Motivation for the outsourcing of complex logistics services

Motivation for the outsourcing of complex logistics services Prof. Dr. Wolfgang Kersten, President, Hamburg School of Logistics Dipl.-Ing. oec. Jan Koch, Research Associate, Hamburg School of Logistics Dipl.-Ing. oec. Philipp Hohrath, Research Associate, Hamburg School of Logistics Hamburg School of Logistics At Hamburg University of Technology Kasernenstraße 12 21073, Hamburg, Germany Phone: +49 (0)40 428 78 3525 Fax: +49 (0)40 428 78 22 00 Email: LogU@tu-harburg.de -1-

Abstract As many authors have noted, the outsourcing of logistics services is growing ever more prevalent in today s business environment (2004). In this context, a number of different outsourcing business models have developed. The scope of logistics outsourcing relationship can be limited to a few simple tasks such as transportation and storage. In recent years, however, the outsourcing of complex bundles of logistics functions, often referred to as contract logistics, is an area that exhibits high growth rates. This is often associated with companies focussing on their core competencies, but the literature shows a variety of possible reasons. In order to clarify the motivation for logistics outsourcing this paper analyses the perceived advantages and limitations of contract logistics outsourcing from the perspective of logistics service providers and their clients. A literature review of existing theoretical and empirical studies was conducted. To complement existing findings, the Hamburg School of Logistics constructed a survey instrument and distributed it to a sample of German companies. Introduction In order to survive in the face of the competitive pressures that arise from an increasing globalisation of corporations, organisations today need to perform their activities in the most effective and cost-efficient manner possible. This has led companies to adjust the scope of their activities to only include those at which they are particularly efficient, creating a need to outsource the remaining activities. Whereas the aim of early outsourcing was mainly the short-term reduction of costs, in recent years the focus has moved towards long-term strategic cooperations. This has led to the emergence of new outsourcing business models (Zhu et al., 2001). In the field of logistics, some areas like shipping and warehousing have a long history of outsourcing for cost-reduction reasons. The new, strategically focused logistics -2-

outsourcing business model is called contract logistics, is based on a long-term contractual agreement between provider and customer, and covers a package or bundle of different services. This paper is structured in five main parts. The first one describes the state of the theoretical discussion concerning the advantages of outsourcing in general and contract logistics. The second part introduces the empirical perspective on the motives of companies to use contract logistics and ends in a selection of specific motives that are most commonly found to be important in empirical studies. In the third part, the concerns and risks associated with contract logistics are discussed. The fourth and fifth parts describe the mode and analyze the results of an empirical study which was conducted by the authors, specifically addressing the selected motives for contract logistics. This study examines the motives from the perspective of both customers and providers. The theoretical discussion of outsourcing and contract logistics The impracticality of excelling in every possible task has led many companies to concentrate on activities which they perceive to be linked to their core competencies, a concept proposed by Hamel and Prahalad (1994, pp. 123-126). This concentration was made possible by, and further stimulated the emergence of providers specialised on performing tasks that many organisations considered to be non-core. The resulting arrangement is referred to as outsourcing, defined by Lankford and Parsa (1999, p. 310) as the procurement of products or services from sources that are external to the organization. These specialised providers achieve economies of scale and offer increased flexibility in reacting to technological progress and changing business requirements such as just-in-time manufacturing (Goldberg, 1990, p. 26) -3-

One way of understanding the decision to outsource is through transaction costs economics. Providers are able to achieve economies of scale and learning curve effects through concentrating on a single area, enabling them to provide their service at a lower cost. On the other hand, the coordination between both parties increases transaction costs. According to this view, a company will outsource certain activities if the cost advantages of a provider exceed the additional transaction costs (Williamson, 1996, pp. 135-136). Another rationale for outsourcing can be seen in its potential in complexity and risk management. Outsourcing potentially implements two of the ways of dealing with complexity and risk that Blecker at al. (2005, pp. 55-57) propose internal complexity and risk are both reduced and transferred. Kakabadse (2000, pp. 708-713) and others have introduced a new outsourcing paradigm that suggests closer cooperation between companies and their suppliers or service providers. The resulting long-term, trust-based partnerships reduce coordination costs and information asymmetries, thus making strategic advantages possible (Stölzle and Heusler, 2003, pp. 174-177). Logistics is defined by the Council of Supply Chain Management Professionals as The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements. (CSCMP, 2006, p. 88). Logistics outsourcing, in consequence, refers to the procurement of any of these activities from a logistics service provider (LSP). -4-

