Supply Chain Management (SG2038) Case study on DLH as a third-party logistics player Abstract This study or essay attempt to examine the role DHL plays as a third party logistics player and the advantages of the business role of DHL in todays’ supply chain management. Based on the rapid growth of other logistics companies, it will also analyse the challenges DHL is facing and also the challenges the company could face in future in relation to supply chain management.
Furthermore, recommendations will be given that could maintain and promote the success of DHL’s role in the third party logistics business. Introduction Company background DHL is a logistics service based industry founded in 1969 in San Francisco by three young shipping executives – Adrian Dalsey, Larry Hillblom and Robert Lynn. Since then, it continued to grow rapidly until today where it stands to be the market leader of the international express and logistics industry.
In 1969, it took its primary step in planning for its future through personal shipping of documents by airplane from port to port so they can be, examined and see to, before the ships arrive. As the year goes by DHL network expanded largely, reaching out to every of its customers around the globe. Their market share increased and became more intricate therefore in order to meet the changing needs of its customers both globally and local level, it adapted to the new market changes.
DHL international network now links more than 220 countries and territories in the world. It offers incomparable skill in express, overland transport, contract logistics solutions, air and ocean freight and international mail services. Behind its success are its employees whose main focuses is on customers’ needs and provision of individual modified solutions since its success has always been around delivering service of extreme excellence to its ustomers ( DHL 2013).
Role of DHL as a third-party logistics (3PL) player As a third-party logistics player, DHL plays a significant role in providing services to its clients of outsourced logistics services for all or part of their function of supply chain management. DHL normally focus on integrated operations which can be customized to the needs of customers based on the condition of the market demand and delivery service supplies for their materials and products (Razzaque and Sheng, 2006).
The role of DHL thus is to maintain balance in its customers supply chain anagement by rendering services such as; DHL freight transport: this is one of DHL’s most common services it involves the movement of goods from one location to the other. This may be from a particular retail store to another or perhaps from a coastal port to a warehouse. They help their customers to constantly improve on their means of transportation by getting products to the market more efficiently and faster therefore making them gain competitive advantage (Bardi and Tracey, 2006).
Warehousing and distribution: As a third-party logistics, DHL offer some form of warehousing and distribution. In this sense, the clients business hires the company to store their goods in an organized facility and later distribute the goods to different locations (Ahmed and Raflq, 2003), DHL fulfilment: this can be described as a version of warehousing where they store goods in a warehouse, and then different collections of the goods are assembled in other containers or box.
DHL maintains employees, pickers and packers who are able to carry out orders with speed and high level of accuracy (Stefansson, 2006). Supply chain solution: DHL render a special service in helping their clients improve their operational performance and rofitability by making use of current lean and green supply chain management techniques (Lieb, 2005). Advantages of DHL’s business role in supply chain management DHL’s business role in supply chain management enables business to stay ahead of their rivals with greater flexibility, lower cost structure and strong customer satisfaction.
Here are some of the advantages of DHL’s business role in supply chain management; Better focus on core activities DHL’s business role in supply chain management allows business or clients to focus on their activities that are of great importance to the company. In a period of rapid growth, operations in a company will expand and when this happens, it may consume both human and financial resources at the expense of the main activities that made the company successful but, when these additional operations are outsourced, the company focuses on the core activities (Nwokah, 2009).
Reduced cost on operations and recruitment The role of DHL in supply chain management evades the needs for companies to hire workers in-house so that operational and recruitment cost are minimized to a great extent (Hertz and Monica, 2003). Risk management In any business or investment, there are, certain level of risk involve. DHL 3pl business in supply chain management is to assume and manage these risks and they can also decide a better way of avoiding these risks since it is one of their area of expertise (Kim, 2003).
Increase efficiency In the supply chain, most business that does everything by themselves, often have higher research and development, marketing and distribution expenses and these expenses are passed on to customers. However, with the cost structure and economic of scale of a third party logistics like DHL, can give an important competitive dvantage to your firm (Langley and Capgemmini, 2012).
Innovation This is one of the greatest advantages of DHL’s business role in supply chain management in the sense that it applies its expertise in various ways that will improve, business operations by, introducing innovative business ideas and technology (Rahman, 2011). Challenges faced by DHL from the perspective of supply chain Third-party logistics like DHL experience constant challenge due to pressure from customers and new innovative ideas in supply chain. However, these challenges, brings about changes in their operations.
