Third-party logistics firms

 Third-party logistics firms

Currently, the concept of offshoring and outsourcing is increasing among firms as they try to improve the supply chain. Most of the firms are creating value and gaining competitive advantage through the supply chain (Shi et al., 2016). That makes the firm to concentrate on doing the right thing other than everything that may lead to losing its competitive advantage. Through that, offshoring and outsourcing help in focusing on core activities that add value to the business and allow another firm to handle the rest to a third party logistic company.

The third-party logistics firms are businesses where companies outsource elements of distribution, warehousing and fulfilment services (Shi et al., 2016). Outsourcing means hiring a third company logistics to conduct the activities within the supply chain. Also, through expansion, firms decide to offshore the logistics activities so that they can be able to serve customer needs in those regions. Focusing on XPO logistics, it is a global cutting edge of the supply chain that is a third party logistic firm with offshoring activities to meet the demand. It helps many countries across the globe with transportation, truckload brokerage, engineering supplies, last-mile logistics, warehousing and distribution. The XPO Company has more than 50,000 customers around the world and operates in 33 countries. The third-party logistics can be done as a whole or party of it can be outsourced to the firm. The XPO logistics providers specialize in integrated operations that customize customers’ needs and allow them to concentrate on the core functions of the firm.

Q.2 Motivational factors for going internationally

Many companies have decided to international since there are factors that make it easier to enter into global markets. First, there are emerging markets for the goods are increasing. Particularly in developing countries, big companies are seeing a chance of consumption of their products and concentrate on meeting the demand. Further, the financial institutions are still growing and able to access resources required to expand beyond the country’s borders (Paul & Mas, 2016). Improvement of financial institution systems has increased trust among investors in offshoring of activities of the supply chain and even outsourcing.

Further, global political stability has contributed to created an environment that is better to operate for investors (Paul & Mas, 2016). Most of the countries both developed, and those developing are at peace, and, likely, they cannot affect the business performance at a global level. Technology and communication improvement has also led to firms going international (Paul & Mas, 2016). The firm can be able to get staffs through technology. Also, the coordination of offshore activities with those domestic activities is easily coordinated through technology and communication. Also, the local market becomes saturated thereby limiting chances of growth and expansion. The investors focused on the global development of business to ensure that there is growth and increased profits.

Q.3 On what ground companies choose developing countries location for offshoring

Countries consider offshoring activities, particularly of the supply chain on different ground. Some may decide to expand in developed countries likely to get skilled labour and high-end technology. But those that focus on establishing business activities in developing countries are guided by other factors such as cost reduction, taking advantage of low protectionism of domestic and avoiding high competition (Kaur et al., 2019). Cost economics is a critical factor that leads to businesses establishing businesses in South Africa. The cost of labour is a bit low as compared to developed countries. When it comes to labour-intensive activities, the company always prefer offshoring their operations to countries that can offer labour at a lower cost. Competition in developed countries can hinder the success of a business. But in developed countries, it becomes easier since the firms have better economies of scale as compared to the local companies. Therefore, it becomes easy to thrive and grow.

Q.4 Third-party logistics service in Saudi Arabia

Due to competitive pressures has resulted in firms working on designing customer-adapted products that need to meet international quality and delivery on time. As a result, that has resulted in the adoption and use of third-party logistics services.  Several reasons have led to an increase in the use of third party logistics services. Presence of logistics experts that have improved the value of the supply chain for most of the firm (Ferrer & Santa, 2017). Currently, firms are focusing on enhancing the competitiveness either by concentrating on what they can do best and outsourcing other activities that they do not have the expertise to conduct. Since Saudi Arabia is an oil economy, the companies have to look for experts in logistics for warehousing and transportation.

Shi, Y., Zhang, A., Arthanari, T., Liu, Y., & Cheng, T. C. E. (2016). Third-party purchase: An empirical study of third-party logistics providers in China. International Journal of Production Economics, 171, 189-200.

Ferrer, M., & Santa, R. (2017). The mediating role of outsourcing in the relationship between speed, flexibility and performance: a Saudi Arabian study. International Journal of Productivity and Quality Management, 22(3), 395-412.

Paul, J., & Mas, E. (2016). The emergence of China and India in the global market. Journal of East-West Business, 22(1), 28-50.

Kaur, H., Singh, S. P., & Majumdar, A. (2019). Modelling joint outsourcing and offshoring decisions. International Journal of Production Research, 57(13), 4278-4309.