Procurement
Materials and services bought from outside to support operations
→ Related to logistics because goods and services must be delivered in the required quantities, precise time, …
Purchasing
Buying goods and services
Supply management
Relational exchange approach involving limited number of suppliers
Emphasizes the issue of coordination and control of flow of goods between company and its suppliers according to demand
Logisitcs cooperation
Cooperation between company and its vendors of logistics services
Factors influencing relationships with vendors
Scope of services provided
Expected period of cooperation with vendor
Number of vendors of the same type of service
Expected influence of vendor on strategy of principal
Commitment of vendor in development of principal’s core activity
Joint investment (risk sharing) with vendors
Second party logistics (2PL)
Provider of single type of logistics tasks or simple related tasks (transport & storage)
Developed as an alternative to independent performed logistics task (First party logistics)
Third party logistics (3PL)
Offer comprehensive logistics services
Covers supply, distribution, and flow of good in production
Tasks are defined in the contract with the client
Fourth party logistics (4PL)
Evolves from 3PL
Includes a wider range of logistics services beyond transport and storage
Cooperate with specialized service providers
Can manage the logistics activity of several / all partners cooperating in the supply chain
Five party logistics (5PL)
Combines 3PL and 4PL functions
Manages logistics throughout the entire supply chain with focus on the network cooperation
Makes strategic decisions to enhance flexibility
Relies on advanced IT tools for comprehensive monitoring
→ Detect chain reducing or eliminate bottlenecks
Types of relationships:
Transactional
Individual transactions
Individual, simple serviced rendered (transport of well-known goods, standardized vehicles, loading with usual loading forklifts)
Long-term involvement of supplier
Greater need to integrate activities of principal and supplier
Partnership based on equal status and mutual benefits
Stability of activities (handling orders with delivery to customer)
Joint investment
Boundaries of each partner are difficult to identify / describe
Working together
Commitment of employees of both parties
Ability to work in teams required
Assumptions of relationships in supply chain:
Partnership
Involvement of all enterprises in the preparation of the offer for the final customer
Agreed risk-benefit strategy
Increased one-party risk associated with increased benefits for that party
Assumptions of relationships in supply chain
Collaboration
Sharing of information, ensuring transparency, and understanding of actions taken
Joint planning, forecasting, and replenishment (CPFR)
Synchronized material movement
Confidence in partners
Regarding quality of delivered goods, skills to handle deliveries, and delivery times
Financial security
Maintenance of performance quality
Own risk management and care to reduce partners risk
Visibility
Applies to activities and effects on all links of the supply chain
→ Exchange of information
Ensures fast flow of information concerning new risk factors
Process convergence
Adapt processes to common standards
Adaptation of partners to work according to “Just-in-Time” concept, “Total quality management” approach or as joint risk management
High velocity
= Time of moving goods from first suppliers to the final customer
Closely related to the reduction of inventory storage times, waiting for production, movement of material / semi-finished products between production stages
Velocity is dependent on the level of integration of the partners activities
Role of trust and reliance on partner
When buyer purchases specific services and closely monitors the vendor, trust is less critical
→ Detailed control reduces the need for a high level of trust.
If vendor offers complex logistics services and the partnership is long-term, trust becomes more important
→ Trust is based on goodwill and vendor's competencies, as detailed control is limited In supply chain the need to trust partners is most important
Stability of long-term relationships
Depends on attitude of parties
Value of company’s relationships with its customers and suppliers (relational capital)
Belief, that relationship with other company is important and needs maximum effort to maintain and ensure its continuity (relational commitment)
Attitude of employees concerns trust in goodwill and competence of partner (reliance on partner)
Reliance on partner reduces risk of cooperation
Risk
Susceptibility to disruption that could lead to a loss
→ Variety of forms as it related to the management of logistics activities
Logistics uncertainty pyramid model
Model to identify sources of uncertainty that can affect the risk exposure for logistics activities
Identifies several types of sources of uncertainty (shipper, customer, carrier, control systems, external environment
Can help to structure and consider potential risk that could influence the logistics system
Characteristics of risk inherent in logistics
Perceived negatively (approach is different to description of risk)
Multidimensional
Different types of risk have different components
Significances of risk is subjective
Considers account logistics cooperation it relates to non-performance or unsatisfactory performance of partners
Description of risk
Negative scenarios occurring in logistics activity and relationships with partners
Risk factors, affecting the occurrence of identified scenarios
Sources of risk factors
Consequences of scenarios (importance of consequences for further operations)
Identification of action for reducing the risk of different scenarios
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