Does the outsourcing of logistics services keep its
promise of increased efficiency? The case of
Colgate-Palmolive, Greece
Aliona Grigorenco
Philippos Papadopoulos
Konstantinos Rotsios
Perrotis College, Greece
ABSTRACT
The aim of this paper is to evaluate the efficiency of third party logistics (3PL) and the importance of
outsourcing logistics services from the client’s perspective. The research focuses on current practices
related to the extent of use, predictive value outsourcing and performance measures system of ColgatePalmolive Company in Greece. The study examines the efficiency of the logistics service providers, and
its impact on the overall client performance, evaluated through interviews with the 3PL Coordinator, the
Logistics Manager and the Manufacturing Director. The key findings of the work are that logistics
outsourcing takes responsibility for non-core business functions, brings reductions of stocks and costs as
well as order-to-delivery lead-time, accelerates capital turnover and capitalizes on synergies to achieve
efficiency. Overall, its contribution is evaluated by the client as satisfactory and of medium significance,
with room for improvements.
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
INTRODUCTION
Faced with persistent competitive
pressures connected with the growth of
globalization and innovations in an increasingly
global marketplace, firms have reacted with a
diversity of business strategies designed to
attract customer value. One of these strategies is
outsourcing logistics services to 3PL suppliers.
This paper is focused on the impact of the
activities outsourced to third-party logistics
providers in order to achieve the potential
economies of scale and flexibility needed to
compete in increasingly uncertain environments,
by taking into consideration the risk related to
outsourcing.
In particular, the study has the following primary
objectives:
 Identify customer needs and how well
3PL providers are responding to those
needs.
 Examine the risk factors which
negatively affect the logistics
outsourcing.
 Critically present the performance
measurement system of ColgatePalmolive Company regarding 3PL
providers and its satisfaction with their
performance.
In this analysis particular emphasis is
placed on the various roles of a logistics service
provider and the interaction with the outsourcing
company. This research is designed to apply
existing literature regarding logistics outsourcing
in a Greek context. The paper attempts to
analyze the efficiency of outsourcing of logistics
services through a case study approach which
allows a deeper understanding of the issues
involved and is not very common in this field.
The paper begins with a review of
previous studies of 3PL’s role in firms’
efficiency and why customers elect to outsource
logistics services. The findings are discussed in
relation to the approach of manufacturing and
trading firms such Colgate-Palmolive. Then it
continues with a constellation of the risks and
challenges that affect the balance of economic
sustainability of the customers. After this it
describes Colgate-Palmolive Company’s history,
products and performance around the world and
in Greece. This is followed by a description of
the research methodology adopted for this study.
Then the research results are presented along
with the managerial implications from the
current research and a discussion regarding the
interview questions. Finally, the paper presents
future research developments on the efficiency
of the outsourcing logistics services and draws
some final conclusions.
Despite the fact that the phrase
outsourcing of logistics services is widely used,
different definitions and different evaluations are
associated with the same term.
Most authors refer to outsourcing as the
“use of external companies to perform logistics
functions which have traditionally been
performed within an organization” (Bourlakis &
Malewar, 2010, p. 302). The functions of
outsourcing are performed by 3PL (third party
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
2
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
logistics) firms that are defined as “trade
organizations, which provide services in the
fields of logistics, execution of separate
operations or complex logistics functions
(warehoused stock, transportation, order
management, physical distribution, etc. and
accomplishment of integrated management of
logistics chains of the client-organization”
(Parashkevova 2007).
These organizations can cover the entire
logistics process or selective activities within
that process (Figure 1).
The setting
Outsourcing of logistics services is a topic
that has been given considerable and growing
world-wide
interest
among
consultants,
academics and researchers in the last decade.
This is indicated by the increased volume of
articles on the subject. In Europe the research on
logistics outsourcing has focused either on the
users’ or both users’ and providers’ perceptions
of logistics services dominated by consultant
companies such as Datamonitor (2008) that
focuses on European 3PL providers’ perceptions
of the current service and relationship
performance and status of the industry. The
annual reports of The State of Logistics
(Langley, 2007; 2008; 2010) explore the 3PL
sector and the special topics: integrated service
LITERATURE REVIEW
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
3
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
offerings, green supply chain, and supply chain
security.
The impact of outsourcing logistics
services and efficiency of logistics in a firm’s
success has been acknowledged by various
international journals like the: International
Journal of Physical Distribution & Logistics
Management, Journal of Business Logistics,
International Journal of Logistics: Research and
Applications, the International Journal of
Logistics Management, etc. As far as the
impacts of outsourcing are concerned, most of
the firms quoted by researchers have been either
positive or very positive about cost reduction,
and improvement of service levels and customer
satisfaction (Mello. Stank & Esper, 2008;
Parashkevova, 2007; Rushton & Walker, 2007;
Wilding & Juriado, 2004). Various collaboration
and relationship issues between 3PL users and
service providers have been discussed by
Deepen (2007), Gunnar (2006), Hieber (2002),
Jung, Semeijn & Ghijsen (2004) where well
coordinated relationships are considered as the
tool for problem solving, exchange of
information and better planning and support the
firms’ achievement.
Marasco (2007) attempted to provide a
representation of research produced in the field
of 3PL during the period 1989–2006. In this
research are included only academic journal
papers which are generally considered to be the
highest level of research for acquiring
information and disseminating new findings.