Inventory policy changes: the consistent changes in the organizations inventory process has become a big challenge to the logistics outsourcing companies including DHL. In this way, the supply chain concepts such as just-in-time and Just-in-sequence approaches have put a challenging demand in the service of DHL Express. Hence, contemporary organizations, does not work in isolation due to interdependent on each other. DHL however is currently strategizing towards changing their original methods on service delivery to ensure efficiency as well as customer satisfaction (Gibson etal, 2006).
Competitors: the entrant of various companies into logistics outsourcing industry has become a great challenge to DHL’s services. Logistics report in I-JK 2009 revealed that smaller companies are using channel freight-forwarders which are positioned to enhance service delivery to the customers (Wright, Pickton, and Calliw, 2002). This association has made DHL to lose some of its customers, since the rivals, provides the same services.
Also other big competitors like UPS and FEDEX are buying smaller logistics firm to expand their business and this situation may cost DHL its foremost position in the world Express Service. Transportation cost: increase in the cost of transportation (increase in the price of fuel, gas and diesel) creates a big challenge to third-party logistics providers like DHL. For instance, when there is an increase or scarcity in petroleum products, there will be a delay in delivering goods to their supposed destination.
As a result of this delay, there will be a loss to the involved organization (Virum, 2003). Globalization: the new trend in globalization, have brought about a change in the concept of third-party logistics business. Users or customers of third party logistics re now demanding more from their service providers as a result of new innovative ideas in supply chain thereby, pushing third-party logistics like DHL to take a new turn (Langley, Newton and Tyndall, 1999).
Recommendation For DHL to maintain its successful role as a third-party logistics player in various business industries, it needs to improve in its Just-in-time and Just-in sequence inventory strategy and acquire more channel fright-forwarders that will enhance quick delivery of goods in other to meet and satisfy the pressing needs of its customers and when this is done, they will be able to regain their lost customers hereby allowing them to compete and retain its place in the logistics business.
However, to reduce the delay in the delivering of goods due to scarcity and increase in the price of petroleum products, DHL should have a store or a bank where petroleum products can be stored in case of such occurrence to facilitate the delivery of goods and avoiding loss in the side of customers. As the world continues to develop into a more globalized economy and organizations are coming up with new ideas and becoming more demanding, DHL should also create new innovative ideas o match with the present trend in the globalized economy.
Conclusion As third-party logistics companies to grow, the role of DHL in the third-party logistics business will in no doubt continue to change and as the economy continues to move into a more globalized world, the challenges of DHL will increase thereby making its services stronger and giving them more competitive advantage in the long run of logistics business and supply chain management. Referencing Ahmed, P. and Rafiq, M. (2003) ‘Internal market issues and challenges’. European Journal of Marketing, 37 (9) pp. 1177-1186. Bard’, E. nd Tracey, M. (2006) ‘Transportation outsourcing: a survey of US practices. International Journal of Physical Distribution & Logistics Management, 21 (3) pp. 15-21. DHL official website (2013) Available at: http://www. dhl. com/en. html, (Accessed Nov. 18, 2013). Hertz, S. and Monica, A. (2003) ‘Strategic development of third party logistics providers’. Industrial Marketing Management, 32 (2) pp. 139-149. Kim, J. (2006) ‘Logistics in Korea: current state and future directions. ‘ International Journal of Physical Distribution & Logistics Management, 26 (10) pp. 6-21. Lieb, R. C. (2005) ‘The 3PL ndustry : where it’s been, where it’s going.
Supply chain management review, 9 (6) pp. 20-27. Langley, J. , Newton, B. and Tyndall, G. (1999) ‘Has the future of third-party logistics’, Supply Chain Management Review, 56 (5) pp. 85-94. Langley, J. and Capgemmini (2012) 2012 16th Annual Third-Party Logistics Study. Nwokah, N. (2009) ‘Customer-focus, competitor-focus and marketing performance’. Measuring Business Excellence, 13 (3) pp. 20-28. Rahman, S. (201 1), An exploratory study of outsourcing 3PL services: an Australian perspective, An International Journal, 18 (3) pp. 342 – 358. Razzaque, M. and Sheng, C. 006) ‘Outsourcing of logistics function: a literature survey. ‘ International Journal of Physical Distribution & Logistics Management, 28 (2), pp. 89-107. Stefansson, G. (2006) ‘Collaborative logistics management and the role of third-party service providers’, International Journal of Physical Distribution & Logistics Management, 36 (19) pp. 76-92. Virum, H. (2003) ‘Third party logistics development in Europe’, Logistics and transportation review, 29 (4). Wright, S. , Pickton, D. and Calliw,J. (2002) ‘Competitive intelligence in UK firms; a Typology. Marketing intelligence & Planning, 20 (6) pp. 349-360.