The value creation characteristics essential in the strategic outsource to third party logistic providers within the automotive industry

Abstract

Many companies are questioning the value created from logistics outsourcing. This is especially evident in contract logistics (specialised warehousing), given the increased commoditisation of transportation and distribution today. A clear need emerged to understand the value creation characteristics at play between third party logistics (3PL) providers and clients, and this formed the basis for this research. More specifically, the research sought to identify the elements driving the quality and functionality of value creation. The research focused on the South African automotive industry limited to Original Equipment Manufacturers (OEM’s) that had outsourced, were currently outsourcing or were planning to outsource their specialised warehousing. The research consisted of a phased approach in which key industry players (clients and 3PL’s) were interviewed to understand and expand on the nature of the problem. A questionnaire was then sent out to the OEM’s and quantitative analysis was undertaken on the data collected to answer the stated research propositions It was found that client satisfaction was achieved through long term strategic relationships with 3PL’s rather than a short term transactional approach. The value creation that was driving client satisfaction was being achieved through behaviour that sought stronger relationships, cooperation and strategic partnering with each other. Although there was a clear understanding on what the value creation characteristics were, the execution was unclear. Overall, the majority of OEM’s that took part in this study indicated satisfaction with their 3PL providers. Copyright