Testing the feasibility of collaborative competition to reduce cost and improve efficiency of third party logistics providers

The main focus of the research work was to test the feasibility of collaborative competition for reducing cost and maximize the efficiency of third party logistics providers. The Toll Global Forwarding was chosen as the case study for this research work. After completing the overall study, it has been noted that collaboration and third party logistics enrich a company from several aspects. Most importantly, one of the primary aims of these two factors is to provide the opportunity of profit making to the company. However, the business organization on the other hand, should have enough capability to maintain the value chain management properly. Other than that, the organizations should provide healthy working atmosphere to the third party logistics providers for getting the full benefit from them. Actually, a successful collaboration depends on several factors like identification of the area, promoting the win-win situation, sharing the benefit, selection of proper partner, accuracy in investment, teamwork, focusing on the long-term collaboration, etc.

Some theories and facts related to the research topic have been mentioned in this study. One of them is Porter's value chain model. This model has provided the fundamental information about logistics and provided a better understanding of this. Step by step benefits of third party logistics has enhanced the research paper. This research work has been composed by following a proper methodology. Post-positivism research philosophy, Deductive approach and descriptive design have been selected to lead the project in right direction. Actually, all of them have helped to analyze the gathered facts and to identify the findings. The company comprises of 50 employees. However, out of 50, 30 employees have provided proper feedback. Therefore, the quantitative analysis is done on 30 employees of the organization. 10 managers of the selected company have been interviewed to complete this research work. The analysis and the recommendations have been composed on the basis of their statements. The discussion of the facts collected from this interview session has made this research more meaningful and informative as well. However, the company is presently facing some challenges those need to be recovered. Thus, the company has been recommended to invest in proper infrastructure and select partners on the basis of capabilities. These may help the company in future.

The researcher presents a self-reflection report that illustrates the development of the knowledge of the researcher after the completion of this research work. The report also highlights the issues that the researcher had to face in order to complete the dissertation, successfully.

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Table of Contents

  • Chapter 1: Introduction
  • 1.1 Introduction:
  • 1.2 Background of the Study:
  • 1.3 Background of the organization - Toll Global Forwarding:
  • 1.4 Rationale of the research:
  • 1.5 Research Aim:
  • 1.6 Research Objectives:
  • 1.7 Research Questions:
  • 1.8 Purpose of the Study:
  • 1.9 Structure of the research:
  • 1.10 Summary:
  • Chapter 2: Literature Review
  • 2.1 Introduction
  • 2.2 Conceptual framework
  • 2.3 Previous research
  • 2.4 Understanding the concept of Collaboration
  • 2.4.1 Steps of successful collaboration in supply chain management
  • 2.4.2 Comparing different supply chain collaborative approaches
  • 2.4.3 Agency theory in collaborative supply chains
  • 2.5 Benefits of supply chain collaboration
  • 2.6 Types of collaboration in supply chain management
  • 2.7 Importance of collaborative competition in cost reduction and improve efficiency:
  • 2.8 Functions and benefits of third-party logistics in collaborative competition environment:
  • 2.8.1 Analysing Value chain model in logistics:
  • 2.9 Identifying methods to reduce supply chain logistics costs:
  • 2.10 Comparing previous research and present research
  • 2.11 Summary

Chapter 1: Introduction

1.1 Introduction:

This research study is done based on Testing the feasibility of collaborative competition to reduce cost and improve efficiency of third party logistics providers. The researcher has chosen Toll Global Forwarding for this research as a case study. The concept of globalization has changed the operational framework of businesses across the world. Guan and Rehme (2012) stated that the competition between different companies has increased nowadays. Cuthbertson and Piotrowicz (2014) added that most of the owners of the business are now more interested in integration and collaboration with the suppliers. According to them, collaboration with the suppliers will enhance the profitability of their companies.

Here, the researcher has chosen the company named Toll Global Forwarding. This organization is a logistics organization, which runs its business all over the world. It helps in providing huge range of logistics and transport solutions towards their customers throughout the world. The researcher will find out the trends for the integration and collaboration that exists between the company and its suppliers. This research may help the management of the company in taking steps to enhance business through the effective collaboration with their suppliers.

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1.2 Background of the Study:

According to Berglund et al. (2011), the competition in integration and collaboration is important in building the relationships between the organization and its suppliers. Collaborative competition facilitates sharing of information. Warner and Palfreyman (2014) informed that a successful integration or collaboration is dependent upon the mutual benefits of all the supply chain. On the contrary, Rushton et al. (2010) stated that it is difficult to achieve the mutual benefit for all the suppliers involved in the supply chain. This problem arises due to lack of trust among the business partners.

