Purpose

The purpose of this project is to develop and test a model that evaluates the value of outsourcing logistics in the third party logistics service industry. Firms making decisions about outsourcing focus primarily on costs. An important part of this research will include the development of a model that firms can use to measure the value of outsourcing logistics functions. It is hoped that this tool will assist firms to make more informed decisions about how they so and distribute product.

In Figure 1 below, an initial attempt at developing this tool is displayed. You can click on the figure to view a larger version. This figure is adapted from a model describing the impact of logistics on profitability developed by Lambert and Burdoglu. The figure depicted below is only a preliminary model used so that the idea can be discussed with potential research participants. The idea presented here is that there are other important elements of outsourced logistics relationships that need to be evaluated in addition to tightly managing the supply chain cost. Many companies are often “penny wise and pound foolish” when it comes to working with third party logistics service companies.

In figure 2 below, an evolved model is presented. You can click on the figure to view a larger version. This model is simplified and contains three primary elements: 1) Operating cost impact, 2) Revenue impact, and 3) asset impact. This model was developed in conjunction with Herb Shear and Steven South.

Dale S. Rogers . IWLA Third-Party Trends and Practices Study . International Warehouse and Logistics Association. Park Ridge , IL., 2004, p. 19. Douglas M.

Lambert and Renan Burdoglu. “Measuring and Selling the Value of Logistics,” The International Journal of Logistics Management , 2000, 11 no. 1, p. 9.

Robert Burton, Anatomy of Melancholy. edited by Thomas C. Faulkner, Nicolas K. Kiessling, Rhonda L. Blair ; with an introduction by J.B. Bamborough, Oxford [ England ]: Clarendon Press, 1989

Value Project Sponsors:

GENCO

Center for Logistics Management