Bolumole et al. (2007) develop a theoretical framework for logistics outsourcing based on three theoretical approaches: The resource-based view of the firm (Penrose, 1997), the abovementioned transaction cost theory and network theory (Ford, 1990). From these theories, possible motives leading companies to outsource logistics functions can be derived. These were tested by various authors as to their practical relevance to companies. The following chapter analyzes the results of these studies where they are related specifically to contract logistics. Motives for logistics outsourcing in the literature In literature there are many papers which deal with outsourcing decisions in the logistics area. Especially the motives and benefits for outsourcing are attended frequently by different authors. Although some authors distinguish between motives, as an ex ante perspective, and benefits, as an ex post perspective, we summarize these different views. The research activities found in literature were based on empirical investigations as well as literature evaluations. Several factors facilitating logistics outsourcing were identified in recent years (compare Table 1). Most researchers identified cost reduction or other cost related aspects as key factors for logistics outsourcing. Wilding and Juriado (2004) for example conclude after a broad literature review that cost aspects are most important in this context. Additionally, other factors related to costs are often mentioned. The reduction of assets owned by companies themselves leads to changes in their cost structure, turning fixed costs into variable costs (Rao and Young, 1994, McGinnis et al., 1995, van Damme and van Amstel, 1996, Sink and Langley, 1997, Razzaque and Sheng, 1998, Weber and Engelbrecht, 2002, Langley et al., 2005). The same effect leads to a reduction of capital employed (van Damme and van Amstel, 1996, Weber and Engelbrecht, 2002, Lynch, 2004). Furthermore, logistics service -5-

providers are able to realize economies of scale (van Damme and van Amstel, 1996, Jung, 2004), which enable them to perform logistics operations at lower costs. Since they pass a part of this cost advantage to their customer, manufacturing companies can reduce their costs as well. Beyond cost reduction Laarhoven et al. (2000) as well as Langley et al. (2005) have identified increasing transparency concerning logistics costs as benefit of outsourcing decisions. Table 1: Motives for logistics outsourcing Weber Razzaque Lynch Van Damme Laarhoven Sink Boyson Langley Jung McGinnis Roa Number Cost Reduction X X X X X X X X X X 10 Improvement of service level / service quality Focus on core business / core competencies Changes in cost structure (elimination of fix costs) X X X X X X X X 8 X X X X X X X X X 9 X X X X X X X 7 Gaining flexibility X X X X X X X 7 Know-how transfer / usage X X X X 4 Labour Considerations X X X X 4 Capacity improvement Handle peaks Customer demand X X X 3 Decrease of capital employed X X X 3 Access to new information technology X X X 3 Increase of speed X X 2 Company restructuring Development of supply chain partnership Centralized facilities / distribution systems X X 2 X X 2 Management and political considerations X X X X 4 Global capabilities X X 2 Service provider can realize economies of scale X X 2 Gaining more cost transparency X X 2 Change Implementation X X 2 After cost aspects, the concentration on companies core competencies is the second most mentioned motive for logistics outsourcing in literature and practice. -6-