Harrison et al. (2010) observed that effective negotiation helps the supply chain partners to achieve mutual benefits. As per the opinion of Cao and Zhang (2013), for the long-term business collaboration, it is important to have a huge effort from all the partners involved in the collaboration. Chen et al. (2010) stated that there are mainly two types of dimensions for the effective business collaboration, viz. vertical dimension and horizontal dimension. As explained by Hallgren and Olhager (2013), the vertical dimension of collaboration exists between the customers and the suppliers. On the other hand, the horizontal dimension of collaboration can be created among the competitors involved in the supply chain.

Different benefits can be achieved through the integration within the supply chain. It helps to decrease the carrying costs, transportation costs and other costs of inventories. In addition to that, Huatuco et al. (2015) said that other benefits can be created regarding the lead time performance through proper technology sharing. Moreover, Christopher and Juttner (2011) added that collaboration in supply chain helps to decrease the uncertainty in the business. It can be done by sharing the risks and opportunities among the involved partners within the supply chain. It also helps in increasing the experience and knowledge within the partners involved in the supply chain.

1.3 Background of the organization - Toll Global Forwarding:

Toll Global Forwarding (TGF) is a part of Toll Group. It provides different complex services of supply chain through port-to-port shipment. It provides supply chain management and freight services throughout the world. It is a part of transportation logistics. Albert Toll founded this organization in Australia in the year 1888. The headquarters of the company is located in China. As per the financial report of 2014, the total revenue of Toll Global Forwarding was Australian $ 306.2 million. As per the report of 2014, currently 5500 employees are working with this integrated service provider organization. The net profit of Toll Global Forwarding was Australian $ 15.3 million at the end of the year 2014. It is also observed that in the financial year of 2014, Toll Global Forwarding has made transaction on air freight volume of 114,000 tonnes where the ocean freight volume was 542,000 TEU's (Tollgroup.com, 2015).

1.4 Rationale of the research:

What is the issue:
The issue of this research is the lack of feasibility in the collaborative competition. Narasimhan and Kim (2013) stated that the feasible collaborative competition helps the organizations to minimize the costs. Additionally, it enhances the effectiveness of third party logistics in integrated business. Lack of feasible collaborative competition fails to create mutual benefits for the supply chain involved in the collaboration.

Why it is an issue:
The lack of feasibility involved in the collaborative competition has become an issue for the supply chain. Lack of feasibility in collaborative competitive happens due to the failure of creating mutual benefits for all the supply chain. Tiwari and Samuel (2014) informed that absence of trust among the partners involved in collaboration is an important issue.

Why it is an issue now:
The globalisation is increased in today's business world. In this situation, Guan and Rehme (2012) stated that it is very important for the organizations to collaborate with the suppliers. It helps the organizations to become successful within the competitive global business environment. Successful business relationship cannot be created because lack in creating positive business relationships.

What could this research shed light on:
This research will help to understand the impact of collaborative competition. The researcher will be able to understand the process by which, collaborative competition helps to minimize the cost. The researcher will be able to know about different methods to reduce the delivery time. This research ensures effective suggestions for the organizations within the global environment to generate successful collaboration with their suppliers.

1.5 Research Aim:
The aim of this research is to analyze the feasibility of collaborative competition that helps to reduce the cost and also improve the efficiency of third party logistics providers. The researcher has chosen Toll Global Forwarding to perform this particular project.

1.6 Research Objectives:
The objectives for this research are -
• To find out and measure the impact of collaborative competition in Toll Global Forwarding.
• To analyse different ways to reduce the cost through effective collaboration and partnership among the supply chain partners.
• To trace the effective methods to minimise the delivery time.
• To recommend important suggestions for Toll Global Forwarding to increase the efficiency of the third party logistics providers through more healthy collaborative competition.

1.7 Research Questions:
The research questions for this particular study are -
» What are the impacts of collaborative competition in Toll Global Forwarding?
» What are the different ways to reduce the cost through effective collaboration and partnership among the supply chain partners?
» What are the effective methods to minimise the delivery time?
» What are the important suggestions for Toll Global Forwarding to increase the efficiency of the third party logistics providers through more healthy collaborative competition?