Selviaridis & Spring (2007) developed a
research
agenda
with
comprehensive
classification framework of 3PL which include
the important issues such as outsourcing
decision, benefits and risks of outsourcing, 3PL
service offerings and usage, management of
inter-organisational relationships in 3PL.
Overall then, it could be argued that the
outsourcing of logistics services to 3PL
providers has increasingly been accepted a
powerful alternative to the traditional, verticallyintegrated firm. The development of logistics
outsourcing has been based on the necessities of
achieving cost savings, concentrating on firms’
core competencies and increasing their
efficiency.
The interest in outsourcing logistics
services often appears to be the result of
strategic decisions on the part of companies
regarding their scope and/or direction, such as
reconstruction, market and product line
extension, meeting increasing customer demand,
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
4
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
just in time distribution, entry to new markets,
instituting a quality improvement program and
so on (Mello Stank & Esper, 2008).
Besides the usual activities mentioned
before, 3PL might be involved in short-term
sales forecasting, mode and transport service
selection, the setting of customer service levels,
the determining customer needs and wants for
logistics customer service, determining customer
response to service (Ballou, nd), and insurance
services (Gunnar, 2006). These services are
acquired by the client firm for a certain price,
which is usually negotiated on an annual basis
(Chen, 2008).
According to O’Reilly (2010) most
developed outsourcing logistics market belongs
to the U.S. with 88%. It is followed by Asia
48%, and Europe – 46% (figure 2).
As Rushton and Walker (2007) mention,
European logistic market is placed as the “most
mature outsourced logistics market in the world”
with a value of €182 billion in 2005.
Nevertheless, in 2007 the European
logistics market grew by 5.7% with a value of
$248.7 billion (Datamonitor, 2008). According
to Datamonitor (2008) forecast, in 2012, the
European logistics market will have a value of
$255.6 billion representing an increase of 2.8%
since 2007.
Greece has an ultimate “logistics”
advantage due to its geopolitical location. It is
potentially the main hub that connects three
continents:
Europe,
Asia
and
Africa.
International shipping and logistics enterprises
have focused their interest in the two main ports
of Greece, Piraeus and Thessaloniki. For
instance, recently Chinese shipping took control
of Piraeus port with the goal of creating a
network of ports, logistics centers and railways
to distribute their products across Europe (Bruin,
2011).
Although the penetration of 3PL services
has increased, only 10% of Greek companies use
the services of this industry. This general data
shows that logistics services’ outsourcing is not
yet a common practice among Greek companies
(Gotzamani Longinidis & Vouzas, 2010).
Advantages of outsourcing
The logistics process is based on its basic
rule called the 7R standards: “the right product
with the right quality in the right quantity has to
be delivered at the right time and right place to
the right customer at the right cost”
(Parashkevova, 2007).
Logistics outsourcing has rapidly become
an effective way to reduce costs and spread risks
for traditional, vertically integrated firms. Some
examples of cost-related advantages are
reduction in asset investment (turning fixed cost
into variable), labor and equipment maintenance
costs (Selviaridis & Spring, 2007). According to
Deepen (2007), the main idea of logistics is
based on increasing competitive advantage and
logistics performance and reducing the firm’s
costs. Taking into consideration that the global
market is in long term continuing growth, many
firms that don’t want to fall behind that growth
rate are outsourcing their logistics as a way of
minimizing their internal transaction costs. The
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
5
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
logistics’ costs of business organizations have
been estimated to generally constitute between
20% and 50% of their total operating expenses
(Lu & Yang, 2010). The outsourcing of logistics
services contributes to reducing the total costs in
the system as it allows companies to increase
their profits.
Besides lowering operating costs, together
with logistics expenditure, one of the main
advantages for the firms that use outsourcing
logistics services is that it lets the organization
focus on its core, value adding activities
(Simchi-Levi, Kaminsky & Simchi-Levi, 2004).
This helps the rational allocation of resources to
those types of business which take advantage of
aspects such as external specialist know-how,
trained personnel, special equipment and
technology.
Trained personnel of logistics services and
logistical channels that are specialized are in
charge of generating efficiency (Bourlakis &
Melewar, 2011). While the provider of
outsourcing is a specialized organization, the
company, which is serviced, has a chance to
decrease its capital investment and to improve
the quality of production. As a result of better
specialization in performance of logistics
activities, the supply chain of the client is less
risky in operational terms (Singh, Kundu &
Singh, 1989).
Meeting the increasing need for
technological flexibility is another important
advantage of the use of a 3PL supplier. As
requirements change and day by day technology
advances, the better 3PL suppliers constantly
update their information technology and
equipment. In this case through 3PL providers,
the firms effectively benefit from new and high
technologies and can meet their requirements in
a quicker cost-effective way (Parashkevova,
2007; Simchi-Levi Kaminsky & Simchi-Levi,
2004). Additionally it is argued that the 3PL’s
have improved management of the inventory
which is an essential competitive weapon
(Mangan, Lalwani & Butcher, 2008). The annual
report of The State of Logistics Outsourcing
(Langley, 2007) in 2007 reported a 7% increase
in consumer satisfaction due to warehouse and
transportation technologies used by 3PL’s.
The supply chain network is another
potential gain of 3PL’s which have the
possibility to design new networks that are more
convenient for organizational goals. The result
of this benefit creates the possibility to expand
new products to the new market (Langley,
2010). Being integrated globally, a 3PL’s
provider helps to handle problems with
geographical distance (Embleton & Wright,
1998) and globalised standards offer common
data, and service performance indicators (IBM
Institute for Business Value, 2006). Moreover,
Langley (2010) emphasizes the role of 3PL’s in
increasing resource-sharing among customers,
setting mutual supply chain optimization targets,
offering flexible service menus based on
delivery date requirements, and sharing
constructive suggestions for improvement.
