Gaining Competitive Advantage Through Outsourcing

Gaining competitive advantage

through outsourcing

Authors:

Sarah Tagliapietra

Peter Platan

Ng Seow Li

Ralph Schneider

Executive Summary

Today's escalating, competitive and demanding environment has forced players in the

marketplace to be more efficient, to emphasize on a leaner organization and continuously

innovate new procedures to keep ahead of competitors. Adding final consumer value to the

product or service in the form of lower prices, quality and better service has become an

essential requirement in the global marketplace.

Logistics outsourcing has become an attractive option in order to take advantage of global

opportunities, to acquire state of the art logistics capabilities, significantly improve customer

service and to enable focusing on core competencies.

The purpose of this study is to present a theoretical framework for outsourcing actions as a

guideline for companies on why and how to outsource. It gives a deeper insight on logistical

outsourcing as a new and promising trend in the global environment while presenting the

main logistical areas of outsourcing as well as the advantages and disadvantages.

In order to effectively implement outsourcing, commitment from top to down management

and a wide understanding of all the stages and implications of outsourcing are required. In

order to achieve these prerequisites and a successful implementation process, a model

integrating the third- party logistics buying process and relationship improvement process is

presented. It emphasizes the importance of carefully identifying alternatives, the overall

analysis of partner selection with the help of specific criteria, mutual relationship building

between logistics service buyer and provider through joint team building and continuous

improvement and performance measurement. The relationship positioning tool model can be

used for the continuous enhancement and improving of the supplier-customer relationship.

The results and overall reasons of outsourcing should focus on adding value to the final

consumer of the product or service. By achieving lower logistical costs and a higher level of

quality and expertise these results can be used to add value to the consumer.

The study points out that there is an increasing need for logistical outsourcing as a way to gain

competitive advantage and as an instrument to meet the requirements of the company's

complex environment.

TABLE OF CONTENTS

1.0 INTRODUCTION.............................................................................................................. 1

1.1 OUTSOURCING TODAY....................................................................................................... 1

1.2 LOGISTICS OUTSOURCING ................................................................................................. 1

2.0 APPROACH ....................................................................................................................... 2

2.1 PURPOSE........................................................................................................................... 2

2.2 METHOD........................................................................................................................... 3

3.0 THEORETICAL FRAMEWORK ................................................................................... 3

3.1 LOGISTICS OUTSOURCING DRIVERS................................................................................... 3

3.1.1. Advantages and disadvantages ................................................................................ 4

3.2 THE IMPLEMENTATION OF OUTSOURCING .......................................................................... 6

3.2.1 Model for outsourcing............................................................................................... 6

3.2.2 Relationship positioning tool .................................................................................... 9

3.3 AREAS OF OUTSOURCING................................................................................................. 10

3.3.1 Transportation......................................................................................................... 10

3.3.2 Warehousing............................................................................................................ 11

3.3.3 Inventory management ............................................................................................ 13

3.3.4 Information systems................................................................................................. 14

4.0 CASE EXAMPLE ............................................................................................................ 15

4.1 BACKGROUND ................................................................................................................. 15

4.2 OUTSOURCING SOLUTION ................................................................................................