1.8 Purpose of the Study:
The main important purpose of this study is to understand and evaluate the feasibility of the collaborative competition. This competition helps in improving the third party logistics providers' efficiency and also minimise the cost. The researcher will also be able to understand the effective methods to minimise the delivery time through this research. The researcher through this research work will also understand the partnership among the supply chain partners. For this research, the research has selected Toll Global Forwarding (TGF).

1.9 Structure of the research:

Chapter 1 - Introduction:
This research paper has total five chapters. The first chapter of this paper is Introduction chapter. This chapter explains the introductory part of the research. The background of the research is explained in this chapter. The background of the chosen company elaborates the every detail about the chosen organization. The rationale of the research shows the issues involved in the research. Properly explained research aim, objective and research questions help the researcher to perform the research towards a specific direction.

Chapter 2 - Literature Review:
All the required secondary data for the research are collected by the researcher from the recent books and journals. The researcher presents all the needed secondary data in the second chapter named literature review. This chapter helps the researcher to increase the knowledge about the previous study of the chosen topic. Different models, concepts and processes are discussed in this chapter. It helps the researcher to make a connection between the previous and current research.

Chapter 3 - Research Methodology:
Research methodology chapter shows the methods those are used in this research. The research philosophy, approach and designs are explained in this chapter. These particular philosophy, approach and design help the researcher to conduct this research in a particular scientific way. Data collection method, sampling technique, sample and population size etc. are also discussed in this chapter.

Chapter 4 - Data Findings and Analysis:
The researcher collects the required primary data from the chosen sample size. Firstly, the researcher collects all the required primary data including the quantitative and qualitative data for the research. In the chapter of data findings and analysis, the researcher analyses all the collected primary data. This analysis helps the researcher to come to a clear conclusion.

Chapter 5 - Conclusion and Recommendations:
The final chapter of the researcher denotes the conclusion and recommendation chapter. In this chapter, the researcher makes the clear conclusion. Then, the researcher creates the links between the research objectives and the collected primary and secondary data. After completing the objective linking, the researcher becomes able to provide valuable recommendations for the chosen organization. These recommendations help the chosen organization to overcome the issues identified before starting the research. The future scope of the study is also explained in this chapter.

1.10 Summary:

The chapter of Introduction shows an accurate description of the research paper. This chapter explains that the collaborative competition is very much important for the organizations to minimise the costs of the involved companies. This chapter also adds that it also helps to improve the effectiveness of the third party logistics providers. The issues of the research are explained by the research rationale. Research aim, objectives and questions show the right track of the research. The literature review chapter that presents the theories regarding this research follows this chapter.

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Chapter 2: Literature Review

2.1 Introduction
Irrespective of the size of the firms, supply chain management has become one of the prime concerns, in order to form integration between the suppliers and the customers. The present research seeks to study the "Feasibility of Collaborative Competition to Reduce Cost and Improve Efficiency of Third Party Logistics Providers".

This section discusses the above mentioned topic under certain headings. In the first part of this chapter the researcher highlights on the existing research works under this topic. It will discuss the general concept of collaboration in the context of supply chain management. Thereby, the section compares different theories and approaches in supply chain management and shed lights on the benefits of its collaborative effort. This is also analysed in relation to its functions, cost reduction, and gaining efficiency. In the latter part the researcher offers an analytical comparison between the present and previous research work. In order to attain this purpose it has taken Toll Logistics as a case study.

2.2 Conceptual framework

2.3 Previous research
The researcher has taken relevant materials and information from the article "Application of Agency Theory to Collaborative Supply Chains" by Lena Plambeck and Peter Gibson. The article has described certain theories on supply chain and based its research on an Australian coal exporting supply chain network. It highlighted on the collaborative relation among the players of supply chain system.
"Logistics Collaboration in Supply Chains" by Erik Sandberg is another article that described logistics collaboration and integration in the supply chain management. The study has been undertaken on the Swedish manufacturing firms (Diva-portal.org, 2015).

2.4 Understanding the concept of Collaboration

Cao and Zhang (2013) commented that due to the worldwide economic downturn, collaborative efforts in supply chain management have become prominent. It has brought about competitive advantage to the firms competitive advantage, reduce the cost and improve the level of service. It is particularly beneficial under the time of economic stress. Besides being cost-effective and promoting effectiveness, it can meet the expanding customer expectation and increase the market share. It can also help in product innovation lower the operational cost.

