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Outsourcing
of s?v?ral busin?ss op?rations and functions is v?ry common now-a-days in s?v?ral
compani?s in India. Outsourcing of logistics function is gaining importanc? b?caus?
of its b?n?fits and advantag? all ov?r th? world. Outsourcing of logistics
function h?lps manufacturing compani?s to conc?ntrat? on th?ir cor? comp?t?nci?s
by r?ducing or ?liminating nonproductiv? activiti?s which adds unwant?d cost to
th? product. B?caus? of such growing importanc? of outsourcing of logistics function,
it has transitional shift from conv?ntional to strat?gic function. To minimiz?
th? non-productiv? functions lik? logistics, company can ?ith?r manag? its
logistics at his own or hav? a ti? up with Th? Company providing logistics s?rvic?s
or it will outsourc? th? logistics function to logistics s?rvic? provid?rs.
Among all abov? m?ntion?d options, outsourcing of logistics s?rvic?s to
logistics s?rvic?
provid?rs is consid?r?d as pr?f?rr?d option by many of manufacturing compani?s
now-a-days du? to its s?v?ral b?n?fits.

Global
logistic industry sp?nds approximat?ly US 4 Trillion, out of that US sp?nds
approximat?ly US 990 Billion which is n?ar about on? fourth of ?xp?nditur? of
Global logistic industry & US logistics activiti?s ?xp?nditur? is 8 % of
GDP. Japan’s ?xp?nditur? on logistic activiti?s is 10.5 % its GDP wh?r? as
China’s ?xp?nditur? on logistics activiti?s is 13.5 % of GDP & total ?xp?nditur?
is approximat?ly US 506 Billion. Indian Logistic industry sp?nds 14 p?rc?nt of
its GDP on logistics activiti?s so if w? consid?r GDP of India is US 1.6
Trillion so India sp?nds approximat?ly US 220 Billion on logistics activiti?s
& as compar? to Unit?d Stat?s of Am?rica’s ?xp?nditur? 8 p?rc?nt of its
total GDP on logistics activiti?s & if India is abl? to d?cr?as? its sp?nding
on logistics function from 14 % to 8 % th?n India can sav? approximat?ly

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US 90 Billion r?sulting in to Indian
products ?ff?ctiv?ly withstands in int?rnational mark?ts by providing b?tt?r t?chnology,
b?tt?r quality & b?tt?r s?rvic?s with th? h?lp of sav?d mon?y on logistic
activiti?s. Th? Indian logistics industry consists of transport compani?s for
roadways transportation, railways, air cargo compani?s, s?a ports and shipping
compani?s, as w?ll as third party logistics compani?s. Th? p?rformanc? of
logistics industry wid?ly d?p?nds on th? infrastructur? i.?. roads, railways,
ports and airports of th? r?sp?ctiv? ar?a.

 

In this r?s?arch,
Pun? industrial ar?a is cov?r?d. Diff?r?nt industrial s?ctors ar? cov?r?d so as
to portray a b?tt?r pictur? of logistics & third party logistics s?rvic?s. Pun?
has big industrial ar?a all around th? city. Pimpri Chinchwad Municipal
Corporation was th? rich?st in Asia a coupl? of y?ars ago du? to industrial d?v?lopm?nt.
Th? Bhosari MIDC ar?a is on? of th? larg?st MIDC ar?as in th? stat?. Also
Chakan- Tal?gaon industrial ar?a has grown up tr?m?ndously in r?c?nt tim? with
big giant’s lik? G?n?ral Motors, Mahindra & Mahindra, Volkswag?n, Bajaj
Auto manufacturing s?tups. Many big compani?s lik? Tata Motors, SKF India Ltd, Th?rmax
Ltd, Bajaj auto ltd, KSB pumps, Cummins India Ltd, also hav? pr?f?rr?d Pun? for
th?ir manufacturing plants.

Th? r?s?arch
was int?nd?d to know thr?? main asp?cts of third party logistics provid?rs, i.?.
pr?s?nt ?xt?nt of usag? of third party logistics s?rvic?s, r?asons for
outsourcing and impact of usag? of third party logistics s?rvic?s on busin?ss r?sults.
Th? study will h?lp to und?rstand th? pr?s?nt sc?nario of third party logistics
provid?r (3PLP) in Pun? industrial r?gion & futur? growth.

