Third party logistics and logistics alliances

THIRD PARTY LOGISTICS AND LOGISTICS ALLIANCES - OUTSOURCING OF ACTIVITIES OR “INSOURCING” OF RESOURCES?

ABSTRACT
For the last couple of decades the interest in logistics alliances and third party logistics (TPL) has been growing in academia and industry. The common perspective is to consider TPL as outsourcing of logistics activities. The aim of this paper is to take a complementaryperspective by looking at TPL rather as insourcing of resources; i.e. the shipper gets access to the providers’ resources.

We start by presenting some basic characteristics of the established view of TPL and some of the problems with TPL identified in prior studies. We further discuss how these problems could be tackled if viewed as resource insourcing rather than activity outsourcing. The analysisindicates that such a perspective provides a useful complement for the understanding of TPL in the four phases of pre-alliance considerations, implementation, alliance operations, and performance assessment. For example, as resources are shared among a number of actors, adaptations in the resource collection of each party are required. This can reduce costs for all participants, but demands along-term perspective with regards to investments. Further, the fear of losing control when using TPL can be helped through developing close relationships thus gaining indirect control of the provider’s resources. Another example concerns the implementation phase where a resource insourcing perspective would recommend the shipper to avoid detailed direction of suppliers who have been chosen for theircompetence to provide good services.

1 INTRODUCTION

For the last couple of decades the interest in logistics alliances and TPL (third party logistics) has been growing in both industry and academia. Typical research issues investigated are the motives underlying these strategic efforts, division of labour in logistics alliances, intensity in the co-operation between the provider and theuser, development and control of the logistics process and the strategic choices for the service providers. The common perspective applied in these studies is to consider the ongoing efforts as outsourcing of logistics activities. This is quite understandable bearing in mind that logistics in general has increasingly become focused on efficiency in the performance of logistics activities (Stock1990).
In this paper we suggest a complementary perspective on TPL and logistics alliances. A review of studies and practices of TPL clearly indicates that outsourcing of activities is only one of the possible interpretations of TPL. Closer examination shows that it might as well be seen as a means to access resources owned by other firms. For example, Razzaque and Sheng (1998) argue that one of themost important reasons for employing third-party logistics providers is their ability to support clients with “expertise and experience that otherwise would be difficult to acquire, or costly to have in-house” (p. 93). In this way companies can increase the resource base considerably because ‘firms can access more than they can control’ (Loasby 1998). Therefore, relying on the resources of othersthrough close relationships can be regarded as an indirect control of resources (Gadde and Håkanssson 2001). Thus, the interpretation of “insourcing” of resources should be that a shipper makes use of the logistics resources owned by the service provider.

The aim of the paper is to explore TPL and logistics alliances from a resource insourcing perspective. We begin the paper by providing somearguments for a resource view on logistics in general. Then we continue by presenting some basic characteristics of the established view of TPL. After that we identify some of the problems reported in previous studies of TPL-alliances. In the analysis we discuss whether some of these problems would have been tackled in other ways if viewed as resource insourcing rather than activity outsourcing....