In contrast to this argument, Gulati (2010) remarked that collaboration in supply chain network can bring about differential delivery of performance. This study noted that vertical collaboration between the customers and the suppliers can be costly. It demands adequate investments and often the result of such initiative is unpredictable. Moreover, the relation between the suppliers may witness failure and generate almost no profit to nether of the parties. The reason as it highlighted was the lack of management initiatives and understanding of the true potentials of logistics collaboration.

In support of the above position, Sehgal (2009) stated that with an increase in prices of raw materials and energy and tighter market condition the supply chain cooperation can face a Darwinian struggle. The study predicted huge amount of waste generation and decrease in profit margin in the supply chain networks. Thus in order to combat this growing menace, the partners of this network has devised innovative ways to form collaboration and bring mutual benefits. It also pointed out that firms often diverge in their area of interest that adversely affects the level of commitment among the cooperation in supply chain network and sharing the demand information. Thus, in the recent times the number of instances of success and failure of logistics partnership are almost equal.

According to Burman (2009) the primary goal of supply chain collaboration is to gain visibility in the patterns of demand and promote transparency. The study revealed that strong supplier integration can promote timely delivery of goods and promote Just-in-Time delivery system. However, Wincel (2015) criticised this advantage of gaining visibility and in particular, information sharing. It stated that the supplier and retailer both know the stochastic features of demand pattern as they do not change drastically over the time.

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2.4.1 Steps of successful collaboration in supply chain management
Chen et al. (2010) stated that in order to ensure the joint initiative of supply chain management to work six necessary steps must be followed in the given order. It can reduce inventory cost, improve the service and ensure timely delivery of goods. These steps are discussed below.

Identification of the area to form collaboration: Copulsky (2012) prescribed that the collaboration should be built in those areas that can increase efficiency or the strengths. It is beneficial than compensating on the weaknesses. It also stated that the formation of collaboration should not focus on increasing sales as it is shaped by demands. However, Finch (2013) on the other hand commented that existence of a proper infrastructure of the collaborators is the precondition for this joint initiative.

Promotion of win-win situation and benefit sharing: The collaboration as remarked by Hawes (2009) must ensure an equal benefit for both the partners involved and ensure the sharing of the resultant benefit. However, the supply chain executives often struggle to gain approval from the leaders as sometimes either of the party suffers the burden of logistics cost. Thus, the companies must reduce such asymmetric collaboration and promote the sharing of benefits.

Selection of partners on the basis of strategic goals: In many cases Ford (2014) observed that companies collaborate with their largest suppliers or assuming to bring about the maximum value. This often results in failure of this joint effort. Thus, Foss (2015) stated that collaboration with smaller partners can be effective since they agree to put in greater effort. A successful collaboration must be based strategic goals, capability and value potential.

Investment in the proper infrastructure and people: Lenny et al. (2010) noted that collaborative tasks often become difficult as the employees of two different logistics company need to overcome the barrier of organization and culture. Thus, grass-root collaboration between the supply chain partners is prescribed.

Establishment of uniform performance-management system: Medford (2011) stated that in order to ensure success of the joint initiative both the partners must establish a uniform system of performance management. However, Copulsky (2012) noted that this is difficult to achieve because the organizational culture widely differs.

Focus on long-term collaboration: According to Morash et al. (2012) enthusiasm, stamina and a common perception on the expected outcome of the joint effort can bring positive result for both the partners. However, Narasimhan and Kim (2013) criticised these steps by commenting that in order to make the joint initiative succeed it requires heavy investment, proper planning and mutual trust between the partners. All these steps should be based on understanding the concept of collaboration

2.4.2 Comparing different supply chain collaborative approaches

The collaborative relationships across the supply chain network have certain unique characteristic, benefits as well as requirements and barriers. Neuman and Samuels (2014) have discussed three types of collaborative approaches in this context together with their inherent benefits and limitations. These types are discussed below.

Collaborative transaction management: This approach as studied by Nilsson (2010) is characterised by exchanges of high volume of data and alignment of tasks on the basis of operational issues or tasks. This approach is confined between the two supply chain managers or between two individuals. This type ensures exchange of voluminous information is transmitted automatically through technology. The decision making is monitored generally by either of the partner. The collaborative effort is focused more on problem-solving at the supplier level.

The benefit of this approach as highlighted in this study is the greater visibility of the supply chain and reduction in frequency of error. In contrast, New (2015) commented that it is time consuming to set up this system of collaboration and is also difficult to maintain due to dealing with voluminous data and minute detailing.

