Outsourcing Logistics: Significance, Roles, and DHL Supply Chain

This report provides a comprehensive overview of logistics and supply chain management, focusing on the significance of outsourcing these functions to Logistic Service Providers (LSPs). It delves into the benefits of outsourcing, the roles of LSPs, and the performance indicators they utilize. The report then examines DHL Supply Chain as a case study, analyzing its operations, services, and its approach to Lean Thinking. It discusses the advantages and challenges associated with Lean Thinking within the context of supply chain management. The report aims to provide insights into how companies can leverage outsourcing and lean principles to achieve supply chain excellence, improve customer satisfaction, and gain a competitive advantage in the market. The analysis covers various aspects of logistics, including transportation, warehousing, and inventory management, highlighting the importance of efficient supply chain practices in today's globalized business environment. The report also discusses the impact of globalization and technological advancements on the logistics industry.

OPERATIONS AND
SUPPLY
EXCELLENCE

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
LITERATURE REVIEW............................................................................................................1
Theme 1 Significance of outsourcing logistics............................................................................1
Theme-2 Role of Logistic service providers (LSPs)....................................................................3
Theme-3 Performance indicators use by LSPs............................................................................4
PART B ...........................................................................................................................................5
DHL Supply Chain Logistics ......................................................................................................5
Benefit of Lean Thinking.............................................................................................................6
Challenges of Lean Thinking.......................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Operation refers as a set ofactionswhich modifies inputs or raw material into goods or
services. On the other hand, supply chain can be defined the activities which transfer information
or inputs from manufacturing to industry and stakeholders. Supply chain management plays
essential role in firms’ success because it enhances customers satisfaction. Additionally, supply
chain permits business to quickly delivers products or goods to the customers on lower cost.
Logistic service providers (LSP) mentions as a firm which offers management over flow of
material and goods between manufacturing to firms and to end user. LSP controls shipping,
delivering, inventory, warehousing, packaging and security operations for shipment. This report
covers motivation for customers firms for outsourcing advanced logistic and supply chain
management activities to LSPs. It includes significance of LSP’s in industry as well their roles.
PART A
LITERATURE REVIEW
According to author outsourcing can be defined as the organization practice in which a
business recruits another business or individual person to execute tasks, handles operations or
offers services which has previously been done by the organization’s employees. Outsourcing
not only handles various activities but also reduces cost of assembling. Advanced outsourcing
logistics executes operational efficiency and cost saving while offering technology, knowledge
and experts for supporting organization to grow and transform into large firm.
Theme 1 Significance of outsourcing logistics
As per the view of Khalyn, (2019)there are several advantage of logistics outsourcings in
various forms such as saves operational cost, saves in human assets and also helps to connect
globally with other franchises. Various manufacturing company exports raw material from
different countries because it is quite cheaper rather than local raw material. Logistic service
providers (LSP’s) is essential component in the logistics outsourcing procedures because they
hire other firm to get raw material on low cost on the basis of outsourcing policies. Even LSP’s
reduces operational cost by using advanced outsource technology which transform raw material
into high quality goods. Another reason of outsourcing logistics is that it supports to establish
wide network across the world. even logistic outsourcing is effective strategy which helps firms
to achieve competitive advantage. Apart from this it improves service level for customers and
decreases cost of logistic. Outsourcing logistics improves customer services such as various
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tucks and drivers afraid the ability of shippers to load high volume of products. While logistic
companies’ providers hire outsource companies to ship high volume products to various
countries without any type of loss. additionally, outsourcing logistics improves product quality
and enhances working efficiency of supply chain to supply products to customers in minimum
time.
However, some Mageto., Prinsloo and Luke., (2018)has illustrated in their published research
paper is that there are some reason which causes most of the business adapts logistic outsourcing
strategy. A manufacturing industry is comprised of various departments which supports industry
to transform input into output. For example, logistic department which has role to keep raw
material which is supplied by logistic service provider (LSP’s). logistic department also known
as warehousing because it is designed to keep raw material in bulk forms. Sample testing is
another part of industry where samples are taken from bulk input and test by instruments. It
transfers into manufacturing house where raw materialtransform into final product by using large
scale technologies. Final products are transferred into packaging department where they packed
product and moves to quality control department. QC tests final product and their packaging
when product is right then it transfers into market by the help of supply chain management.
