Ownership and outsourcing
When one company uses other companies to run its logistics, it is called third party or contract logistics.
Potential benefits of outsourcing includes:
•lower fixed costs, with customers only paying for services they use
•specialist suppliers who have expertise and use the best systems and practices
•suppliers can combine work from several customers to get economies of scale
•guaranteed high, and agreed, levels of customer service
Ownership and outsourcing
Potential benefits of outsourcing includes (cont.):
•flexible capacity, dealing effectively with peaks and troughs in demand
•lower exposure to risk from, say, varying demand
•increased geographical coverage and local knowledge
•a convenient way of entering new markets.
There are disadvantagesto be set against this, such as reduced control, inability to respond to unusual circumstances, more complicated communications, conflicting objectives, less control over costs, and so on.
Capacity
•The capacityof a supply chain is the largest amount of materialsthat can flow through it in a given time.
•Not all parts of a chain have the same capacity, so the overall capacity is set by the part with the smallest individual capacity.
•This forms the bottleneck.
•The only way of increasing the capacity of the supply chain is to increasethe capacity of the bottleneck;
•Adding more resources elsewherehas noeffect, it only increases the amount of spare facilities and reduces the utilisation.
Ownership and outsourcingWhen one company uses other companies to run its logistics, it is called third party or contract logistics.Potential benefits of outsourcing includes:•lower fixed costs, with customers only paying for services they use•specialist suppliers who have expertise and use the best systems and practices•suppliers can combine work from several customers to get economies of scale•guaranteed high, and agreed, levels of customer serviceOwnership and outsourcingPotential benefits of outsourcing includes (cont.):•flexible capacity, dealing effectively with peaks and troughs in demand•lower exposure to risk from, say, varying demand•increased geographical coverage and local knowledge•a convenient way of entering new markets.There are disadvantagesto be set against this, such as reduced control, inability to respond to unusual circumstances, more complicated communications, conflicting objectives, less control over costs, and so on.Capacity•The capacityof a supply chain is the largest amount of materialsthat can flow through it in a given time.•Not all parts of a chain have the same capacity, so the overall capacity is set by the part with the smallest individual capacity.•This forms the bottleneck.•The only way of increasing the capacity of the supply chain is to increasethe capacity of the bottleneck;•Adding more resources elsewherehas noeffect, it only increases the amount of spare facilities and reduces the utilisation.
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