Collaborative event management: According to Power (2011), in this type of collaboration the relationship building efforts, start at the grass-root level of planning and decision-making around key issues. In contrast to the earlier approach, it is not merely focused on the transactions and hence has the advantage of greater sharing of information. The exchange of tacit knowledge enables the collaborative event management effort to yield higher performance outcome.

The key benefit of this approach as noted by Smith (2012) is that it promotes organizational learning. This is due to managerial and strategic planning in the front end as opposed to operational planning in the transaction management. This type also successfully identifies the upcoming problems, tries to provide appropriate resolution and is more oriented towards prevention of those problems. The type is also helpful in understanding supply chain disruptions emanating from inaccurate predictions and ineffective replenishments. The benefits also include lower need for safety-stocks level, better promotional servicing and increase in sale volumes.

In contrast, Sparling (2013) argued that the cross-functional integration and cultural barrier are the most important drawback in this form of collaboration. Moreover, ownership conflicts often crop up between the supply chain group and the sales team. The sales forecast is often not very accurate.

Collaborative process management: Tokar (2014) stated that this type of management focuses on the supply and demand processes in order to promote cross-cultural integration. Both order forecast and sales forecast are incorporated in the mechanism of joint decision-making. The collaborative effort at the level of demand process enhances the effectiveness of the entire supply chain network. The joint business planning is the characteristic feature of this type.

Foss (2015) argued that in contrast to the second approach, performance improvements in the last type are increased. These results from the increase in sales, greater efforts directed at promotions, event execution and greater inventory returns.

Ford (2014) that a proper merger of these three collaborative approaches can bring a more positive result has prescribed it. In case, either of the typologies is adopted then a contingency analysis is a major pre-condition.

2.4.3 Agency theory in collaborative supply chains

As explained by Burman (2009), the Agency theory is primarily related to the business relationships consisting of an agent one hand and a principal on the other. These two players are engaged in an optimum cooperative behaviour, in spite of having varying goals and attitudes towards taking risks. The study notes a well-laid down contract between the principal and the agent depending on the nature of the situation. The primary focus of this theory is the exchange between the cost of behaviour measurements and also its outcomes and transfer of risks to the agents.

Thus, Power (2011) stated by applying this theory in the supply chain management context we can get a better understanding of the collaborative relationship between the suppliers and the firm or the supplier and the customers. This theory is more closely related to Collaborative transaction management approach as discussed in the earlier section. This theory is primarily focused on the buyer's perspective and formation of effective terms of the contract.

2.5 Benefits of supply chain collaboration

In the concept of collaboration the researcher has provided a brief idea about the various benefits of supply chain collaboration. This point will be elaborated on the same and specify the exceptional benefits of joint collaboration. Chen et al. (2010) opined that such integrative mechanisms have the advantage of sharing culture, promoting commitment and trust. More specifically the study stated that a good partnership in turn helps in inter-firm integration and link their operational areas. This increases their effectiveness and expands the opportunity to become more innovative in their approach.

Collaboration increases profit sharing: With the tightening of the economy at large, suppliers are focusing their sales effort to capture their existing customers. Thus competition on competitive pricing strategy can lead to weak customer retention. Thus, Copulsky (2012) noted that the dyadic relationship must be based on delivering value in terms of improved service quality and returns on inventory.

Cost efficiency: According to Sparling (2013), a long-term supply chain collaboration lead to cost savings those results from the established routine system of carrying out procedures. In contrast to this position Neuman and Samuels (2014) argued that the relationship between the buyer and supplier suffer due to inefficiencies and organizational idiosyncrasies. The indirect cost like operational and other costs is reduced in a long-term association.

Innovation: The global supply chain management and their competitive nature increase the pressure on the firms to devise alternative and better strategies and processes to become cost-effective. Finch (2013) commented that the long-standing relation between the suppliers can have the advantage of being both cost-effective as well as providing values for the partners.

Cao and Zhang (2013) on the other hand held that the trust between the partners is the key to successful supply-chain partnership. As noted earlier in the above theories and approaches, the collaborative effort can succeed only when the partners understand their goal and work in close cooperation. The win-win situation may not always be there. Thus, one partner has to satisfy in relative gains and not focus on absolute gains.

2.6 Types of collaboration in supply chain management

Supply chain collaboration can occur at two levels as identified by Sehgal (2009). The former collaboration is easier to apply than the latter one. The pre-condition of vertical collaboration must be obtained on the basis of financial conditions, characteristics of the relationships and strategy compatibility of the two firms. It must also take into account effective negotiations and quality account management system.