Overall operation performs into manufacturing industry by different department, so
operation cost becomes high. To reduce operation cost and input cost adapts outsourcing logistic
strategy by various organizations. Outsourcing logistic leads cost effectiveness because inputs
gets on low cost which automatically reduces operational cost. Outsourcing is not only helping
take rawmaterial but also establishes good relation with other firms in global market.
From another perspectives, Marchet andet,al., (2018)illustrated that supply chain
management (SCM) is important for firm because it helps industry to move information and raw
material from manufacturing to company and end user. Supply chain management is the set of
activities which establish good relation with customers and creates way to gain competitive
advantage in business market.
However,Zhao, (2018)has criticized in their research paper about outsourcing logistics
because they thought outsourcing createsuncertainty in business operation due to disconnection
with local logistic departments.
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Theme-2 Role of Logistic service providers (LSPs)
As per the view of Wang, Persson and Huemer, (2016)logistic service providers are third
parties who offers logistic operations which are not performed by business.Various services are
provided by LSPs i.e. transportation services, warehousing, material management services,
information related services, order administration and value-added services. Logistic service
provider is not only improving organization performance but also improves customer’s supply
chain.
However, Multaharju and et,al., (2017)has illustrated Lean manufacturing approach in
their published articles. Lean manufacturing approach is applied by various firms because it has
main focus to reduce waste within manufacturing system while enhancing productivity of
outputs. Lean manufacturing model is basically designed through specified principles i.e.
continuous improvement.There are five principles of lean manufacturing approach such as
determine value from the customers perspective by taking feedback about product quality and
their services. Logistic service providers (LSPs) is act as third part in manufacturing industry
who gathers feedbacks from customers about product quality.
The main goal of customers feedbacks to access their requirements and offers them
values by offering desirable products. Map the value stream is another principle of lean
manufacturing approach where logistic department analyses each phase of the cycle for waste
and determine methods to reuse waste. Create flow of material production is another principle of
lean manufacturing approach where logistic service producer eliminates various process like raw
collection, sampling etc. they transfer raw material timely to manufacturing industry which
converts raw material into goods. Establish a pull system is another principle where keeps
flexibility in inventory while manufacturing products. LSPs helps manufacturing industry to
keeps flexibility in production by offering raw material timely on demand. Supervise above
principles where LSPs evaluates each step of manufacturing so that get standard quality product.
While some Ibrahim, Hirdand and Whitfield (2018)suggested six sigma approach to
improve product quality along with customer s4rvices in their research paper. Six Sigma
approach is more effective approach which focuses on continuous improvement by reducing
defects in products, procedures or services. Six Sigma approach is based on five principles such
as define, measures, analyse, design and verify. While logic service producers help firms to
implement approach successfully in manufacturing department. Initially LSPs analyse customers
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perspectives about product and their services. While measure is second phase where LSPs
gathers overall complaints about product quality and works on that to meets their objectives.
Logistic service provider analyses inputs quality and uses various technologies to improve
products quality. Thus, six sigma approach supports logistic service providers to improve
product quality and their services.
However, Lonsdale and Lucas, (2019)havecriticized in their published article is that constraint
theory approach is quite effective rather than other approach. The main reason behind is lean
manufacturing approach and six sigma approach both are required high maintenance.
Additionally, these approaches can enhance cost of production. Some authors suggested
information system technology. They think information system can help logistic service
providers to move information or goods from manufacturing to industry.
Theme-3 Performance indicators use by LSPs
Lean manufacturing approach helps logistic service providers to improve quality services
as well enhance working efficiency. LSPs plays essential role to move input from a department
into other department such as raw material move to warehousing to sampling, sampling to
manufacturing, final product moves from manufacturing to testing laboratory, to cross checking
reliability of products transfer to packaging department. To transfer material a department to
other department are performed by logistic service providers. They are also played role as supply
chain but in manufacturing industry. Six Sigma approach also applies by LSPs to keep
continuous improvement in their delivery services.
As per the view ofEl Meladi, Glavee-Geo and Buvik, (2018) there are various key
performance indicators which is used by LSPs to improve their supply chain performance such
as performance management cycle. It is new indicator which is applied by LSPs to analyse their
service performance. even LSPs offers training classes for the staff whom involves into logistic
services. The main goal of the training classes to improve their working efficiency at workplace.