For business organizations 3PL is a tool
for supporting the marketing section of the
firms. The logistics has strong relationship with
the three basic marketing concepts: customers’
satisfaction (suppliers, intermediate and final
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
6
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
consumers), integrated effort (4 P’s) and profit
maximization (Lambert, Stock & Ellram, 1998).
The 4P’s of marketing mix are fulfilled by the 7
“rights”: to have a desired product at the right
place advertised with the appropriate promotion.
The above findings illustrate the growing
consensus that outsourcing of logistics services
is a way for firms to achieve positive benefits for
overall business performance. Logistics services
are significant for the whole organizational
business activity due to their positive effect in
efficiency, the reduction of costs, the divesting
of non-core business functions and the allaying
risk. They helps customers to configure and
control their supply chains to better rationalize
and position inventory in order to distribute the
right product at the right place on time. The
previous research confirms the use of 3PLs has
usually had a positive impact on companies’
performance, especially on cost (Wilding &
Juriado, 2004; Wang & Regan, 2003).
Possible failures in outsourcing of
logistics services
The literature on outsourcing of logistic
services indicates that some
logistics
outsourcing arrangements are not successful.
According to Rabinovich et al. (1999) these
unsuccessful relationships have been generally
attributed to “unclear goals and unrealistic
expectations, internal sabotage by managers of
the firms engaging in outsourcing, and flaws in
the contractual agreements linking the parties
involved”. Selviaridis and Spring (2007)
enumerate the most common risks of
outsourcing such as “problems with respect to
service performance, disruption to inbound
flows, inadequate provider expertise, inadequate
employee quality, sustained time and effort
spent on logistics, loss of customer feedback and
inability of 3PL providers to deal with special
product needs and emergency circumstances”.
The failures of outsourcing are classified
into three main types of risk factors:
performance failure, organizational asset failure
and market competition failure (Kersten &
Blecker, 2006)
Performance problems are subcategorized
into four sub-items which are: delay of time,
hidden cost, potential quality inferiority and
incapacity to help solve emergency problems in
time (Kersten & Blecker, 2006). Delay of time
can be a consequence of many factors. One of
the factors, as Heiber (2002) mentions, is
involvement of several value-adding levels
where communication or interaction between
them is uncertain. As a result, the uncertainty is
transmitted to all levels, of involvement
resulting in delay and prejudice. Hidden cost
problems appear as a result of cost
underestimation or poor contract management
between logistics providers’ services and their
customers (Wright, Smith & Wright, 2007).
Organizational assets problems are
subdivided also into four categories. In this area
problems may appear in the area of switching
costs from abrogation of contracts, loss of knowhow, loss of control and employees’ disturbance,
also called staff degradation (Kersten & Blecker,
2006; Slope, 2009; Embleton & Wright, 1998).
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
7
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
In cases where the 3PL provider often changes
its personnel, the firm has to establish new
partnerships and to understand how things are
operated in a new environment (Wang & Regan,
2003). In addition, Wang & Regan (2003)
mention the risk of conflicts of firms’ culture,
which is explained by the differences of the
goals and views of each party. Here is included
the differences in management styles and of
bureaucracy within firms.
Market efficiency theory tells us that
markets are the most efficient mechanism in the
short-run (Whitman & Diz, 2009). On the other
hand, organizational hierarchies are good at
providing long-term security of commitment. In
the case of long term relationships, firms that
outsource their services risk becoming
dependent on their 3PL providers. Dependence
is considered as one of the most serious concerns
regarding outsourcing logistics services; it may
cause the potential loss of direct control over
logistics activities, uncertainties about the
service level to be provided, and questions
concerning the time cost of outsourcing over
currently available service (Mello, Stank &
Esper, 2008; Wang & Regan, 2003).
The information that a manager receives
might not be as comprehensive as in the case of
in-house logistics. The firm’s fear is based on
losing internal competencies, as well as visibility
in their own supply chains, “It’s hard to check
on the 3PL’s” performance” (Langley 2008, p.
18). This could lead to problems of quality and
to delays, as well as to misunderstandings and
even mistrust. Lack of visibility may have
adverse effects as the creation of excess
expenditures and the use of uneconomic
transportation (Wang & Regan, 2003).
As everywhere in business, market
competition represents a risk for outsourcing of
logistics services. According to Kersten &
Blecker (2006) these issues come from customer
complaints and the diminishing of market
reaction elasticity. One area of growing concern
and attention for firms is environmental issues
such as green marketing. In the packaging sector
this means reducing, reusing, and reapplying
packaging materials, tasks which complicate the
job of both firm and 3PL’s by increasing costs
and limiting options (Lambert, Stock & Ellram,
1998).
Another frequent problem met in logistics
services, which affect a firm’s operation, is the
so called bullwhip effect. The effect is produced
by incorrect demand forecasting that leads to an
amplification of demand volatility in the
upstream direction of the supply chain (Kersten
& Blecker, 2006). Svensson (2005) explains that
the disequilibrium between the stocking levels in
a supply chain can be caused by the value
adding process in different business operations.
Another explanation of the bullwhip effect is
cognitive distance between suppliers and firms
which makes it more difficult to support
decisions
and
exchange
knowledge
(Mahmoodzadeh, Jalalinia & Yazdi, 2009).