As Farahani et al. (2011) had stated, the horizontal collaboration on the other hand refers to the approach whereby the manufacturers share assets of the supply chain for mutual benefits. In contrast to the vertical collaboration this form of collaboration is formed across the supply chain network. Gulati (2010) noted that when the supply horizontal collaboration are typically found between the firms of the same industry.

2.7 Importance of collaborative competition in cost reduction and improve efficiency:

As per Cox (2009), long-term supply chain relationships are on the decline due to increased competition within the supply chains. The trend of supply chains towards collaboration has given rise to effective collaborative competition. The market is expanding and becoming more competitive by the day. In the scenario of a tight economy, new accounts are hard to secure. This is the case in emerging markets as well.

Levine and Pearlman (2011) opined that, collaboration is the only way that the suppliers can enjoy a share of profit in the ever changing and competitive market. Collaboration in the supply chain management can help in the pooling of services for providing the customers the best benefits than their rivals. In way, collaboration increases the wallet share for the suppliers. The effectiveness of supply chain management depends on the effective buyer-seller relationship. Mostly, collaboration is adopted by the supplier and retailer to attain mutual benefits. The effective relationship between supplier and retailer provide quality products and the customer benefits. Otoole (2012) argued that, only supplier and retailer relationship is not always responsible for attaining the objectives, building customer relations is also important.

Collaborative competition is extremely effective for cost reduction. As per Rushton and Walker (2013), a long-term supply chain collaboration guarantees cost reduction through its routine procedures conducted by buyers and suppliers. Initially the cost may be high due to the inefficiencies of workers and expensive organizational structures. However, the advantage of long-term association minimises costs from the second year. This is achieved by streamlined procedures, better interpersonal relationships and improving the IT segment. According to Kotler and Kotler (2009), longer relationships reduce the indirect costs to the company as opposed to short-term relations. The cost savings are shared by both the buyers and sellers thereby increasing benefits to both. This results in lower cost of products and the customer benefits from the reduction of price. Angerhofer and Angelides (2009) criticised that, it is not always possible that the cohesiveness of the relations will improve in the resulting years; the scenario can be just the opposite as well.

Collaborative competition increases the competitiveness of the supply chains and pushes supply chain managers to adopt innovative ideas to reduce cost and bring efficiency. The innovations that collaborative competition brings to the supply chain management are helpful in the long-term. As per Beheshti (2010), success of the innovation not always comes from the organization, customer and supplier feedback necessitate the need of innovative measures. In the fiercely competitive market, innovative ideas can help develop cost reduction methods and initiate efficient work. Berglund et al. (2011) argued that, this is not applicable to established businesses due to the fact that innovative ideas are not the only prerequisite for better supply chain management. Callender (2012) stated that, new product creation and development is a costly method, collaboration helps in understanding customer demands and supplier criticisms. This helps the supply chain managers use old and efficient techniques to mould the new product. The reduced cost of plan formulation, preventing wastage of resources and reduced price of product can be attained.

The efficiency of designers and engineers can be improved by collaborating with the manufacturing and procurement departments. As per Cavinato (2013), Collaborative competition ensures that the designers continuously identify and correct design flaws to maintain a competitive advantage. Collaborative competition provides advantages of faster marketing, improved quality of product and lower inventory costs. However, Cuthbertson and Piotrowicz (2014) opined that, interpersonal relations will need co-operation from the employees and management only then success is certain. Looking at the factors it is clear that collaborative competition is effective in creating a competitive atmosphere of demand and supply in the market. Supply chain management is the link for continuing the process of production to sales.

2.8 Functions and benefits of third-party logistics in collaborative competition environment:

Devaraj et al. (2013) opined that, Third-party logistics are firms that specialize in integrated operations and services of warehousing and transportation based upon customer needs of the product. They sometimes provide value-added services related to the production or procurement of goods. The integration of these value-added services makes the firm a third-party supply chain management provider.

The functions of warehousing, transportation and value added services effectively aid collaboration. These functions enable the third-party logistics or TPL to maintain effective work relations with the buyers and consumers. According to Feng and Sethi (2014), warehousing is an important function that enables suppliers to effectively stock goods as per consumer demands. Collaborative competition helps in creating an atmosphere of competitiveness that influences the containment quantity and quality of warehouse of the TPL. A competitive environment leads to efficient work and timely delivery of the stocked product by a company. Guan and Rehme (2012) criticised that, in order to maintain a competitive advantage, improving warehousing functions is the need of the company.