Besides these aspects, the improvement of service level or service quality is the third most mentioned advantage of logistics outsourcing (compare Table 1). Logistics service providers are often thought to be able to do things better due to their experience and know-how as well as their superior equipment. Also related to quality in the context of logistics is the speed of operation, which is noticed by Weber and Engelbrecht (2002) and Razzaque and Sheng (1998). On the management level, many companies from the industrial sector seem not to be able to manage their logistics effectively, creating another quality-related motive for outsourcing (van Damme and van Amstel, 1996, Razzaque and Sheng, Weber and Engelbrecht, 2002, Langley et al., 2005). Furthermore, many authors associate logistics outsourcing with an increase in flexibility. Aspects which are mentioned by fewer authors are for example the transfer of providers know-how (van Damme and van Amstel, 1996, Sink and Langley, 1997, Boyson et al., 1999, Weber and Engelbrecht, 2002), considerations linked to labor (Razzaque and Sheng, 1998, Weber and Engelbrecht, 2002, Langley et al., 2005), or the ability to handle capacity bottlenecks by means of logistics service providers (Razzaque and Sheng, 1998, Weber and Engelbrecht, 2002, Jung, 2004). Furthermore logistics outsourcing provides companies with access to up-to-date information technology and to the global capabilities some service provider maintain (Sink and Langley, 1997, Lynch, 2004, Langley et al., 2005). Two studies from Laarhoven et al. (1994, 2000) over a period of six years show that the motives for logistics outsourcing are not very volatile. The importance of the investigated strategic reasons for outsourcing stayed almost the same between 1993 and 1998. The same conclusion is drawn by Razzaque et al. (1998) and Selviaridis and Spring (2007) in their literature based evaluations. The motives and benefits analyzed in different articles are summarized in Table 1. Using as the criterion the number of times they were mentioned in the studies, cost reduction, -7-

improvement of service, and focus on core competencies appear to be the most important factors. Table 2 is limited to the original empirical studies and omits literature review papers, and it confirms the importance of the chosen aspects, even though their order changes. In these studies, cost reduction remains the most important aspect for logistics outsourcing. The difference to Table 1 is that service improvement is the second most important benefit when focusing on recent empirical studies (compare Table 2) Table 2. Empirical investigations Weber Laarhoven Sink Boyson Langley Jung McGinnis 5 agree to 1 disagree % % % % (Europe) % (Shipper) 5 agree to 2 disagree Cost Reduction 4,1 69 57,7 41 74% 80 3,4 Improvement of service level / service quality 3,0 60 52,1 55% 20 2,9 Focus on core business / core competencies 1,7 53 38,0 26,5 40% 20 2,3 Because both empirical studies and literature review papers support their importance, we will use cost reduction, service improvement, and concentration on core competencies as a basis for our empirical investigation, which we will describe in detail later. Concerns and risks related with logistics outsourcing Although there are many studies evaluating benefits or motives for logistics outsourcing there are only a few which deal with the concerns and risks related to this concept (Damme and Amstel, 1996, Sink and Langley, 1997, Razzaque and Sheng, 1998, Laarhoven et al., 2000). However, Sink and Langley (1997) as well as Razzaque and Sheng (1998) consider the loss of control as the main problem linked with logistics outsourcing. In other studies the loss of control is mentioned but not identified as a main problem. Especially Laarhoven et al. (2000) discover in their empirical study, in which they interviewed companies twice before and after establishing a logistics outsourcing relationship, that other problems are considered -8-

more important, especially once the outsourcing relationship was established. A possible reason for the decrease of this problem after starting the cooperation is the fact that companies often do not totally relinquish their control after outsourcing (Razzaque and Sheng, 1998). Although companies are able to control logistics service providers after establishing an outsourcing relationship, they are concerned about a possible dependence on a single provider as van Damme and van Amtel (1996) as well as Laarhoven et al. (2000) conclude. In this context some companies seem to worry about sharing confidential data (Damme and Amstel, 1996) or do not trust providers (Razzaque and Sheng, 1998, Laarhoven et al., 2000). Another crucial risk concerning logistics outsourcing, which is often mentioned in literature, is poor performance in relation to companies expectations. Sink and Langley for example found that some companies are dissatisfied with the decrease of time and effort they spend on logistics after outsourcing, and that in some cases the planned cost reductions are never realized (Sink and Langley, 1997). Also Laarhoven et al. (Laarhoven et al., 2000) recognize in their survey that poor performance is one of the three main noted problems of logistics outsourcing, especially once the outsourcing relation has been established. Razzaque and Sheng (1998) confirm this estimation. They found that unreliable promises of the providers as well as their lack of understanding the shippers business are further problems related with poor performance. Furthermore companies are afraid of losing direct contact to their customers (Damme and Amstel, 1996). Losing the ability to react quickly to changing customer needs (Damme and Amstel, 1996), increasing customer complaints (Sink and Langley, 1997), and losing touch with important sources of information (Razzaque and Sheng, 1998) are other possible negative consequences of logistics outsourcing. Internally companies are concerned about losing the know-how needed in order to perform logistics activities and manage logistics processes. An internal factor which should not be -9-

