Risk Management: A New Way to Improve Logistics Outsourcing

Risk Management: A New Way to Improve Logistics Outsourcing

Thierry Sauvage (Aix-Marseille University, France) and Mohamed Haouari (Aix-Marseille University, France)
DOI: 10.4018/978-1-60960-585-8.ch020
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Abstract

In recent years, logistics outsourcing has shown a strong development. However, despite the benefits associated with logistics outsourcing, there are many relationships that do not last as long as they were initially planned. In this chapter the authors tried to sketch a conceptual model of Risk Management applied to logistics outsourcing and supported by a case study within aerospace industry. Their results show that Risk Management could be an innovative tool favoring the success of logistics outsourcing by securing future performance and relationships between supply chain partners.
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Introduction

Companies, whether industrial or commercial, have proceeded for about twenty years in the outsourcing of operations. In the 80’s, the outsourcing of activities like data processing, telecommunications or logistics, considered as an integral part of the company, was perceived as a solution of last recourse for firms in bad financial health (Barthélemy 2004). Nowadays, many functions are totally or partially outsourced by firms (Chanson, 2003). Logistics follows this trend. Thus, according to the barometer of Ernst & Young Outsourcing (2008), 36% of European companies have outsourced at least whole or part of their “distribution, logistics and transport” function.

Indeed, brought by the constraints of flexibility, competitiveness and cost control, more and more companies are using the services of logistics providers. According to Byrne (2004), 78% of North American shippers, and 79% of European shippers, resort to logistics service providers. Thus, since the second half of the 1990s, logistics outsourcing has become a major strategic issue, making logistics service providers (LSP) as critical and indispensable partners for industry and trade (Paché and Sauvage, 2004). The LSP is no longer limited to merely providing transport services, but offer complete packages of logistics services with a higher value added. Alongside this trend, the relationship between shippers and service providers has also evolved. There is a change in the nature of the relationship among shippers and suppliers to an extent that logistics partnerships have replaced the simple sub-contracting practices (Murphy and Poist, 1996). This change can be explained on the one hand, by the potential benefits associated partnership, and also by the emergence of new logistics’ strategies in line with supply chain management (Brulhart, 2002).

However, Lieb (2000) notes that despite of the benefits of logistics outsourcing, many relationships are not renewed at the end of their contract or do not last as long as they were initially expected.

Thus, our thinking lies at the heart of this fact. This paper aims to draft the stake in managing risk in a logistics’ outsourcing process. Our approach constitutes an innovative and successful way of managing the supply chain. We try to propose a new Risk Management (RM) framework for managing relationships between shipper and LSP. Our paper will show how RM would allow better integration of the LSP driving to success.

The chapter is organized as following. Section 1 presents a literature review, definitions and key concepts used throughout the chapter. Section 2 presents the preliminary results of an empirical study that we conducted on a firm operating in the aerospace industry. These results allow developing an exploratory model. Supply chain innovation implications deriving from the model are then discussed. Finally, the concluding section presents some concluding remarks, research limitations and future research avenues.

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