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Sin Hoon Hum: National University of Singapore, Singapore
ACKNOWLEDGMENT: This study was funded by the National University of Singapore Research Grant, RP: 950007.
Introduction
The globalisation of businesses and the competitive pressures of the business arena have led to the growing strategic importance of the logistics function within the organisation. In fact, the logistics function has often been referred to as the last frontier for the development of strategic competitive advantages. Increasingly therefore, many organisations are looking to their logistics operations, seeking to manage them strategically so that significant competitive advantages may be made available for the business as a whole.
Within this context, many organisations are also increasingly recognising that their core competencies are not in logistics and hence have progressively sought to outsource their logistics functions to third party logistics service providers who could probably help manage their logistics more efficiently and effectively. Quite clearly, the positioning of third party service providers should be that of helping the outsourcing company manage its logistics function strategically. This means that the third party logistics (3PL) service providers must build and possess logistics capabilities which are able to enhance the strategic effectiveness of the logistics function for their customers.
While literature exists on the strategic management of the logistics function within an organisation, little is available on the strategic management of 3PL service providers. Shapiro, for example, proposed four generic modes of operation for logistics which may be interpreted as logistics strategies for the organisation concerned (Shapiro, 1988). Shapiro introduced the concept of the Full Service mode which represents the strategy of providing a full product line with special service capability such as rapid delivery. A low cost strategy, on the other hand, is that where neither customisation nor rapid delivery is offered, this is especially relevant in markets where price is the major consideration. Shapiro's other two strategies are: Narrow Line, which trims the product line breadth for low cost and rapid delivery; and Full Line, which trades off quick delivery for product customisation. LaLonde and Masters highlighted that logistics strategies should be integrated with production, marketing and total corporate strategy (LaLonde and Masters, 1994). Fawcett and Fawcett argued that there are tremendous untapped synergies that exist amongst logistics, operations and purchasing (Fawcett and Fawcett,...