The evaluation of outsourcing of logistics
performance has an important role in achieving
organizational goals. By measuring outcome,
business organizations can reduce operating
costs, use these measures to drive revenue
growth (Keebler & Plank, 2009), reduce cycle
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
8
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
times and improve system responsiveness
(Large, 2007). Each firm needs to define the
appropriate measures of its inter-firm processes
related to its changing markets and technologies
that have to be adapted in order to maintain
competitive advantage (Barber, 2008).
The consulted literature doesn’t mention
significant variation in the outsourcing of
logistics in different manufacturing sectors. The
examples of advantages and risks of the
outsourcing logistics service are taken from
different industries which commonalities with
the personal care sector, in which the case-study
organisation operates.
COLGATE-PALMOLIVE CASE STUDY
Colgate-Palmolive Company is a $15.6
billion global company serving people in more
than 200 countries. The Company focuses on
strong global brands in its core businesses – Oral
Care, Personal Care, Home Care and Pet
Nutrition
(Colgate-Palmolive’s
website).
Colgate-Palmolive (Hellas) was founded in 1962
in Athens with import of foreign capital. The
Company takes into account the environmental,
health, quality and safety issues in its business
actions. Colgate follow rules for managing solid
waste that has been agreed worldwide: reduced
production,
recycling
(including
reuse),
incineration and deposition in specific areas
(Colgate-Palmolive’s website). According to
Colgate-Palmolive report (2010, p. 16) the
company adopts a new logistics program which
generates significant savings and flexibility. The
program is expected to produce over $5 million
in annual savings and will soon be expanded
globally (p. 16).
The main activities of outsourcing
logistics services of Colgate-Palmolive are:
stock transfer, warehousing, distribution to
customers, co-packing. The services have all
been assigned to a specific 3PL provider
applying an "overall single responsibility" model
building a partnership based on continuous
improvements and economies of scale.
According to the interviewees the
structure of the Colgate-Palmolive Company in
Greece is made up of the following departments:
Economics, Marketing, Customer Development,
Customer
Service
&
Logistics,
IT,
Manufacturing and Legal Department.
METHODOLOGY
Given the limitations of this paper, the
most appropriate method to investigate the
efficiency of outsourcing of logistics services is
the qualitative method (Dowlatshahi, 2010;
Ellram, 1996). Qualitative research has the
probability to bring supplementary insights into
the particular rather than the general cases of
efficiency of 3PL’s firms (Ellram, 1996).
Marasco (2007) suggests that 3PL studies
are exclusively based on empirical methods
where case studies represent a very useful and
appropriate instrument for research on
relationships as they allow an in-depth, ‘‘multiperspective’’ analysis.
Case study research is “a complete
analysis and report of an individual subject with
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
9
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
respect to specific phases of its totality”
(Krishnaswamy, Sivakumar & Mathirajan,
2006). Several motivations have lead to the
choice of the case study method in the present
research. First, according to Ellram (1996), the
case study is a proper method when a holistic,
in-depth investigation is required. Second, this
model has the advantage of generating multicategory data like economic, technological,
procedural, managerial and organizational
aspects, and sometimes cultural aspects by
providing rich description of the business
environment. Third, logistics issues are usually
practical-oriented problems and are resolved by
applying multi-disciplinary and cross-functional
approaches. As a result the case study method
creates the possibility to gather first-hand
information to develop knowledge and gain
relevance (Ellram, 1996). Fourth, through case
study analysis can be elaborated strategies that a
company can use to solve problems by relating
them to a firm’s objectives (Mello & Flint,
2009).
Generally qualitative case research design
focuses on a small number of cases due to the
depth required. There are no precise guides
regarding the number of cases which should be
included in the research (Perry, 1998). Hancock
(1998) states “case study research is used to
describe an entity that forms a single unit such
as a person, an organization or an institution.
According to Romano (1998) a single case study
is a practical research method in providing
“stimulating insight” in elaborating hypothesis
for neglected areas of research. Each case study
is a self-contained experiment with a unique
context that is part of the experiment (Ellram,
1996). The paper investigates a single case study
which is Colgate-Palmolive – one of the largest
manufacturing firms in Greece.
The primary source of data was in-depth,
structured interviews realized with three
interviewees at different hierarchical levels
involved in the relationship with 3PL firms.
Participants, representing different levels within
logistics management positions were selected to
obtain a diverse set of experiences and
viewpoints. The interview is composed of 15
questions which were formulated according to
research questions which investigate the
efficiency of the 3PL’s supplier and the
performance measurement used by the firm.
The interview questions consist of the
written list of open-ended questions which were
distributed electronically.
A comprehensive and extensive review of
the existing academic and practitioner literature
was conducted. The secondary source is based
on a literature review of international trade and
investment,
international
logistics
and
international purchasing which has an essential
role in formulating the research and interview
questions and focuses on the data collection
phase in the form of research issues. The
literature review chapter also has some initial
theoretical frameworks which generate a wider
perspective regarding 3PL’s efficiency and
influences on firm development.
The interviews were conducted through email correspondence however the practicalities
of the situation sometimes necessitated
telephone interviews.
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
10
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
EMPIRICAL FINDINGS
The interviews provided a rich source of
data concerning current perceptions of the top
management which in this case are: the 3PL
Coordinator, the Logistics Manager and the
Manufacturing Director of Colgate-Palmolive
Company. The interview consists of 15
questions which reflect the importance of the
3PL’s supplier(s) in achieving ColgatePalmolive’s objectives and evaluate the
performance model.