360 feedback strategy is also applied by LSPs to gather feedback from customers about
employee’s performance which perform while offering logistic services. Analyses overall
feedbacks which is collected from customer’s and departments. Thus, LSPs improves supply
chain performance continuously.
From another perspectives, Zhao, (2018) have suggested Artificial Intelligence strategy
which also quite effective indicator. LSPs can use this strategy it helps them to monitor supply
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chain activities on working place as well reduces high turnover of employees in logistic
department. AI can lead advancement in existing technology which can improve communication
between employee as result can get desirable outcomes in their performance. Thus, LSPs can
improve effectiveness in supply chain and enables to establish good relation with customer by
offering desirable product timely.
PART B
DHL Supply Chain Logistics
DHL supply chain is the UK based Logistics service provider which operates its services in
different countries. The logistics is located in Bonn, Germany and it the leading service provider
in the automotive sector and technology sectors. As it is very essential for the company to
improve tits services which helps to increase the customer satisfaction and improve the brand
value of the company in the market effectively (Calatayud, Mangan and Christopher, 2019). It is
very essential fort the company to analyse all the factors to understand the market trends and
become more effective in providing their logistics services to their customers and increase their
opportunity to grow effectively. DHL supply chain helps to deliver the automotive parts of
different manufacturing companies across the world depending on the customer’s demands. Due
to globalization the market has expanded and so is the business to increase their potential and
achieve profitability effectively (Ivanov, Tsipoulanidis and Schönberger, 2017). DHL supply
chain provides its services in retail industries and directly to consumers as well. Health care and
life science sectors and the main customers in UK is NHS which lead all the health care products
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in UK to increase the efficiency of the company. Automotive sectors increased its growth after
the globalization which helps the DHL supply chain to gain better services all over the world as
automotive industry is the strongest industry with the largest revenue generation annually of the
company. The major customers of the logistics are India, Brazil and China due to huge import
and export trade relations with the entire world. Due to increase concerns of sustainable energies
the new industry evolved which helps to reduce the carbon emission and protect environment.
DHL provides services in sustainable energy sectors which is growing rapidly this increases the
opportunities for the company to gain better profit margins and growth opportunities in the
future.
DHL provides services to all these sectors from planning, warehousing, sourcing,
production faculties, delivery and storage. DHL also works as the third party logistics which
helps the company to provide all the services in the supply chain to increase the productivity of
the business effectively (Shi and Yu, 2018). The main of the company is to deliver the
customer’s products to the market as fast as possible to reduce the cost of transportation and
increase their market value effectively. This also helps the customers of DHL to attain core
competency in the market due to fast deliveries and low cost. Some of the services of DHL
include lead logistics provider (LLC), packaging services and aviation services to the airlines.
DHL understands all the factors in the market and moves towards to adopt lean thinking which
helps to increase customer satisfaction and improve the quality of their services in the market
effectively to achieve their objectives and to earn more profit margins.
Benefit of Lean Thinking
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DHL is the major Logistics service provider in the world which support and increase the
global economic growth positively. It is very essential for the company to understand the
efficiency and adopt new technological advantages reduce their cost and increase customer
satisfaction effectively (Meredith and Shafer, 2019). With the implementation of DHL’s
manufacturing towers which helps to increase its efficiency reduce the risk of losses to its
customer helps the company to increase the customer satisfaction effectively. This helps DHL to
grow in the market effectively and increase its productivity to increase its profit margins
effectively. As DHL follows lean thinking and focuses on the value of services, value of streams,
flow intensity, pull and perfection of the services (Dhir, 2019). Lean thinking help the company
to continuous improve the quality of services with the change in the global trends and also to be
effective to lead in the global market effectively.
Value
DHL thinks from the customer point of view and try to increase the information about all
the customers to increase the efficiency of the company and increase their satisfaction level
effectively. As DHL is innovating their delivery system by tracking network for customers and
also adopting specialised delivery equipments and transportation ode to protect the products of
the customers with lowest cost and higher services effectively (Rich and Shararah, 2020). DHL
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also improves the quality of their in management information system which helps to understand
all the products which are stored in the warehouses or are still in process. This helps the
customers to formulate effective marketing strategies considering the time of delivery and cost
incurred by that time.
