Literature search and literature review - Outsourcing logistics activities (PDF)

Essay from the year 2012 in the subject Business economics - General, grade: 2, Heriot-Watt University Edinburgh (School of Language and Management), language: English, abstract: The business world offers numerous examples of companies sourcing their activities out. This
literature review will put emphasis on companies that engage with a third-party that provide
logistics services to them. Third-party logistics (TPL), which can be perceived as outsourcing
logistics, has been receiving considerable amount of attention within the academic world (e.g. Lieb
and Bentz, 2004, 2005; Lieb and Randall, 1999; Cooper and Johnstone, 1990; Fernie, 1989;
Marasco, 2007). This trend has been dominating both the business world and the academic world
since the 1980s (Stalk, Evans and Shulman, 1992; McKinnon, 1999) and yet, this topic doesn't
seems to be exhausted. While Porter (1985) illustrate the Value Chain, he argues that
organisations need to assess their activities in their value chain and evaluate whether they create a
competitive advantage by executing this activity in-house. If they do not achieve so, he continues
by suggesting outsourcing that activity. Hsiao et al. (2009) distinguish between core business
outsourcing and non-core business outsourcing. A firm's core business or core competencies can
be designated as "the collective learning in the organization, especially how to coordinate diverse
production skill and integrate multiple streams of technologies" (Prahalad and Hamel, 1990).
Core business outsourcing can be understand as activities such as product design, development,
manufacturing, marketing, and sales (Facanha and Horvath, 2005), and research has proven that
this business conduct may have positive effects in order to be responsiveness to inconsistencies in
demand (Dabhilkar and Bengtsson, 2008; Jiang et al, 2007). The non-core business in
manufacturing industry incorporates activities such as IT, HRM, accounting and logistic services
(Hsiao et al, 2009). However, this literature review will not focus on outsourcing core business but
will concentrate on outsourcing non-core business; in particular outsourcing of logistics activities to
TPL. Initially, this paper will draw attention to essential definitions that have been published over
the years. This will be followed by an examination to discover the driving forces for this field. The
main body will be closing with the highlighting the risk that are associate with outsourcing.