Transportation is another function that makes TPL important in the collaborative competition environment. As per Hallgren and Olhager (2013), transportation is a key necessity for specialization that allows production and supply of the desired goods to several locations. Transportation has a major role in fulfilling supply chain management relations. Timely transportation of the finished product ensures that the consumer demands are met and any changes can be further processed quickly. This function is required to save time and increase supply.

As per Han (2014), a smooth supply chain management requires the timely production and delivery of the finished goods. In the long-term, effective transportation can lead to quick clearance of goods from the warehouse and initiate further production. According to Huatuco et al. (2015), transport planning enables supply chain managers to effectively plan routes and modes of transport to supply products faster for meeting demands. This enables reduction of cost by effective implementation of technology to monitor, control and optimize transport.

After analysis of the role of third-party logistics in a collaborative competition, the benefits they provide to companies and customers can be assessed. The few benefits are mentioned below:

Cost and Time saver: The benefit that TPL provide to customers and the buyers is that of saving cost and time. As per Kumar and Nath Banerjee (2012), the core competence of third-party logistics can be determined by its logistics. These firms possess better knowledge and expertise than the producing and selling companies. This provides an advantage to established companies as they can use the knowledge and use their global network to assess the demand and need for supply. The information technology systems are constantly updated to keep a track of goods stored and the transport of the finished goods. However, Lutz et al. (2012) argued that the producing and selling companies do not have the advantage of time, resources or expertise to adapt to the new IT system.

Low capital use of the company: Another benefit that third-party logistics provide is to the producing and selling companies. Panayides (2013) opined that, most of the operative functions are outsourced by the companies to the third-party logistics. This presents a significant advantage to companies since they do not require creating their own warehouse and transporting services. This helps them to save cost for creating and maintaining low capital use. Sagbansua and Alabay (2010) argued that, having their own warehouse and transport can provide the company management control over production and supply of the goods.

Focus: Third-party logistics provide the advantage to companies for outsourcing. Outsourcing enables the company to focus on the core business function. According to Teli (2013), a continuous increase of business complexities blocks the chances of becoming an expert in every sector and third-party logistics eases the burden. Since this aids focus on the business, the final product needs to be of high quality. TPL are of no use if the core product is not up to quality standards. Tiwari and Samuel (2014) argued that, if the company's core business id-logistics, then the outsourcing of products is unnecessary and illogical.

Flexibility of operation: A vital advantage that third-party logistics provide is that of flexibility. The geographical flexibility for supplying the finished product gives them importance. According to Vilko and Hallikas (2012), the TPL firms have more variety in services than the producing and selling companies. The client enjoys flexibility of resources and a vast workforce for enforcing the supply chain. The account books of companies also benefit as the cost of logistics turn into variable costs. However, Lieb and Randall (2013) mentioned that, loss of communication between the TPL and the company can lead to delayed results resulting in losses.

2.8.1 Analysing Value chain model in logistics:

Feng and Sethi (2014) opined that, Logistics management is very important for companies to formulate business strategy and assists the growth of the supply chain management in the long run. Logistics provide important processes of customer care services; order processing, inventory management and transportation. Porter's value chain model can be utilised to understand the working of logistics to meet customer demands. This model is beneficial to provide insights on the advantage of logistics to a company regarding cost reduction and services.

The above figure shows the use of Porter's value chain in the logistics scenario. The primary activities are those that involve in the product formation, marketing, delivery and servicing of the finished product. The figure also highlights the supporting activities that fulfil the primary task of purchasing the inputs for production, technology used, Human Resources and infrastructure. As per Cuthbertson and Piotrowicz (2014), the porter's model of value chain compiles the management operations in order to show their effect on profits.

It can be noted that among the 5 primary activities, 2 are related to logistics including inbound logistics and outbound logistics. The inbound logistics cover the activities of supply of raw materials, components for production and services included for production of goods. The outbound activities include management of flow and supply of finished goods after production to the customers. These methods ultimately are related to attain profitability in the business. According to Cavinato (2013), Logistics is relevant to provide customer satisfaction that result in loyalty and attainment of market share. The porter's value chain is a strategic management tool used to monitor every aspect of the company's operations.