Lit?ratur?
R?vi?w

 

Logistics
role as a part of organizational strategy has been apparent since 1970’s (Heskett
1977), as a part of research during 1980’s, Bowersox & Daugherty ( 1987 )
presented a typology which postulated three dimensions of logistics strategy:
specialization, information & market. The late Rober V. Delaney suggested
that “Relationships are what will carry the logistics industry in to the future”

 

Delaney
2000 ). Lib & Butner ( 2007 ) point out that provider of logistics services
are attempting to build more collaborative working relationship with their key
customers. Outsourcing logistics services, third party logistics services and
contract logistics are synonyms to each other which mean the same. Outsourcing
of logistics function involves the use of dedicated companies who provides
logistics services and performs logistics activities for the manufacturing
companies which were performed by the company itself. The third party logistics
providers perform either whole logistics function or provide services for limited
functions of logistics Outsourcing of logistics services has gain the momentum
mainly because of globalization which enables companies to share the sources of
resources and technology. Because of globalization of business, companies are
able to manufacture products for foreign markets and source the quality material
at cheaper rates from outside countries. As a result of inter-country
transaction, the supply chain becomes more complex and wide which require better
control and management so that the supply chain becomes more effective and efficient.
As supply chain becomes more complex, it requires expertise of certain
functions like custom clearing, import export procedures, tax policies and
distribution channels of destination countries. Because of which manufacturing
companies are concentrating on their core competencies and emphasizing on
outsourcing such logistics functions.

Th?
curr?nt sc?nario in th? mark?t is v?ry comp?titiv?. For ?ach and ?v?ry product
th?r? ar? num?rous play?rs in th? mark?t which r?sults in th? hug? comp?tition
amongst th? compani?s working in th? sam? fi?ld. Du? to th? incr?as?d comp?tition
in th? mark?t, th? compani?s could not comp?t? by having control on th? s?lling
pric?, th? only thing which compani?s can control was manufacturing cost of th?
product which is an aggr?gat? cost of manufacturing cost, procur?m?nt cost, and
inv?ntory carrying cost, quality insp?ction cost & so on. H?nc? compani?s
ar? mor? k??n on controlling th?s? cost so that ov?rall cost of manufacturing
product will b? l?ss which ultimat?ly incr?as?s th? profitability of th? firm.
For manufacturing cost r?duction compani?s nowadays ar? practicing th? mod?rniz?
t?chniqu?s of production lik? JIT, FMS, CAD/CAM ?tc. For r?ducing inv?ntory
cost t?chniqu?s lik? MRP, ?OQ, classification of inv?ntori?s, Kanban, Z?ro inv?ntory
syst?m ?tc. has b??n us?d. Th?s? all t?chniqu?s hav? mad? supply chain mor? ?ff?ctiv?
& ?ffici?nt which r?sults in r?duc?d l?ad tim? & r?sponsiv? supply
chains. Us? of t?chnology has mad? ord?r proc?ssing mor? advanc?d & fast?r
than ?arli?r. With th? h?lp of int?rn?t & ?nhanc?d communication syst?ms th?
flow of information b?com?s v?ry fast. According to th? study of supply chain
strat?gi?s in India it has b??n obs?rv?d that compani?s ar? consid?ring th? supply chain
strat?gi?s for formulating th?ir busin?ss strat?gi?s so that r?duction of inv?ntory
cost will b? th? major part of ov?rall cost r?duction & ov?rall strat?gi?s
of busin?ss for th? sam?.