underestimated is the limited acceptance by own employees (Laarhoven et al., 2000) due to the fact that they are apprehensive about losing their job (Razzaque and Sheng, 1998). The previous section of this paper identified cost reduction, service improvement, and concentration on core competencies as the motives for contract logistics that are most often stated in the literature. The loss of control and the growing dependence were identified as the most pressing concerns against contract logistics in this section. The following section will discuss our exploratory study that was based on these findings and introduces a new empirical perspective on contract logistics. Empirical Exploration The literature review in the previous chapter found that companies from many different industries in the trade and manufacturing sectors consider costs the most important motive for logistics outsourcing. This is surprising because logistics as a discipline has received growing attention as a source of competitive advantage since the 1980s. Authors such as Shapiro (1984) and Gopal (1986) emphasized the possible benefits from running an effective logistics system. Because the results in empirical studies concerning the motives of contract logistics customers seem to be in conflict with the results from the scientific discussion on logistics, outsourcing and the strategic relevance of both topics, we decided to analyse the perspective of logistics service providers. LSPs are specialised on the field of logistics and thus more familiar with the potential gains from effective logistics systems. Our working hypothesis is that they should value quality aspects and strategic implications more highly than their customers. The subject of the survey was not the motives of the LSPs to engage in contract logistics relationships but their sales arguments for and the concerns they notice against contract logistics. -10-

In order to investigate these questions concerning the motives for and concerns against contract logistics in management practice, an empirical study will be conducted at the Hamburg School of Logistics in near future. We performed a smaller exploration to formulate hypotheses concerning logistics outsourcing and contract logistics in preparation for this. In our main investigation we plan to differentiate between manufacturing companies and logistics service providers. Although we have only the results of our pre-study so far, we found some interesting aspects that will be presented in the next section. Two different surveys were used for conducting the pre-study, one for manufacturing companies and one for logistics service providers. Each of these two surveys was available as a paper-based and as an online version. Beside directly collected data such as company size, we used a five point Likert scale for estimation questions. The scales encoded from 0 (lowest category) to 4 (highest category). For analysis the five items were classified into three classes, the first consisting of the two lowest categories, the second one of the two highest categories, and the last one of the neutral category. In order to evaluate companies assessment of contract logistics, they were asked to estimate the importance of the motives for and concerns against contract logistics which we develop based on the literature review introduced in the previous sections of this paper. In contrast to many of the surveys cited in the previous chapters, the survey specifically concentrated on contract logistics and differentiated it clearly from general logistics outsourcing. We have identified cost reduction, service improvement, and concentration on core competencies as the most important motives for logistics outsourcing in literature. These criteria were mainly adapted for designing the surveys. Only in the field of service improvement, a more quantifiable factor was chosen. Since we assume that in the field of logistics, the most important element of service quality is an on-time delivery, we choose an improvement delivery time as the criterion for service improvements. Furthermore we decide -11-

