Abstract
Background: In a rapidly changing global business environment, the outsourcing of logistics activities to fourth party logistics (4PL) service providers is growing in popularity as a strategy for efficiency and customer service improvements. However, there are very few empirical studies on logistics outsourcing performance. In addition, there is a lack of information on the effectiveness of a 4PL model, especially from a South African perspective. Objectives: The main purpose of this study was to determine if the use of a 4PL model to manage the courier distribution for a major retailer in South Africa was able to achieve ongoing cost savings for the client. Method: This research entails a case study of a large non-food retailer in South Africa. Secondary quantitative distribution cost data covering a 10-year period was analysed, using a time series method. The findings were verified through semi-structured interviews of key personnel involved in the implementation and management of the outsourcing contract. Results: The outsourcing of courier distribution management resulted in the targeted cost savings for the client organisation to be exceeded. Cost savings were consistent over a 10-year period. Conclusion: The findings of this study supports the theory that the outsourcing of logistics functions can result in sustainable cost savings for clients if done properly. It adds to the limited body of independent evidence that exists on the matter of sustainable results obtained from 4PL outsourcing agreements.
Highlights
The outsourcing of logistics functions or elements thereof has become a popular strategy aimed at making organisations more efficient and effective
This study looks at the retailers decision to migrate from managing multiple service providers in a 3PL model, to appointing a single 4PL to manage all of their courier distribution
The findings verify that these cost savings can be sustainable over a long time-period. This confirms the opinion of Christopher (2011) that a 4PL arrangement works best as a long-term one and gains arising from such an agreement should be of long-term nature. This finding adds to the limited body of independent evidence on the matter of sustainable results 4PL obtained from 4PL outsourcing agreements
Summary
The outsourcing of logistics functions or elements thereof has become a popular strategy aimed at making organisations more efficient and effective. One of the main reasons for the outsourcing of logistics activities is the need to reduce cost (Baluch 2005:139; Godsmark & Richard 2020:51; Rushton, Croucher & Baker 2016:651). Cost reductions as an achievable goal of logistics outsourcing has been confirmed by various studies (Baluch 2005:139; Capgemini & Langley 2017; Godsmark & Richard 2020). The LSPs will frequently advertise their ability to provide sustainable cost savings for clients. They tend to rate their own capabilities and achievements higher than the client organisations (Langley 2016)
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