Customer expectations and
satisfaction with 3PL achievements
issues:
Question 1: What expectations the company
has regarding 3PL providers?
According to the 3PL coordinator of
Colgate-Palmolive, the outsourcing of logistics
service providers should have critical mass
where the 3PL business activity acquired selfsustaining viability. Also, of equal importance is
the capability of providers to maintain flexibility
for handling peaks and valleys, while
capitalizing on synergies to achieve efficiency
and effectiveness. At the same time, a 3PL
should achieve lower operational costs.
Regarding costs, the Logistic Manager
underlines that his expectation is not to have any
surprises as far as cost is concerned. At the same
time, 3PLs should provide a reliable service,
continuous improvement of operations and quick
adaptation of innovations. All processes should
be transparent accompanied with early feedback
as far as changes in the sector are concerned.
According to the Manufacturing Director,
expectations are linked to quality service at
competitive cost without interruptions and
customer complaints. Like the Logistic
Manager, the Manufacturing Director values and
expects 3PL to be able to stay abreast of all
technological tools available on the market such
as warehouse management systems, RFID, and
loading optimization. Regarding cooperation, the
Manufacturing Director gives significance to
3PL’s ability to generate synergies with other
companies/customers in order to optimize
services and costs.
All three interviewees mention cost
reduction and service improvement as their main
expectations regarding the 3PL provider. These
two reasons are most frequently cited reasons in
the literature for outsourcing logistics activities
(Mello, Stank & Esper, 2008). According to
Jaafar and Rafiq (2005), the top priority for
outsourcing, besides reducing costs, is avoiding
investments in a non-core activity, while
improvement of service was the second priority
for the customers from the research. The
previous research confirms the findings from
interviews that the use of 3PLs has usually had a
positive impact on companies’ performance,
especially on cost (Wilding & Juriado,
2004).This outcome indicates that servicerelated factors became critically important as
financial factors.
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
11
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
Question 2: What logistics operations does
Colgate-Palmolive Company outsource and
to how many suppliers? If you have more
than one supplier, what is the basis for
segmentation?
According to the 3PL coordinator,
Colgate-Palmolive outsources its inbound
logistics to many suppliers. The company has
only one supplier in logistics areas such as
warehousing, co-packing and outbound.
Regarding the basis of segmentation, in the
majority of cases the Company divides 3PL by
geography and also by category segment.
The same opinion is expressed by the
Logistics Manager who specifies that the
Company uses a single supplier model in
warehousing where the 3PL provider has tasks
such as handling, storage and orders physical
preparation. Also one supplier is used for
distribution of the products to customers, for
transportation of daily production from factory
to distribution center (shuttling) and for copacking. In the countries where the Company
has more than one supplier, the basis for
segmentation can be either geographical, for
instance Italy, which is a “long” country, or by
product category like France, where there is such
a market segmentation by Personal Care or
Home Care products.
According
to
the
Director
of
Manufacturing, Colgate-Palmolive outsource
their logistics services such as picking, delivery
to customers, storage of R&P, co-packing,
promotional packs, reconditioning activities.
Regarding the basis of segmentation, the
Director of Manufacturing mentions 3PL’s
segmentation based on geographical area.
Jaafar and Rafiq (2005) point out in their
article that more than one 3PL may increase
operational flexibility as a result of receiving
different operational experience gained from
different service providers. The research
suggests an explanation of why customers prefer
to work with more than one supplier. One reason
would be the lack of confidence and fear of
facing a risk due to reliance on one particular
3PL provider, which guides companies to source
from multiple service providers.
From a general point of view, there are
indications
that different
manufacturing
segments implement different strategies
concerning the acquisition of logistics services.
For example Wanke, Arkader & Hij (2007)
observe that Brazilian shippers in the durable
and semi-durable consumer products segment
outsource their logistics activities to a larger
number of providers (30), compared to other
segments like the non-durable consumer
products segment which outsource their services
to around five 3PL.
Question 3: What are the key criteria for
choosing 3PL – domestic and global?
According to the 3PL Coordinator basic criteria
for selecting a 3PL are:
 Past financial records
 Legitimate operations
 Documented processes that meet our
requirements
 Reassurance for stable quality service
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
12
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?


Capability to handle peaks
Fixed, competitive & analytical pricing.
The Logistics Manager of the Company
considered that competitive cost, proven
expertise, relative IT systems and know-how,
synergies with other shippers that they can offer
at a local and/or global level are the most
important factors which will influence the
decision of customers in outsourcing logistics
services.
The Manufacturing Director had the
opinion that a 3PL provider should be chosen by
paying attention to national reach, preexisting
customers, the financial strength of the provider,
quality of staff, customer service orientation,
cost effectiveness, potential for growth, potential
for further modernization, technological level,
quality of infrastructure, location and proximity.
According to a European survey (Juga,
Juntunen, & Grant, 2010), customers consider
that service quality is the most important factor
when choosing a 3PL service provider. Terreri’s
article (2010) presents ten key criteria which
should be taken into consideration in choosing a
3PL provider. One of the keys, mentioned by all
three interviewers too, is historical data of the
company which gives a general picture of 3PL
abilities. Another key criterion according to
Terreri (2010) is the ability of the provider to
handle emergencies and exceptions quickly and
successfully. The list continues with the ability
of the 3PL to keep the lines of communication
open at all times; to meet compliance, safety,
and cargo security requirements and to possess
the proper qualifications and liability coverage
to transport the goods. Generally, as Terreri
(2010) points out, companies are looking for that
triad of price, service (speed) and quality, but it
is rare to find a provider with all three
characteristics. In our case, the respondents
value a 3PL suppliers’ proven expertise in
dealing with different situations and their ability
to keep up-to-date the new technological
methods at economically efficiency.
