1. SUPPLY CHAIN RELATIONSHIPS

2. Learning Objectives
Understand the types of supply chain relationships and their importance.
Describe a process model that will facilitate the development and implementation of successful supply chain relationships.
Recognize the importance of “collaborative” supply chain relationships.

3. Learning Objectives, continued
Know the extent to which customers are satisfied with 3PL services and identify where improvement may be needed.
Understand some of the likely future directions for outsourced logistics services.

4. Logistics Relationships
Types of Relationships
Vertical relationships
these refer to the traditional linkages between firms in the supply chain such as retailers, distributors, manufacturers, and parts and materials suppliers.
Horizontal relationships
includes those business agreements between firms that have “parallel” or cooperating positions in the logistics process.
Intensity of Involvement
Ranges from vendor to strategic alliance

5. Intensity of Involvement
Logistics Relationships, continued
Intensity of Involvement
Transactional
Both parties in a vendor relationship are said to be at “arm’s length”
Collaborative
the relationship suggested by a strategic alliance is one in which two or more business organizations cooperate and willingly modify their business objectives and practices to help achieve long-term goals and objectives
Strategic
represents an alternative that may imply even greater involvement than the partnership or strategic alliance.

6. Figure 4.1 Relationship Perspectives
Source: C. John Langley Jr., Ph.D. Used with permission

7. Relationships may differ in numerous ways. A partial list includes:
Logistics Relationships, continued
Relationships may differ in numerous ways. A partial list includes:
Duration
Obligations
Expectations
Interaction/Communication
Cooperation
Planning
Goals
Performance analysis
Benefits and burdens

8. Figure 4.2 Process for Forming Relationships
Source: C. John Langley Jr., Ph.D. Used with permission

9. Figure 4.3 Required for a Core Competency Area
Source: C. John Langley Jr., Ph.D. Used with permission

10. Model for Developing and Implementing Successful Supply Chain Relationships
Step 1: Perform strategic assessment
Step 2: Decision to form relationship
Step 3: Evaluate alternatives
Step 4: Select partners
Step 5: Structure operating model

11. Figure 4.4 Implementation & Continuous Improvement
Source: Ray A. Mundy C. John Langley Jr., and Brian J. Gibson Used with permission

12. Need for Collaborative Relationships
Vertical collaboration refers to the relationship between buyer and supplier in the supply chain.
Horizontal collaboration refers to buyer-buyer or seller-seller relationships.
Full collaboration is the dynamic combination of both vertical and horizontal collaboration.

13. Figure 4.5 Types of Collaboration
Source: C. John Langley Jr., Ph.D. Used with permission

14. Table 4.1 7 Laws of Collaborative Logistics
Collaborative Logistics Networks Must Support:
Real and recognized benefits to all members
Dynamic creation, measurement, and evolution of collaborative partnerships
Co-buyer and co-supplier relationships
Flexibility and security
Collaboration across all stages of business process integration
Open integration with other sources
Collaboration around essential logistics flows
Source: C. John Langley Jr., Ph.D. Used with permission

15. Third-Party Logistics – Industry Overview
Definition of Third-Party logistics
Essentially, a third-party-logistics firm may be defined as an external supplier that performs all or part of a company’s logistics functions. Among these, multiple logistics activities are included, those that are included are “integrated” or managed together, and they pro-vide “solutions” to logistics/supply chain problems.

16. 3PL market size and scope
Third-Party Logistics – Industry Overview, continued
Types of 3PL providers
Transportation-based
Warehouse/distribution-based
Forwarder-based
Financial-based
Information-based firms
3PL market size and scope
Total NA revenue $143.3 billion
Global revenue $539.1 billion

17. Table 4.2 Top Buyers of 3PL Services

18. Table 4.3 Global 3PL Market Revenue Estimate

19. Figure 4.6 3PL Market – U.S. Turnover Growth
Source: Predictions and major trends for third part logistics 2011, Armstrong & Assoc., Inc. Used with permission

20. Third-Party Logistics Research Study – Industry Details
Profile of logistics outsourcing
Operational, transactional, and repetitive services were the most likely to be outsourced.
Strategic role of information technology
Most frequently used services were transportation and warehouse management systems.
Management and relationship issues
Must establish appropriate roles for 3PL and clients

21. Customer Value Framework
Third-Party Logistics Research Study– Industry Details , continued
Customer Value Framework
3PL’s enable reduced costs, fewer assets, less working capital, and improved order performance.
A Strategic View of Logistics and the Role of 3PL’s
Fourth-party relationships
Logistics outsourcing model for the future
Proprietary provision evolving through stages to lead logistics provider

22. Figure 4.7 Outsourced Logistics Services
Source: Fifteenth Annual 3PL Study, C. John Langley Jr. Ph.D. . Used with permission

23. Figure 4.9 Customer’s Perspectives on 3PL Relationships
Source: 2005 Tenth Annual 3PL Study, C. John Langley Jr. Ph.D. and Cap Gemini LLC.
Used with permission

24. Figure 4.10 Evolution of 3PL / LLP / 4PL Services
Source: C. John Langley Jr., Ph.D. Used with permission

25. Figure 4.11 Next Generation Logistics Outsourcing Models
Source: 2005 Tenth Annual 3PL Study, C. John Langley Jr. Ph.D. and Cap Gemini LLC.
Used with permission

26. Summary
The two most basic types of supply chain relationships are “vertical” (e.g., buyer-seller) and “horizontal” (e.g., parallel or cooperating).
In terms of intensity of involvement, inter-firm relationships may span from transactional to relational and may take the form of vendor, partner, and strategic alliances.
There are six steps in the development and implementation of successful relationships. These six steps are critical to the formation and success of supply chain relationships.

27. Summary, continued
Collaborative relationships, both vertical and horizontal, have been identified as highly useful to the achievement of long-term supply chain objectives. The “Seven Immutable Laws of Collaborative Logistics” provide a framework for the development of effective supply chain relationships.
Third-party logistics providers may be thought of as an “external supplier that per-forms all or part of a company’s logistics functions.” It is desirable that these suppliers provide multiple services, and that these services are integrated in the way they are managed and delivered.
The several types of 3PLs are transportation-based, warehouse/distribution-based, forwarder-based, financial-based, and information-based suppliers.

28. Summary, continued
Based on the results of a comprehensive study of users of 3PL services in the United States, over 70 percent of the firms studied are, to some extent, users of 3PL services.
User experience suggests a broad range of 3PL services utilized; and the most prevalent are transportation, warehousing, customs clearance and brokerage, and forwarding.
While nonusers of 3PL services have their reasons to justify their decision, these same reasons are sometimes cited by users as justification for using a 3PL.
Customers have significant IT-based requirements of their 3PL providers, and they feel that the 3PLs are attaching a priority to respond to these requirements.

29. Summary, continued
Approximately two-thirds of the customers suggest 3PL involvement in their global supply chain activities.
Although most customers indicate satisfaction with existing 3PL services, there is no shortage of suggestions for improvement.
Customers generally have high aspirations for their strategic use of 3PLs and consider their 3PLs as keys to their supply chain success.
There is a growing need for fourth-party logistics relationships that provide a wide range of integrative supply chain services.