H?nc? logistics is consid?r?d as th?
main w?apon of th? comp?titiv? mark?t in th? r?c?nt futur?. ?ff?ctiv?
logistics Manag?m?nt N??d a Balanc? of inv?ntory l?v?l & L?ad tim? at th?
sam? tim? which should consid?r th? s?rvic? l?v?l for custom?r and ?conomi?s of
scal? for th? manufacturing company too.Logistics outsourcing players enables
the manufactures to convert their fixed expenses into variable one. Third party
logistics providers enables the manufacturing companies to maintain the balance
between inventory levels, lead time and service l?v?l of manufacturing firms.
According to th? r?s?arch on 3PLP it has b??n found that following factors d?fin?
th? ?xt?nt of usag? of logistics outsourcing:

 

Total ?xp?ri?nc? of third party logistics provid?rs. Busin?ss polici?s for using th?
logistics outsourcing s?rvic?s ?xp?nditur? d?cid?d by th? company
for using third party logistics s?rvic?s. Outsourcing
limit?d s?rvic?s of logistics (war?housing, v?hicl? consolidation, fr?ight
manag?m?nt, or-d?r proc?ssing, r?v?rs? logistics, s?l?ction of mod? of
transport, logistics MIS, rat? n?gotiation, inv?ntory manag?m?nt, ord?r r?c?iving,
inbound logistics, outbound logistics, packaging, distribution, custom proc?dural
assistanc?, import ?xport proc?dural assistanc?, custom?r s?rvic?/support). Research
about logistics outsourcing indicates that firms outsource logistics activities
for several reasons, so as to concentrate on manufacturing process, Reduction
of Logistics Expenditure, Enhancing operations flexibility, Better customer service,
Elimination of non-productive activities, Exposure to technology, Growth in terms
of expansion, Effective use of Capital investment, Better Inventory turnover
ratio, Benefits of outsourcing, Organizational restructuring, Development of supply
chain, Improvement in profitability. Third party logistics providers are more efficient
& effective in terms of managing inventories, inventory costs, lead time
& balance between all of them as this firms operate dedicatedly for
logistics services only which enables them to have exp?rtis? of th? logistics
manag?m?nt. Th? d?cision of outsourcing logistics s?rvic?s is a major d?cision
& critical with r?sp?ct to th? busin?ss & h?nc? th? outcom? of using
third party logistics s?rvic?s should b? consid?r?d.The
use of logistics outsourcing services in the future totally depends on the success
of the firms using third party logistics services. If we sum up all the researches
about use of third party logistics services, we can conclude that in future more
and more companies will be interested in outsourcing logistics services. Generally
companies start outsourcing few of the activities so that they can observe the
benefits of the 3PL services. Later on companies keep on increasing the
outsourcing percentage which contributes to logistics performance system.Th?
abov? discussion giv?s th? foundation for studying outsourcing logistics s?rvic?s
in pun? industrial ar?a with r?sp?ct to th? thr?? main obj?ctiv?s of und?rstanding
th? pr?s?nt ?xt?nt of usag? of logistics outsourcing s?rvic?s & various logistics functions in Pun?
industrial ar?a, und?rstanding th? r?asons for outsourcing th? logistics s?rvic?s
and studying th? impact of usag? of third party logistics s?rvic?s on busin?ss
r?sults. 

Obj?ctiv?s

To und?rstand th? pr?s?nt ?xt?nt of
usag? of logistics outsourcing s?rvic?s & various logistics functions in
Pun? industrial ar?a. To und?rstand th? r?asons for
outsourcing th? logistics s?rvic?s. To study th? impact of usag? of
third party logistics s?rvic?s on busin?ss r?sults.

Hypoth?sis

 

In Pun? industrial ar?a v?ry f?w functions of logistics ar?
outsourc?d in which functions lik? war?-housing, transportation, inv?ntory
manag?m?nt & r?v?rs? logistics ar? primary. R?sts of th? functions ar? not
outsourc?d marginally. R?asons for outsourcing th?
logistics s?rvic?s in pun? industrial ar?a ar? mainly to conc?ntrat? on cor?
comp?t?nci?s of company, logistics cost r?duction & to incr?as? inv?ntory
turns. Outsourcing logistics s?rvic?s to
third party logistics provid?rs h?lps compani?s to incr?as? th?ir productivity,
to minimiz? cost of logistics & cost of inv?ntory which r?sults positiv?ly
on custom?r satisfaction as w?ll as ?mploy?? moral?.

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