THE ROLE OF LOGISTICS SERVICE PROVIDERS IN HORIZONTAL COLLABORATION PARTNERSHIPS

THE ROLE OF LOGISTICS SERVICE PROVIDERS IN HORIZONTAL COLLABORATION PARTNERSHIPS

 

Introduction

Establishing horizontal partnership in logistic supplies attracts various benefits to the business. The idea of horizontal collaboration is currently gaining attention as an effective model that can improve procedures especially in transport and logistics. Horizontal collaboration demands multiple autonomous entities to work together in clusters of communities in order to realize shared objectives. This entails synchronization of entities in logistical procedures to ensure that they are consolidated in time and space. This is in contrast to the customary logistical procedures in which the bundled supply procedures of community were gathered and physically conducted by a logistical service provider. Particularly, horizontal collaboration works on the idea of “grouping” where one to one contract bind service providers (Wagner, 2008). Studies confirm that horizontal collaboration has the potential of generating considerable increase in network asset utilization. This is essential in improving the efficiency and sustainability of logistics network. However, organizations have not embraced this strategy fully because of its unfamiliarity and sophisticated nature (Rushton & Walker, 2007). Evaluating the idea of Logistic service providers (LSP) under the aspects of establishing the partnership, essential type of relationships that the partnership should  have, the type of services that entities in the partnership can provide and the effective business model that they can adopt is fundamental in developing knowledge of the role of LSP in horizontal collaboration partnerships.

Setting of a partnership and strategies for ensuring full participation and feasible compensation of all entities

When setting logistics partnership, the strategists should understand the available market opportunities and challenges. Furthermore, one should carefully examine demand and supply forces to establish the state of the market. This should include evaluating the market dynamism in order to formulate strategies that serve the interest of the customers while rewarding the effort of the partnership’s entities. Downes (2009) observes that the proliferation of the products due to swiftly changing demand and increasing customer expectations needs more sophisticates, flexible and responsive supply chains. The scholar further notes that novel opportunities and problems emerging from changing international markets demands companies to develop firm partnerships with LSP (Rabinovich, & Knemeyer, 2006). This means that organizations constituting a particular partnership should integrate their supply chain with the ones for their suppliers and customers in order to develop a single network that can reduce costs and increase opportunities for all entities involved. This means that when setting a partnership, each entity should prioritize their need of bringing its strengths into the community in order to improve the welfare of the entire partnership (Shah, 2009).

Furthermore, a partnership may need the intervention of an unbiased third party in order to increase the benefits of the community. This third entity would act as a trustee enabling the community to establish a unified ground. Hsiao (2009) argues that a trustee is essential especially were entities are dealing with confidential information or when operating in semi-competing markets. This is because a trustee would enable the partnership to redistribute its gains proportionately. The party is also essential when entities need to synchronize their daily operations (Walton, 2010). The trustee or the contractual guidelines should ensure that compensation is based on the amount of capital and effort invested into the partnership. In essence, entities that contribute large amount of capital and time into the partnership’s activities should receive a larger share of the enterprise’s benefits. This would ensure that entities that are involved in the community trust each other and are receiving fair portion of the profits realized by their partnership (Shah, 2009 p.32).

Type of the relationship that entities should have

Entities participating in the partnership should have harmonious relationship with each other. Every entity needs to understand that each member of the partnership has a vital role in the team. Ideally, entities must understand that the overall objectives of the partnership are attainable through communal effort (Hassan, 2011p. 43). This means that each entity should understand its roles and the boundary for its authority in order to avoid conflicts. Furthermore, regulations controlling the relationship of entities in the partnership should have legal authority. This means that entities should understand legal procedures, which control their activities while in the partnership. Consequently, entities that ignore terms, which are spelt by the contact should face the consequences of their practice (Hsiao, 2009 p. 32).

Moreover, entities included in the community should establish a long-term relationship with each other. It is apparent that realization of the partnership’s objectives may take long time. Entities need to remain together for a considerable amount of time in order to realize their goals (Lun, Lai & Cheng, 2010). For example, logistical procedures within the clothing industry are primary slow and time consuming. Clothing products goes through sophisticated procedures from the initial step of gathering raw materials to the time of supplying finished clothes. Establishing a long-term relationship would provide entities with new strategies for differentiating themselves in extensively competitive logistic market offering them the opportunity of dominating the industry in long run. Consequently, each entity should have knowledge of the partnership’s long-term goals or strategies that bind them together. This would act as a motivating factor empowering entities in creating an effective relationship that would propel them to high successes (Coyle & Coyle, 2009).

