15th Panhellenic Logistics Conference
Outsourcing service logistics providers for the transportation of hazardous materials with the use of multicriteria analysis Aidonis D., Achillas Ch., Voulgarakis N., Triantafillou D., Moussiopoulos N.
15th Panhellenic Logistics Conference
Agenda Introduction Scope Problem definition Criteria to be considered in the decision-making process Multi-criteria Analysis Methodological approach Case study Conclusions
15th Panhellenic Logistics Conference
Introduction
New trends in business management
Effects of the economic crisis
Revision of logistics services
Requirement of creating new ones
15th Panhellenic Logistics Conference
Introduction Logistics services include;
design,
implementation and
control
of the production, storage and distribution processes of materials
Logistics services consist a holistic approach of;
planning and coordinating the material
flows from source to user
in order to manage these materials
in the appropriate quantity, quality, time and place
and at the lowest possible cost
15th Panhellenic Logistics Conference
Introduction
Logistics can help firms to become leaders of the markets by achieving the twin peaks of excellence; gain both cost leadership and service leadership
15th Panhellenic Logistics Conference
Introduction
ď Ž In order to achieve their targets and improve their
competitiveness, firms have focused developing their core businesses
mainly
on
ď Ž On the other hand, outsourcing of non-core businesses
has become lately a very common practice
15th Panhellenic Logistics Conference
Scope
Present a
multicriteria analysis approach for the selection of the
optimal outsourcing strategy involving a number of service logistics providers
15th Panhellenic Logistics Conference
Problem definition Logistics outsourcing functions to 3PL providers, involves
the use of external companies to perform some or all of the firm’s logistics activities The use of qualified 3PL providers generates a large
number of advantages for manufactures dealing with hazardous materials:
High level of expertise
Specialization on logistics services
Experience and know-how to ensure compliance with safety and environmental standards
Reduction of risks
Building up a reassuring layer of supply chain accountability
Help client companies to focus more on their main objectives
15th Panhellenic Logistics Conference
Problem definition Outsourcing reduces capital investment in
facilities,
equipment,
information technology systems and
human resources,
helping the clients to remain competitive
3PL
companies provide high level of logistics services to its clients by
reducing transportation lead times and
supporting the provision of higher customer service level.
15th Panhellenic Logistics Conference
Problem definition Critical questions:
Should a firm outsource or should it not? What
part of the logistics should be outsourced and what should be better executed “in-house”? What is the optimal balance?
15th Panhellenic Logistics Conference
Criteria to be considered in the decision-making process ď Ž The
decision hierarchy process regarding the selection of the appropriate 3PL provider is composed of multiple levels: 1.
General company’s considerations
(price, financial considerations,
industry experience, location, asset ownership, international scope, growth forecasts, yearly efficiency) 2.
Capabilities
(optimization capabilities, information technologies systems,
customer service, responsiveness) 3.
Quality
supply
chain
vision,
creative
management
and
(service quality and performance, continuous improvement, key
performance indicators, measurement and reporting) 4.
Client relationship
(service quality and performance, continuous
improvement, key performance indicators, measurement and reporting) 5.
Labor relations (human resources policies and availability)
15th Panhellenic Logistics Conference
Criteria to be considered in the decision-making process Indicative criteria:
Cost
Asset ownership
Service quality
Growth forecasts
Technical expertise
IT infrastructure
Reputation
Customer service
Reliability
Creative management
Flexibility
Responsiveness
Geographical coverage
Continuous improvement
Capacity
KPIs
Financial stability
Cultural fit
Industry experience
Location
Availability of adequate human resources
15th Panhellenic Logistics Conference
Multi-criteria Analysis Need to take into account mutually conflicting criteria
in the decision-making process
Method: ELECTRE III
Use of:
Weighting factors for selected criteria
Indifference threshold
Preference threshold
Veto threshold
15th Panhellenic Logistics Conference
Methodological approach
15th Panhellenic Logistics Conference
Case study Alternatives:
A1: Selection of service logistics provider A
A2: Selection of service logistics provider B
A3: Selection of service logistics provider C
A4: Selection of service logistics provider A for carrying out 50% of the volume and service logistics provider B for carrying out the remaining 50% of the volume
A5: Selection of service logistics provider A for carrying out 75% of the volume and service logistics provider B for carrying out the remaining 25% of the volume
A6: Selection of service logistics provider A for carrying out 25% of the volume and service logistics provider B for carrying out the remaining 75% of the volume
A7: Selection of service logistics provider A for carrying out 50% of the volume, service logistics provider B for carrying out 25% of the volume and service logistics provider C for carrying out the remaining 25% of the volume
A8: Selection of service logistics provider A for carrying out 50% of the volume and “in-house” execution of the remaining 50% of the volume
A9: Selection of service logistics provider A for carrying out 25% of the volume, service logistics provider B for carrying out 25% of the volume, service logistics provider C for carrying out 25% of the volume and “in-house” execution of the remaining 25% of the volume
A10: Selection of “in-house” execution of the company’s logistics
15th Panhellenic Logistics Conference
Case study Selected criteria:
C1: Cost (in €/km×m3)
C2: Geographical coverage (in thousand km2)
C3: Reputation - Reliability (in 0-10 scale)
C4: Capacity (in m3/day)
C5: Technical expertise - Know how (in 0-10 scale)
C6: Environmental performance (in 0-10 scale)
15th Panhellenic Logistics Conference
Case study Performances of the available alternatives for the selected criteria
Weighting factors and thresholds
Normalized performances of the available alternatives for the selected criteria
Sensitivity Analysis
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Case study
Ascending and descending distillations
A3: Selection of service logistics provider C
Hierarchy of available alternatives
15th Panhellenic Logistics Conference
Conclusions Outsourcing
logistics services competitive advantages to firms
provides
significant
Logistics outsourcing can help in reducing cost elements
and lead times The presented methodological framework provides firms
with an easy-to-use tool that enables them to simultaneously assess several -often mutually conflictingcriteria The
approach can be easily adopted -with slight modifications and adjustments to the special requirements of the problem under consideration- in order to similar logistics decision-making problems
15th Panhellenic Logistics Conference
Thank you for your attention!
Contact details: daidonis@logistics.teithe.gr