Business relationships and perceived
risks
Question 4 and 5: How can your relationship
with 3PL organizations be described? How
does the 3PL relationship affect the success
of supply chain management?
The 3PL Coordinator describes the
relationship between Colgate Company and its
3PL providers as a successful which is based on
a win-win philosophy which has been adopted in
their common projects. Also the 3PL coordinator
considers that openness and full transparency are
necessary to maintain productive collaboration.
He believes that a good relationship helps
undertaking common projects that drive
efficiency, effectiveness and result in better
service at lower cost.
According to Jung, Semeijn & Ghijsen
(2004) not only cost reduction would be an
effect of such a positive relationship, but also
risk reductions, and improvements of the system
responsiveness, especially on-time delivery
which was expected to improve with increasing
closeness of the relationship between
partnerships.
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
13
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
Regarding these questions the Logistic
Manager affirms: “Our purpose is to reach a
trustworthy long partnership with mutual
benefits. Some Suppliers succeed having a long
partnership with us by being open and
transparent. By taking corrective actions fast and
building mechanisms that protect costs and
service”. It is also important to underline the
comment of the Logistic Manager regarding the
roots of problems in the partner’s collaboration:
“Some suppliers fail especially whenever they
make initial aggressive offers to take the job,
underestimating either real costs or their
capabilities for offering reliable service to us”.
He consider that relationship, accountability, and
procedures built with 3PL are very important for
safety control management as they are critical in
facing any challenge like peaks, ad hoc needs
and issues in the total chain.
The Manufacturing Director in agreement
both his colleagues mentioned above, considers
that
the
openness,
transparency,
and
communication received from suppliers are the
most important factors in the collaborative
relationship. From his experience, ColgatePalmolive over the years of collaboration has
reached a satisfactory level of collaboration in
all the above areas, and trust has been
established. The 3PL provider greatly affects
success as he has become the middleman and the
contact point between the company and the
customer at the delivery points.
According to Jaafar and Rafiq (2005) the
key to successful outsourcing, is to create
strategic partnerships and networks to replace
simple market-based transactions and traditional
bureaucratic
hierarchical
organizations.
Rinehart, Lee & Page (2008) consider that
success in a supplier-customer relationship is
also partly based on how frequently the parties
interact concerning business activities and the
volume of business transacted. Jung, Semeijn &
Ghijsen (2004) emphasize five characteristics
which are considered to be important in
achieving positive relationship outcomes. These
are: the trust in the provider, the perceived
commitment of the provider, the communication
with the provider, the dependence on the
provider, and the reputation of the provider.
Successful collaboration is the result of
the communication and the sharing of
information which Rinehart, Lee & Page (2008)
consider fundamental aspects of the suppliercustomer relationship. According to Langley’s
(2008) research, the greatest potential benefits of
collaboration seem to be associated with
business processes, such as inventory
management, customer order management,
customer
service
and
supplier
order
management.
Question 6: What value would you give
to the probability of the risk factor negatively
affecting the logistics outsourcing? How
important would be the consequences?
The 3PL Coordinator considers that due to
synergies and greater volumes achieved by 3PL,
any risk from the external environment should
be lower with outsourcing compared to in-house
scenarios. Depending on specific circumstances,
however, it may be decided to outsource to more
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
14
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
than one party, or even cover part of demand
with one’s own resources. A disruption to the
supply chain could mean lost sales, so
importance could be ranked as critical.
According to the Logistics Manager the
probability of ending up with a negative logistics
outsourcing is around 20%. He mentions that it
usually happens at the beginning of the
cooperation whenever some critical parameter of
the project is not communicated correctly by the
customer or is underestimated by the provider. It
can also happen after some years if some
parameter in the environment changes
significantly and there is no mechanism for
capturing it on time. Regarding consequences,
the Logistics Manager mentions that it can be
very serious if corrective actions are not
implemented fast. It can even result in business
interruption as 3PL are responsible also for the
final availability of the products in the market.
The same point of view is expressed by
the Manufacturing Director when he says that
the effects can be very serious and adversely
affect the company’s sales to customers.
Performance measurement issues:
Question 7: What aspects of quality do your
performance metrics for logistics capture?
The 3PL Coordinator affirms that the
operational aspect of quality includes
performance metrics. The Logistics Manager,
similarly emphasises the operational aspect like
rating of losses and damages, operational
efficiencies (cost), furthermore, he adds to the
quality performance the metrics service aspect
(on time and accuracy), and product quality for
co-packing.
In the manufacturing department the
capture of quality is focused on quantitative
accuracy: the number of mistakes, respect for
delivery dates, percentage of damage,
percentage of shrinkage on-shelf quality of copacked goods.
Gotzamani et al. (2010) in their paper
mention three aspects of quality in logistic
activity:
service
quality,
continuous
improvement, and key performance indicator
(KPI) measurement and reporting. In their
literature review the authors divide the same
criterion into two elements: quality of service
and quality of management. Quality of service
takes account of many aspects such as on-time
delivery, accuracy of order fulfillment,
promptness in attending to customers’
complaints and commitment to continuous
improvement.