Types of services that the partnership can provide

Entities in this partnership can base their services on third-party logistics procedures to offer a wide range of 3PL services. These can include warehousing, fulfillment, contract warehousing, and various value added services, which are the major services in the clothing industry. Aligning the partnership’s activities with the basic services in the industry would enhance relevance of their services (Lars-Erik & Kajsa, 2009 p. 23). This is supported by the fact that consumers are always willing to spend on services that satisfy their needs. However, the partnership should utilize calculative strategies in order to outshine other firms that offer the same services (Love, 2004). For example, the partnership should provide services that uphold the idea of cost saving in the aspect of economies of scale. Furthermore, the partnership should offer convenient and easily accessible services by creating local and international presence (Hassan, 2011).

The partnership should also prioritize the need of creating best practices throughout its logistical activities. According to Coyle & Coyle (2009), effective logistics services by the 3PL provider are characterized by strategic customer service experience. This means that the partnership should have highly skilled personnel who have experience in essential areas of third party logistics. Furthermore, focusing in strategic elements such as technology would enable entities in the partnership supply their services at sustainable costs. Furthermore, the strategy would enhance the visualization of the firms’ inventories while creating flexibility that would improve their performance (Downes, 2009).

The business model

The partnership should implement an open business model because the scheme is highly sustainable. This means that partners should share assets and the pricing policy. Sharing assets would attract various benefits to the entire partnership (Zuckerman, 2002). For example, sharing assets would reduce operational costs because the available assets are utilized maximally. Sharing the asset would ensure that a particular asset is entirely occupied at any particular time. Consequently, the costs saved from such procedures can grow the company’s profit (Lun, Lai & Cheng, 2010). Furthermore, an open business model would increase the authority of the partnership. This is because the strategy promotes the need of pooling resources together which would increase the partnership’s purchasing and buying power. For example, entities can contribute and raise large amount of capital that they can use in obtaining expensive assets. Furthermore, Stefansson (2004) approves the efficacy of the open model in logistic business activities by noting that the strategy reduces firm’s inventory considerably. This is because an entity can collect products from its supplier only when their demand is high. This is essential considering the fact that inventory management poses a serious challenge in the supply business. Furthermore, sharing the pricing mechanism would ease the procedures for executing transactions such as payments (OECD, 2002).

Conclusion

Horizontal collaboration is responsible for efficiency and sustainability of the logistics sector. LSPs participate in actions that help in creating plus executing business models that are useful in partnerships. LSPs help in the validation of various business models that appear in different forms. In the clothing sector, LSPs help in devising succinct methodologies, for example, those involving computation of revenues benefits, and legal frameworks. Application of appropriate logistics in the clothing enterprises is vital because it helps them gain competitive advantage.

 

 

References

Coyle, J. J., & Coyle, J. J. (2009). Supply chain management: a logistics perspective. Mason, OH, South-Western Cengage Learning.

Downes, L. (2009). The laws of disruption: Harnessing the new forces that govern life and business in the digital age. New York: Basic Books

Hassan, N. (2011). A collaborative framework in outbound logistics for the US automakers. Wayne State University). ProQuest Dissertations and Theses, 235. Retrieved from http://search.proquest.com/docview/913498131?accountid=35812. (913498131).

Hsiao, H.-I. (2009). Logistics outsourcing in the food processing industry: a study in the Netherlands and Taiwan. Wageningen, The Netherlands, Wageningen Academic Publishers.

Lars-Erik Gadde, Kajsa Hulthén (2009) “Improving logistics outsourcing through increasing buyer–provider interaction”, Industrial Marketing Management, Vol.38 No.6

Love, J. (2004). 3PL/4PL–Where Next?. Logistics & Transport Focus. pp. 18-21.

Lun, Y. H. V., Lai, K., & Cheng, T. C. E. (2010). Shipping and logistics management. New York: Springer.

Organisation for Economic Co-operation and Development.  (OECD)(2002). Transport logistics: Shared solutions to common challenges. Paris: OECD.

Rabinovich, E., & Knemeyer, A. (2006). Logistics Service Providers in Internet Supply Chains. California Management Review, vol.48 no.4, 84-108.

Rushton, A., & Walker, S. (2007). International logistics supply chain outsourcing: From local to global. London: Kogan Page.

Shah, J. (2009). Supply chain management: Text and cases. Upper Saddle River, N.J: Pearson Education.

Stefansson, G. (2004). Collaborative logistics management: The role of third-party service providers and the enabling information systems architecture. Chalmers Tekniska Hogskola (Sweden)). ProQuest Dissertations and Theses, , 335-335 p. Retrieved from http://search.proquest.com/docview/305102360?accountid=35812. (305102360).

Wagner, S. M. (2008). Managing innovation: The new competitive edge for logistics service providers. Berne: Haupt.

Walton, C. (2010). 3PL versus 4PL. Motor Transport, , 10-10. Retrieved from http://search.proquest.com/docview/744040666?accountid=35812

Zuckerman, A. (2002). Supply chain management. Oxford (UK), Capstone.

 

 

 

 

 

 

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