Berglund et al. (2011) opined that, the primary activities are vital for organizations in order to develop a competitive advantage. Logistics information is extremely vital for TPL since it contains data regarding warehousing and inventory details about the stored products. According to Beheshti (2010), porter's model shows the flow of processes in an organization for attaining profits. The involvement of logistics operations makes this model helpful to understand the need of logistics to complete the chain of processes in the management. Emmett and Crocker (2009) argued that logistics alone does not guarantee a smooth running of the processes, and time for manufacturing can delay logistics.

Angerhofer and Angelides (2009) opined that, outbound logistics effectively helps the company to fulfil the marketing duties of supplying customers with the finished goods. Through this model it is clear that logistics form an important part in the supply chain management in a collaborative competition market. It clears the role of logistics on the processes of production to sales of the finished goods. Wood (2012) criticized that marketing duties can effectively fail if the product quality is not up to standards.

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2.9 Identifying methods to reduce supply chain logistics costs:

Controlling costs in a collaborative competition market is important for companies. According to Levine and Pearlman (2011), it is a top priority for companies indulging in foreign trade. Logistics management is an important factor since it consists of procuring, storing and transport of the products. These methods may incur huge costs if not monitored carefully. Supply chain logistics costs can range from 5% to 50% of a product's cost in the industry sector.

Rushton and Walker (2013) opined that, companies must maintain an effective supply chain logistics management to curtail costs. There are several complexities in conducting trade that may increase the costs, these methods are mentioned below to reduce the supply chain logistics cost for a business.

Identify true costs for outsourcing overseas: Tsasis (2014) stated that it is extremely important to understand the rates for Freight, Duty, Brokerage and Inventory carrying costs for a supply chain to be effective. Understanding the true costs and its overall impact on the business can help in determining ideas to curtail costs in these areas. Domestic sourcing of materials helps greatly in reduction of the costs. However, Wong (2011) argued that domestic materials may be of lower quality and hamper the quality of the final product.

Focus on removing variability from transit times: Variable transit times result in the likeliness of more premium freight duty, inventory stocking and inconsistent orders. Paying higher freight costs increases the variability levels and saves costs to the company from extra orders of goods.

Consolidate goods: The consolidation of goods from multiple suppliers within the country helps in the reduction of costs. Rushton et al. (2010) stated that partnering with importers with cost-effective full container loads (FCL) is more effective than having less than container load (LCL) and saves extra costs on the container. In contrast, Miller (2013) argued that sometimes the supplier may charge for the entire container even though the goods quantity may be scarce.

Need for informed decision making: Proving vital information about logistics data about cost of freight, reliability of service and true inventory carrying costs can help in effective decision making. Selection of the less expensive plan can help reduce costs. Mayer (2009) commented that this helps in the increase of efficiency of the managers and employees taking part in decision making. Kim (2015) argued that accurate planning is not always possible due to the ever changing market conditions.

Controlling costs on express shipping: Johnsen et al. (2014) stated that whenever a company gets tangled in a supply chain issue, the entire shipment is sent on express service levels that are more expensive. Calculating and shipping the amount of goods that are required urgently through express service and the balance through standard service will reduce cost substantially.

Automated compliance process: Harrison et al. (2010) commented that implementation of software solutions for preparing and sending the manual data such as documents and other legal papers reduce chances of errors. Quick paper work results in fewer delays of shipment and results in on-time delivery of the products and avoidance of fines. However, Franzen (2011) criticised that software and system corruption though viruses or natural calamities can be a problem.

According to Jayaram and Tan (2010), these methods can effectively reduce costs in supply chain management and help companies fulfil the demands of customers effectively. Reduction of cost and efficiency growth of the logistics providers can be attained via collaborative competition through supply chain management. Logistics is an important part of supply chain management and effectively help in the reduction of cost.

2.10 Comparing previous research and present research
In the previous research work primarily indicated that the logistics and supply chain management can influence customer satisfaction and consequent increase in market share. In contrast, the present research work primarily focuses on the collaborative efforts across supply chain network and highlights the positive as well as negative consequences of such endeavour.

2.11 Summary
The researcher in this chapter has critically evaluated the existing literature on the topic and has presented counter arguments. It has evaluated certain techniques and approaches and offers a comparison between them. The research has also emphasised on the methods of reducing supply chain logistics costs. The various kinds of collaboration in supply chain management have been discussed and the researcher has utilised porter's value chain model for logistics. This helps in understanding the importance of logistics in the supply chain and manufacturing processes. The comparison between previous and current research is also done and the researcher finds that collaborative efforts including logistics is an important variable.

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