Regarding
quality
of
management, the result might be not only good
service but also the fostering of a long-term
relationship between the user and the provider
(Gotzamani et al., 2010).
Question 8: How do you measure the
performance of your 3PL provider and your
satisfaction with this performance?

Do you have records of how well the
same services were performed when
they were undertaken internally by your
organization?
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
15
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?

Has the adoption of 3PL improved the
sophistication of your
performance measurement system?
Performance is measured through KPIs
mentioned in Questions 7,9,10. The 3PL
Coordinator also states “Our philosophy lies on
a continuous improvement basis –comparison
versus previous periods- while setting
improvement targets in agreement with 3PL;
comparison of performance is also made with
other 3PLs operating for Colgate Palmolive all
around the world, as well as industry standards”.
The same opinion is expressed by the Logistics
Manager according to whom performance is
evaluated against the previous year and targets
for the current year. In addition, the
Manufacturing Director emphasizes that the
daily and monthly KPIs are more cost related,
like cost per ton.
Regarding question 8a, three of the
respondents confirm the presence of records of
how well the same services were performed
when they were undertaken internally by the
Colgate-Palmolive organization. At the same
time, the 3PL Coordinator adds that business has
evolved through time, and so comparison for
specific KPIs could be misleading. The Logistics
Manager specifies “If own management was
recent, then internal measurements are available
for comparison”. On the other hand, the 3PL
Coordinator considers that the adoption of 3PL
did not improve the sophistication of the
Company’s performance measurement system.
According to the Logistics Manager and
the Manufacturing Director, the adoption of 3PL
improved the performance system to some
degree as the Company has to monitor closely an
outsider. Nevertheless, as the Logistic Manager
mentions, it has also been a barrier as they
cannot demand a lot of measurements without
paying the required cost.
Forslund
(2011)
emphasizes
four
performance measurements systems which
companies use. The simple form is internal
performance measurement systems, where
managers can understand which departments and
activities are adding more or less value to the
firm’s revenue and know how to control them
(Forslund, 2011). Dynamic measurement gives
more flexibility because two business partners
apply the measurement system not only to their
own company but also to their partner’s. A
triadic system is organized between more
logistics services like transportation, storage and
the company itself. And a more complex system
is supply chain measurement which is applied
between all actors of the supply chain and is
measured as a single entity (Forslund, 2011).
Question 9: What information do you record
to identify performance of the 3PL?
The information that the 3PL Coordinator
mentions is divided into qualitative and
quantitative. For instance, qualitative strategies
can include: handling peaks, handling ordinary
situations (any nature of strike), fast and
professional replies to any ad hoc request.
Quantitative strategies focus on cost, on time
pickup and delivery in exports/distribution,
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
16
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
returns due to 3PL, damaged products due to
3PL, and deficits and surpluses at stock count.
The Logistics Manager specifies the process of
identification based on information related to
KPI’s:







Delivery transit time to customers,
Returns from customers due to 3PL,
Loss of product,
Damages of products due to handling,
transportation and co-packing,
Accuracy of stock,
Qualitative issues at co-packing,
Adherence to production plan at copacking, etc.
According to the Manufacturing Director
information that evaluates the performance of
the 3PL is extracted from the company
Enterprise Resource Planning (ERP) system,
System Application and Products in Data
Processing (SAP), and metrics are automatically
generated upon request of the user.
In research by Lu and Yang (2010), the
authors present several logistics’ variables for
performance measurement which have been
identified from previous studies. These are
delivery, quality, customer service, innovation,
information-technology, flexibility and cost.
Keebler and Plank (2009) found 37 specific
measures that can be measured and related to
logistics performance. These measures also are
categorized into five categories: effectiveness
measures involving a trading partner (supply
chain partner), effectiveness measures having an
internal focus, and efficiency measures having
either a cost, productivity, or utilization focus.
As a result of the research, Keebler and Plank
(2009) show that effectiveness and cost
measures are captured more often and
productivity and utilization measures much less
often.
Question 10: According to the customeroriented, objective-based performanceevaluation model there are six metrics:
 target price,
 lot reject rate,
 lot delay rate,
 customer complaint,
 complaint service,
 line complain
What is your opinion about each of the
model's performance metrics?
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
17
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
Table 1.
The 3PL Coordinator considers basic metrics as
the target price and customer complaint, and the
rest are not available for warehouse/distribution.
Both, the Logistic Manager and the
Manufacturing Director believe that all the
metrics above are important and relevant and
must be taken into consideration during the
evaluation process. Relatively high performance
is required for all of them. Failing to consider
one can also create low performance in some of
the other metrics.
Carbone and Stone (2005) consider that the
customer-oriented approach is suitable to
measure performance of a 3PL because it
usually provides process-based services that are
aimed at the integration of a whole process on
behalf of the client. Objective-based measures
take into consideration cost with a customer
orientation which Chen (2008) considers the
most appropriate approach in evaluating the
performance of a 3PL provider.
Question 11: If you were to weigh the
significance of each metric how would you
score it from 1to 10? (1 is the lowest score
and 10 the highest score). If you don’t use a
metric, please write N.A.
From table 1 we can see that “target
price” and “customer complaints” are the most
important metrics used at Colgate–Palmolive
Company regarding 3PL providers.
For the Manufacturing Director the “lot
delay” metric has high priority too. Less
significant is the “line complaint” metric.