to test the increase of flexibility and the access to external know-how in our survey (compare Table 3). Beside service quality, these two aspects are strategic issues for the decision towards contract logistics outsourcing. Table 3 Investigated motives and concerns related to contract logistics outsourcing Motives Concerns Cost reduction Loss of control Increase of delivery time Growing dependence on service provider Concentration on core competencies Losing logistics expertise Increasing flexibility Losing direct customer contact Access to external know-how For the evaluation of the major concerns against contract logistics, we also use the results of our literature review. The loss of control and the growing dependence were identified as the most important (compare previous section). We decide to add two questions, one about losing own logistical expertise and one about losing direct customer contact. We are of the opinion that these aspects strengthen the dependence on service provider (compare Table 3). Surveys were sent to 823 companies, namely 594 manufacturing companies and 229 logistics service providers during our pre-study. With an average rate of return of about 10.8%, 50 manufacturing companies and 39 logistics service providers were covered in our sample. In detail, out of the group of manufacturing companies, 22% of the respondents belong to the chemical industry, 17% to the automotive industry, and 15% to the engineering sector. 26% of the questioned manufacturing companies consider themselves an OEM and 30% a Tier 1 supplier. Our sample mainly contains smaller companies - 67% have less than 1000 employees. The interviewed logistics service providers mostly perform classical services such as warehousing (72%), material handling (67%), and transportation (54%). Although 41% of them perform third party logistics services often or always while even 18% of the logistics service providers perform fourth party logistics services often or always. 57% of the investigated logistics service providers have less than 1000 employees. -12-

Empirical Results In this section the evaluation of benefits and problems related to contract logistics outsourcing (compare Table 3) will be presented in detail. Therefore the importance of these two factors will be discussed in general as well as in comparison between logistics service providers and companies from the industrial sector. Advantages of Contract Logistics Outsourcing Concentration on Core Competencies 0 1 2 3 4 Cost Reduction Increasing flexibility Increasing delivery time Access to external know-how Relevance Companies from the industrial sector Logistics service provider Figure 1 Advantages of contract logistics outsourcing As it is presented in Figure 1 the three advantages cost reduction, concentration on core competencies and increasing flexibility are assessed to have almost the same relevance. However, cost reduction, which is the most mentioned aspect in the literature review, does not consistently appear to be the more important in practice. Instead, to companies from the industrial sector, the increase of flexibility seems to be more important. In general the average evaluations of the advantages are in most cases similar between the two groups of companies, although logistics service providers seem to overestimate the advantages of their -13-

services. This effect is particularly considerable concerning access to external know-how, which companies from the industrial sector consider the least important advantage of those we evaluated, far less important than logistics service providers estimated it on average. The results concerning the improvement of delivery times are surprising. The delivery time improvement, which we use as an indicator for service quality, seems to be less important than the other advantages identified in the literature research. Disadvantages of Contract Logistics Outsourcing Growing dependence on service provider 0 1 2 3 4 Losing logistics expertise Losing direct customer contact Loss of control Relevance Companies from the industrial sector Logistics service provider Figure 2 Disadvantages of contract logistics outsourcing More differentiated results can be recognized when looking at the disadvantages of contract logistics (compare Figure 2). Especially the assessment of the growing dependence on providers, which is the most relevant disadvantage, is considered much more important by customers than by providers. In contrast, the unimportant concern, losing direct customer contact, is less relevant for companies from the industrial sector then logistics service provider expected. The other investigated disadvantages are rated similar from both groups, as relatively unimportant. -14-

In comparison to the literature research the loss of control is appraised rather unimportant in our evaluation. The possible loss of direct customer contacts seems to trouble companies even less. Logistics service providers and companies from the industrial sector estimated these points in a very similar way. In general, it can be said that our survey did not confirm the relevance of all factors identified as important in the literature research. Focusing on core competencies and gaining additional flexibility are the strongest advantages companies associate with contract logistics outsourcing. In principle, logistics service providers recognize this and evaluate the arguments for their services accordingly. Especially the practical relevance of cost reduction and the access to external know-how are lower than we expected after the literature review. Obviously the interviewed logistics service providers have the same expectation that we had. Correspondingly, both groups rate the investigated quality aspect, the improvement of delivery times, rather low. Quality improvements seem not to have the relevance academics expected, although outsourcing decisions are far from being purely cost-driven. The two aspects we add, in addition to the advantages identified in literature, increasing flexibility and access to external know-how, were evaluated differently. The increase of flexibility seems to be an equally strong motive for logistics outsourcing as cost reduction and focus on core competencies. Therefore flexibility should be considered more in logistics research, while the access to external know-how is rightly not in the main focus of research. The main concerns companies have against contract logistic outsourcing are related to dependence. Either the direct dependence on logistics service providers or the loss of knowhow leading to indirect dependence is rated quite high. Although logistics providers underestimate this effect, they have recognized these concerns as the most important. The loss of direct customer contact does not appear to be a large problem anymore. Obviously service providers and service users have found techniques to avoid or bypass this problem. -15-

