Decreasing network complexity with logistics outsourcing: an entropic approach

Abstract

Over the years, third-party logistics (3PL) has been adopted by companies with the objective of helping organisations with their value chain activities and hence to be competitive, flexible and responsiveness to dynamic market requirements. According to literature and practice, what is produced in outsourcing logistics has effects not only for the parties directly involved but also for other relationships and organisations of the overall network in which the relationship is embedded. Up to now, 3PL outcomes perceived by the parties directly involved (shipper, manufacturer and logistics service provider) are often addressed in literature, while the 'external outcomes' experienced at the supply chain level need further analysis. This work investigates the implications of the outsourcing of logistics activities on the supply network structure by using a set of entropic measures useful to study the quantity of information required in a network. The intention of this work is to show that a transition from a self managed structure to third-party logistics arrangement brings with it, if correctly managed, a decrease in information needs and consequently a reduction in supply network complexity level.