Value Stream
DHL is using effective team management performance system to achieve the objectives
and increase the efficiency of the entire supply chain by analysing all the factors which can
impact the quality. Due to rapid changes in global market trends it is very essential to understand
all the factors which can reduce the sales of the company and reduces the profit margins
gradually. Company uses the Gemba walks concept of lean management to understand every
issue in the operations of the logistics and solver them effectively.
Flow
Flow is the essential part of the lean thinking and which help DHL to reduce the waste
from the supply chain and increase the efficiency of the company to provide services to their
customers effectively (Wells, 2019). In this stage the company will focus on planning to increase
the efficiency to deliver services with better quality to their customers in order to increase their
satisfaction level effectively.
Pull
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collaboration with third party logistics help DHL to integrate with all these of business to
attract increase their sales and increase the efficiency of the company effectively this also helps
the company to increase the customer base and get better information about their service quality
from the help of proper feedback channel to improve and remove the wastage from the value
chain of the company effectively (Ochieng, 2016). DHL is using multipurpose networks which
help to increase the performance of specific supply chain of each sector to retain the information
from the network to understand all the factors effectively. With the help of anticipatory logistics
it is very effective for DHL logistics to get better data about all the operation to develop
effective strategies and increase the improvement to achieve leadership in global market
effectively.
Perfection
DHL his developing the transportation and supply chain network of the company to foster
the product specifications and increase the trust of the customers to use those services effectively
(Basu, 2017). Retail sector customer has a demand of temperature controlled supply management
system which helps to protect the decline of the quality in transit. Company designs warehouse
which have proper storage facilities at suitable temperature to maintain the nutritional value of
the products effectively. In this stage the company focuses on the needs and wants of the
customers to increase their satisfaction level which helps to increase the goodwill in the market
effectively.
Challenges of Lean Thinking
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As serving in the global market DHL is facing many challenges in lean thinking which
impacts the quality of their services of logistics and supply chain. It is very essential for the
company to analyze all the factors which reduces the efficiency of the company and discourages
customers (Chain, 2017). Due to globalization the company also faces many external factors
which changes due to change in government policies like custom duties, policies. The change in
technologies also impacts the efficiency of the company to gather information and thus reduces
the efficiency of their company to adopt effective lean thinking.
Increase in market completion also reduces the ability of the company to focus on lean
thinking as the first focus of the company will shift to attract more customers (Alexander, 2016).
With the increase in globalization and new business expansion all over the world the
opportunities has increased however the company is not able to use this opportunity due to new
entrants in the market which is attracting the customers with least prices and high innovative
ideas which also impact the brand value of DHL negatively . Change in the climate is increased
the strategic planning of DHL and also reducing safety and protection of the customer’s
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products. The company is also facing huge losses because of the change in environment.
Government has also imposed many environmental policies which has impacted the supply chain
process of DHL and penalized high amount.
Rise in employment pay scale is also increasing the cost of the company to provide better
services to their customers with low cost. Due to lack of potential employee in the global market
and higher technology and cybercrimes it is very difficult for the company to protect and
maintain all the operation and adopt lean thinking effectively. Lean thinking also increases only
when the company has effective workforce which have effective knowledge and experiences in
logistics which helps to gain a better innovative and creative services to increase profit margins
effectively. DHL is also ineffective in implementing the lean thinking due to lack of proper
funding and investments at the right time due to low profit margins (Gardiner and Reefke, 2019).
CONCLUSION
It can be concluded motivation for customer firms to outsource advanced logistics and
SCM activities to LSPs and also has been summarized that logistic services providers play
essential role in supply chain and operational activities. LSPs go about driving performance
improvement in their customers supply chain which can includes several areas such as
development of new services offering and their capabilities, different approaches that is
implemented by business to improve their operations, investment in new technologies, use of
information system can be summarized in report. Six Sigma. Lean manufacturing and Constraint
theory approach has-been concluded in report. Performance indicators such as 360 feedback
strategy, AI strategy and performance management cycle is used by LSPs has been concluded in
report. Improvement which LSPs have achieved in term of supply chain performance can be
summarized in report.
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