Conclusion In general, logistics service providers and companies from the industrial sector agree in their estimation of contract logistics outsourcing. Naturally logistics service providers rate the advantages of contract logistics higher and the disadvantages lower than companies from the industrial sector. Especially the usage of their advanced know-how is overestimated by the logistics service providers. Due to the fact that flexibility emerges as one of the main advantages of logistics outsourcing beside cost reduction and concentration on core competencies, providers should increasingly develop their services for more flexibility. This is all the more true since it is probably not in the interest of logistics service providers to differentiate themselves from their competitors using other two main advantages: The ability to concentrate on core competencies is a general advantage of outsourcing, and a purely cost-driven competition will not be in the interest of most service providers. Regarding the concerns about contract logistics, companies from the industrial sector are most worried about dependence on their service providers. Although companies could apply a classical dual sourcing strategy in some cases to avoid this dependence, often a more distinguished business model is needed. To overcome information asymmetry, which is one main reason for dependency, gaining transparency in both directions is important. The loss of own logistical expertise is another cause of dependency. Service providers and especially their customers should develop models to avoid this loss of expertise, as they have apparently done with regards to the loss of control. This problem, which was thought to be the most crucial one, appears to have been solved partially. The loss of direct customer contacts is also not as important as we expected it to be. -16-

New business models and contract forms in logistics outsourcing should offer a high amount of flexibility to companies from the industrial sector as well as avoid undue dependency. If logistics service providers follow these recommendations, they might be able to depart from the mostly cost driven competition they are faced with today. References BLECKER, T., KERSTEN, W. and MEYER, C. M. (2005) Development of an Approach for Analyzing Supply Chain Complexity. 47-59, IN BLECKER, T. and FRIEDRICH, G. (Eds.) Mass Customization - Concepts - Tools - Realization. Berlin. BOLUMOLE, Y. A., FRANKEL, R. and NASLUND, D. (2007) Developing a Theoretical Framework for Logistics Outsourcing. Transportation Journal, 46, 35-54. BOYSON, S., CORSI, T., DRESNER, M. and RABINOVICH, E. (1999) Managing Effective Third Party Logistics Relationships: What Does It Take? Journal of Business Logistics, 20, 73-100. CSCMP (2006) Supply Chain and Logistics Terms and Glossary. Bellevue. DAMME, D. A. V. and AMSTEL, M. J. P. V. (1996) Outsourcing Logistics Management Activities. The International Journal of Logistics Management, 7, 85-95. FORD, D. (1990) Understanding Business Markets: Interaction, Relationships and Networks, London, Academic Press. GOLDBERG, D. (1990) Jit's Next Step Moves Cargo and Data. Transportation & Distribution, 31, 26-29. GOPAL, C. (1986) Manufacturing Logistics Systems for a Competitive Global Strategy. Information Strategy, 3, 19-25. HAMEL, G. and PRAHALAD, C. K. (1994) Competing for the Future. Harvard Business Review, 72, 122-128. -17-

