Fouth-Party Logistics : A study on modern logistics

Abstract: The business environment has changed tremendously in the last two decades. Corporations have been forced to realign their global strategies and in order to cut costs, they started to transfer activities which were previously performed in-house to the market (e.g. IT, manufacturing or logistics) focusing instead on their core competencies. Nowadays companies outsource several of their logistics activities to so-called third-party logistics (3PL) companies and thus from being centralized, vertically integrated and with single-sited manufacturing facilities, enterprises have their network of resources globally dispersed. As a result corporate management has realized that the competitive vehicle is no longer the individual firm, with its own resources and competencies. Instead, in order to cope with shorter product life cycles and ever more demanding customers, both on industrial and consumer markets, individual firms need to strategically become part of ‘extended enterprises’; that is, networks of specialist providers of resources and competencies. However, because the capabilities to manage the entire network do not exist in any one organization, a new business organization was needed to provide the strategic knowledge and competence that will enable the complete integration of the supply chain. This new sort of firm, with core competencies on logistics processes and supply chain IT integration, besides offering consulting services on implementation and development of logistics and supply chain solutions, manages through the use of logistics control towers “the best of breed” 3PL specialists, integrating the end-to-end supply chain so that superior customer value is delivered in the most cost effective way. But how does the use of a supply chain integrator help the supply chain as a whole to achieve competitive advantages that enhance end-customer service? This paper aims to answer the above question. I felt that in order to be able to do that the most appropriate research strategy would be a qualitative study. Hence, a multi-case study was performed on three Swedish companies which differentiate themselves from the more traditional third-party logistics providers. The study was conducted by performing a set of semi-structured interviews with these companies. In order to give the study some sort of structure, I used an interview guide which was divided into three different themes; a) Organizational Design, b) Enterprise Logistics Integration and c) Logistics and Competitive advantages. Once the interviews were transcribed and summarized, the empirical findings were then analyzed in light of a theoretical framework chosen previously. These theories, which in general terms relate to organizational design, supply chain management and finance, were also divided in the same themes as above. Finally, conclusions were drawn by linking the results of the interviews with the theoretical framework. It became evident that the supply chain integrator can help the supply chain as a whole not only to reduce costs related to inventory holding but also to help its client to improve end-customer service.