Logistics outsourcing: a management guide

Abstract

Logistics Outsourcing-A Management Guide" by CLM past president Clifford F. Lynch, is CLM's latest "research book" (see www.clml.org). The book's purposes are to contribute to the understanding of logistics providers and buyers, and to provide a "useful tool for those who are contemplating or implementing a logistics outsourcing relationship." Lynch defines logistics outsourcing as "...an arrangement whereby a logistics service provider performs services for a firm that could be, or have been, provided in-house" (p. 2). After "a brief history" of outsourcing (Chapter 1), Chapter 2 asks "why outsource?" The reasons for outsourcing include improved return on assets, personnel productivity, flexibility, costs, customer service, and information technology (IT). The book also addresses labor, management, and political considerations. Lynch states: "It is far easier to manage one, or a limited number, of providers than it is to manage the individual functions internally" (p. 11). The strategic importance of managing supplier relationships must also be considered. Outsourcing creates opportunities for positive synergy by bringing the core competencies of two companies together. A special type of inter-organizational relationship is required. Thus, outsourcing can be seen as a means to configure logistics resources and competencies. Chapter 3 asks "what should be outsourced?" Lynch's answer covers many transportation and warehousing activities, but overlooks IT systems and capabilities specific to logistics. Chapter 4, "developing a strategy for outsourcing," is too brief (seven pages) given its promising title. Outsourcing is not seen as a strategy itself but as a "vehicle for achieving the strategy, whatever it may be" (p. 33).\nAdvertisement While Chapter 5 provides lists of publications, associations, and directories, to help logistics managers identify potential logistics service providers, Chapter 6 explains in detail the "selecting a provider" decision. Provider selection criteria "encompass those strategic, tactical, and operational requirements that are critical to the company" (p. 57). The reviewer would have liked to see some "basic benchmarks" applicable to most outsourcing arrangements included. It might be valuable for managers to weigh the different criteria relative to their strategic vs. operational importance. Chapters 7 and 8 cover costs of outsourcing and "defining expectations," respectively. Lynch notes that both provider and customer expectations should be realistic if certain "points of friction" are to be avoided. Though normally standardized, "developing the contract" is the major concern in outsourcing, according to Lynch. Chapter 9 (48 pages) and its five appendices (52 pages) fill nearly a third of the book's total pages. The author aptly notes that contracts can stifle flexibility. A natural follower of contracting is "establishing policies and procedures" (Chapter 10), in which joint effort of provider and buyer is a must. A broad range of logistics providers are capable of participating at early stages in the outsourcing process, especially providers having supply chain design as part of their core competence. Chapter 12, "managing the relationship," is an inevitable successor to the outsourcing decision and its "implementation" (Chapter 11). The focus is on effective management and performance measurement. The book stresses quantitative measures to support relationship management. Managerial tasks can be facilitated with the CD-ROM which accompanies the book. The CD contains various forms and audits useful for data collection and analysis to support the outsourcing process. Honesty and loyalty fall beyond the contract but are traits of a "good partner" in Chapter 13. Important issues in "ending the relationship" are discussed in Chapter 14. Finally, Chapter 15 cuts across the previous chapters by summarizing ten basic rules of logistics outsourcing. These include both legal- ("develop a good contract") and relational- ("be a good partner") based rules. Logistics Outsourcing complements previous 3PL literature published by CLM, in books and in the Journal of Business Logistics. Lynch presents a rational sequence of decisions that can be summarized as ten basic rules of thumb. A valuable experience is shared! Through examination of aspects often not covered in detail by trade press success stories or academic research, Lynch demonstrates convincingly that logistics outsourcing is not to be treated as a plug-and-play arrangement. Managers from various functions and levels within a buying company are undoubtedly confronted with many topics in the book. Also, logistics service providers can use this book for helping present and future customers understand what logistics outsourcing is all about.

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