JUNG, D. K.-P. (2004) Auswertung Outsourcing-Befragung 2004. Frankfurt, Miebach Logistik. KAKABADSE, N. and KAKABADSE, A. (2000) Critical Review - Outsourcing: A Paradigm Shift. The Journal of Management Development, 19, 670-728. KLAUS, P. (2004) Top 100 in European Transport and Logistics Services: Market Sizes, Market Segments and Market Leaders in the European Logistics Industry, Hamburg, Dt. Verkehrs-Verl. LAARHOVEN, P. V., BERGLUND, M. and PETERS, M. (2000) Third-Party Logistics in Europe - Five Years Later. International Journal of Physical Distribution & Logistics Management, 30, 425-442. LAARHOVEN, P. V. and SHARMAN, G. (1994) Logistics Alliances: The European Experience. The McKinsey Quarterly, 1, 39-49. LANGLEY, C. J., VAN DORT, E., ANG, A. and SYKES, S. R. (2005) 2005 Third-Party Logistics - Results and Findings of the 10th Anual Study. Capgemini, Gergia Institute of Technology, SAP, DHL. LANKFORD, W. M. and PARSA, F. (1999) Outsourcing: A Primer. Management Decision, 37, 310-316. LYNCH, C. F. (2004) Why Outsource? Supply Chain Management Review, 8, 44-51. MCGINNIS, M. A., KOCHUNNY, C. M. and ACKERMAN, K. B. (1995) Third Party Logistics Choice. The International Journal of Logistics Management, 6, 93-102. PENROSE, E. T. (1997) The Theory of the Growth of the Firm, Oxford u.a., Oxford Univ. Press. RAO, K. and YOUNG, R. R. (1994) Global Supply Chains: Factors Influencing Outsourcing of Logistics Functions. International Journal of Physical Distribution & Logistics Management, 24, 11-19. -18-

RAZZAQUE, M. A. and SHENG, C. C. (1998) Outsourcing of Logistics Functions: A Literature Survey. International Journal of Physical Distribution & Logistics Management, 28, 89-107. SELVIARIDIS, K. and SPRING, M. (2007) Third Party Logistics: A Literature Review and Research Agenda. The International Journal of Logistics Management, 18, 125-150. SHAPIRO, R. D. (1984) Get Leverage from Logistics. Harvard Business Review, 62, 119. SINK, H. L. and LANGLEY, C. J., JR. (1997) A Managerial Framework for the Acquisition of Third-Party Logistics Services. Journal of Business Logistics, 18, 163-189. STÖLZLE, W. and HEUSLER, K. F. (2003) Supplier Relationship Management - Entstehung, Konzeptverständnis Und Methodisch-Instrumentelle Anwendung. 167-194, IN BOGASCHEWSKY, R. and GÖTZE, U. (Eds.) Management Und Controlling Von Einkauf Und Logistik. Festschrift Für Prof. Dr. Dr. H.C. Jürgen Bloech. Gernsbach. VAN DAMME, D. A. and VAN AMSTEL, M. J. P. (1996) Outsourcing Logistics Management Activities. The International Journal of Logistics Management, 7, 85-95. WEBER, J. and ENGELBRECHT, C. (2002) In Fremden Händen. Logistik Heute, 09/2002, 38-39. WILDING, R. and JURIADO, R. (2004) Customer Perceptions on Logistics Outsourcing in the European Consumer Goods Industry. International Journal of Physical Distribution & Logistics Management, 34, 628-644. WILLIAMSON, O. E. (1996) Economics and Organization: A Primer. California Management Review, 38, 131-146. ZHU, Z., HSU, K. and LILLIE, J. (2001) Outsourcing - a Strategic Move: The Process and the Ingredients for Success. Management Decision, 39, 373-378. -19-

Appendix Companies from the industrial sector Logistics service provider Answers 0 1 2 3 4 0 1 2 3 4 Cost reduction 1 2 11 15 10 39 2,79 0 0 4 10 9 23 3,22 Increase of delivery time 4 3 16 9 7 39 2,31 0 1 9 9 4 23 2,70 Concentration on core competencies 2 2 11 11 13 39 2,79 0 1 4 9 9 23 3,13 Increasing flexibility 3 2 9 9 16 39 2,85 0 0 4 11 8 23 3,17 Access to external know-how 2 7 20 6 4 39 2,08 0 1 5 13 4 23 2,87 Loss of control 2 11 11 12 2 38 2,03 2 5 9 6 2 24 2,04 Growing dependence on service provider 1 5 6 12 14 38 2,87 2 4 4 11 3 24 2,38 Losing logistics expertise 7 4 8 11 8 38 2,24 1 5 9 8 1 24 2,13 Losing direct customer contact 10 16 3 6 3 38 1,37 4 7 5 6 1 23 1,70-20-