Answered: A 3PL provider may have only transport…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

A 3PL provider may have only transport services or may also provide warehouse
and inventory management services. What are the advantages and disadvantages
to a firm in outsourcing its warehouse and inventory management operations along
with transportation?

Expert Solution

Step 1

The advantages and disadvantages of outsourcing warehouse and inventory management operations along with transportation are as follows:

Step 2

Advantages of outsourcing:

Cost saving: The first and foremost advantage of outsourcing warehouse and inventory management operations along with transportation is the cost saving. Warehouse and inventory management operations need the back-office management, manpower, software and updated technology to manage the daily operations, machinery, transportation vehicles and place to store the goods. Such investments can be saved if a firm outsources warehouse and inventory management operations along with transportation.
Economies of Scale: If a firm owns just warehouse and inventory management operations, it has to pay for transportation services. Transportation of goods depends on the number of goods. If the firm outsources transportation also, it will be less expensive, as transportation by the dedicated firm will have other goods to transport. Through reducing shipping costs, the firm can achieve economies of scale.
Flexibility in manufacturing facility: If a firm has outsourced the warehouse and inventory management operations along with transportation, it can focus on the manufacturing with flexibility. The professional 3PL provides services as per the client requirements.
Convenience: Outsourcing warehouse and inventory management operations along with transportation will help the firm to manage the operations swiftly as there will be a single point of contact in case of tracking the shipment or issues with delivery.

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