Transportation & Logistics Management (MGMT615)

 
GDB No. 01
 
Total Marks: 5
 
Objective:
To reinforce the concept of decision making for third-party logistics in global operations.
Scenario:
Consider,  USA based XYZ firm is one of the growing FMCG companies engaged in beverages.
The battle for survival in tough competition compelled the company to expand its operations to
South Asia.
Thus, the company decided to introduce its products (manufactured in the USA) in Pakistan and
India.
To retain control over supply chain, specifically logistics, has always been a desire of such
companies.
However, changing market structure, increasing competition, increasing economic pressure and
increasing regulations for operating globally restrict such companies to expand aggressively.
For this, the company is undecided between two choices for logistics: either hire third-party
logistics services (3PL) or manage its own logistics operations – as both have certain pros and
cons.

Answer:
o As company is dealing with globalization and food (beverages) localization of product is
required to get better market opportunities. But regulatory requirements are restricting
aggressive expansion of organization. There exists business risk in new environment.

o As business is going to expand quickly, it may lack recourses to handle initial heavy loads of

Logistics.
o If company uses its own logistics and initially hires employees and need other

resources to fulfill business requirements. SO there is risk of increase in total cost, if

 sales goes down. In this case extra resources used to handle heavy work load would
not be absorbed into the cost of running business.
o 3PL can easily be scaled-up or scaled-down according to business requirements. So 3PLwill

be favorable.
o in case of 3PL, company can reduce cost as 3PL may already have better access to

large infrastructure and resources.

o They also have better understanding on geographical location and distribution

locations.
o With 3PL company can perform well in transportation, warehousing, picking and

packing, inventory forecasting, order fulfillment, packaging and freight forwarding

(under given circumstances in scenario)
o Other benefits associated with use of 3PL are

 Drive Cost Savings.
 Get Access to Expertise and Experience
 Focus on Core Competencies
 Gain Flexibility 
 Enable Business Growth and Market Expansion. ...
 Improve Customer Satisfaction
O Using 3PL may reduce company control over shipping process and all that go with it.
Company should find a 3PL provider on which company can trust and build a positive
trustful relationship with provider can make company more profitable. Idea of
“horizontal alliance” can enhance business and provide benefit to both 3PL and
company.