reassessment of current business practices that may not necessarily add the highest value to the supply chain process and may not bring the highest possible return from the allocated resources. As such, outsourcing strategy that allows the firm to focus on its core competency has gained popularity over the years. One of the supply chain activities that are often outsourced is logistics as evidenced by a continued growth of the third-party logistics (3PL) industry across the world. To help firms formulate wise logistics outsourcing strategy, this paper examines the common logistics outsourcing practices among the US firms and identifies key determinants influencing their logistics outsourcing decisions. It also explores the current logistics outsourcing trends in terms of customer value propositions. Examples of such trends that this study discovered were the increased outsourcing of global logistics practices and a short-term duration of the logistics outsourcing contracts. Furthermore, this paper identifies the best-in class 3PLs based on their users’ experiences with those 3PLs as guidance for future benchmarking efforts. Keywords Third-party logistics Logistics outsourcing Exploratory analysis US firms
H. Min (&) James R. Good Chair in Global Supply Chain Strategy, Department of Management, BAA 3008C, College of Business Administration, Bowling Green State University, Bowling Green, OH 43403, USA e-mail: [email protected]
1 Introduction With the world economy deeply mired in the worst recession in decades, many firms search for every possible means to enhance their managerial efficiency. One of such means includes logistics outsourcing. Generally, logistics outsourcing is defined as a subcontract arrangement whereby a logistics service provider performs a range of services for a firm that could be, or have been provided, in-house [42]. Logistics outsourcing allows the firm to focus on its core competency and exploit external resources and expertise in handling its logistics activities. In other words, logistics outsourcing involves any form of externalization of logistics activities previously performed ‘‘in-house.’’ The theoretical underpinnings of logistics outsourcing are often predicated on the transaction cost analysis and network theory [68]. According to the transaction cost theory, when transaction costs are low and transaction uncertainty is high, logistics outsourcing can be more appropriate than in-housing [82]. Also, according to the network theory, the firm’s relations with its logistics service providers through outsourcing contracts can constitute its most
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