Critical Logistical Factors when Outsourcing to third party stakeholder

Abstract: Outsourcing breaks up the supply chain and often increases in number of stakeholders and organizations and therefore puts a higher demand on a well-functioning coordination of the material supply. The logistical task spectrum is characterized by a great degree of variety and dissimilarity which is due to the logistical role itself, functions within both overall economic and business processes, in value-added steps from the processing of raw material to the end user. Research in the field of global sourcing environment has been conducted in prior research, however, the outsourcing environments differs one from another. The purpose of this study is to identify critical logistical factors when transferring to a third party stakeholder. The findings are based on an extensive literature study in the field of logistics and a single case study. An interactive investigation at a large, multinational company provided opportunities to observe and participate in an ongoing global transfer and verify the applicability of the result (matrix concept). The observations were done over a three months’ period and gave the author the opportunity to investigate the logistical setup for the ongoing transfer. The company henceforth Genopower AB, is transferring the assembly and testing to a third party stakeholder located in Indonesia. The motives for the transfer is to increase the company’s market shares in Indonesia and further into Asia. The third party stakeholder, henceforth PT PAK does not have any prior experience in the Gas turbine (Power generation) industry. The study provides a generalized matrix with critical logistical factors which affects the logistical performance measurements, logistical cost and customer service elements. By presenting the findings in terms of factors, the matrix can be applicable on future outsourcing projects and give a clear insight in which of the factors is worth investigating further; prior, during or after the actual transfer as an evaluation tool.