Almost the same picture is found in
research by Keebler and Plank (2009), in which
respondents graded the following metrics as
more often used: outbound freight cost, inbound
freight cost, customer complaints, and on-time
delivery.
As mentioned in the literature review the
research by Lu & Yang (2010) found that
delivery speed, reliability, responsiveness, and
low distribution cost were significantly
positively related to the performance of the firm.
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
18
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
Lambert & Pohlen (2001) specify that most
supply chain metrics currently used have an
internal focus, such as order fill rate, lead time,
on-time performance, and damage rates which
do not provide an adequate measurement of the
whole supply.
Morash and Lynch (2002) consider that
the customer service capability of firms with
good performance, such as delivery reliability,
customization during logistics, delivery speed,
customer
service
flexibility,
disruption
avoidance in supply, and responsiveness to
customers, are significantly better than those of
firms with poor performance.
In addition to the above, the interviews
reported the use of some additional metrics,
including the rating of losses, handling-induced
damages, time and stock accuracy, returns due to
3PL, adherence to production plan and quality
conformance at co-packing.
Performance evaluation
Question 12 and 13: Do you use a
performance
management
system
to
evaluate your 3PL suppliers? How often do
you monitor and discuss their performance
with them? Are there any indirect/ intangible
benefits from adopting 3PL that cannot/ are
not included in a performance evaluation
system like the one adopted by this paper?
According to the 3PL Coordinator and the
Manufacturing Manager, the performance is
discussed whenever there is a performance issue.
When the above mentioned KPIs are measured,
results get communicated to cooperating parties
and corrective actions are taken if needed.
Bundles of smaller problems are discussed
during planned meetings or when the Company
shares performance metrics with suppliers on a
monthly basis.
The Logistic Manager makes reference to
a performance management system which
evaluates suppliers globally once every two
years. Between the Colgate- Palmolive
Company and its suppliers the Coordinator
mentioned that there is an agreed contractual set
of KPI’s that is reviewed periodically.
Frequency varies; there are KPI’s evaluated
quarterly, twice per year, or annually. Also, ad
hoc meetings can take place in case of major
performance issues that might occur.
In an article by Kerr (2007), twelve points
are stipulated
for 3PL’s performance
management system. One of the points is 3PL
scorecards through which monthly performance
figures are published with year-to-date rankings
of warehouse metrics that represent the
company’s goals. The manager takes
responsibility for reporting root-cause issues for
any metric that is below the expectations level in
one week.
One way to measure logistics performance
is to assess customers’ complaints (Keeber &
Plank, 2009). In other literature, the common
approach to assessing satisfaction is to use a
rating scale (Juga, Juntunen & Grant, 2010) as a
bases for coordinating responsibilities and
monitoring carefully in order to assure that
agreements are being followed (Tummala,
Phillips & Johnson, 2006).
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
19
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
All three
interviewers recognized
flexibility as the benefit of outsourcing caused
by 3PL investments in logistic infrastructure,
which result in decreasing the cost and in
increasing the quality of logistics. They mention
several benefits of outsourcing logistics services.
First, a fast moving consumer goods company
like Colgate-Palmolive has an interest in
outsourcing all non-core business activities, and
freeing up resources in order to concentrate on
the core activities which are marketing and sales.
Second, it decreases the need for capital
investment by not owning the infrastructure and
because of economy of scale. This gives
flexibility of strategic planning for the future of
the company in a changing environment. Third,
the Company takes advantage of the synergies
that the 3PL will generate through expansion of
its operations with additional customers.
Flexibility /improvement of logistics
services issues:
Question 14 and 15: Does your 3PL supplier
modify its logistics services and/or develop
new ones? If so, does the 3PL supplier
consult you regarding your future needs?
How can responsiveness of outsourcing of
logistics services be improved in today’s
fast-moving environment?
As the 3PL Coordinator mentions that
their suppliers improve and develop new
logistics products. An example can be the
development of e-customs and logistic hubs
serving the Balkans. From his point of view the
most effective 3PL improvements would be:
focusing on 3PL core business, getting expertise,
gaining critical volume, extending synergies,
investing in technology.
The Logistic Manager specifies that their
3PL suppliers deal with a large number of other
shippers too. From their customers, they learn
about needs that arise in the market and prepare
solutions that also become available for ColgatePalmolive Company. “They often ask for our
feedback so that the new service they develop is
useful for us too. In case we have a new
commercial need, we make a plan together on
the way they invest and paid back to satisfy our
need” adds the Logistic Manager.
The Manufacturing Director agrees with
the respondents above regarding 3PL’s
consulting regarding the Company’s future
needs, by mentioning “they act according to
ours, or other customer requests, or on their own
initiative in order to increase their productivity”.
As Flint et al. (2005) suggest, logistics
innovation might materialize from processes
aimed at gathering deep insights about
customers through interactions with customers,
interpreting those insights through a process of
information sharing and dissemination, and
continuously reflecting on what has been learned
as well as the learning process itself.
The Logistic Manager believes that
technological innovation is a strong feature of
the 3PL provider and by building information
systems could provide clients with more
visibility (even on-line) about 3PL operations
and status. Some examples of technological
advances according to the Manufacturing
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
20
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
Director would be: fleet management systems,
WMS, RFID, Enterprise Resource Planning
systems, automated warehouse systems, latest
technology in moving pallets and moving
equipment like Automatic Guided Vehicles
(AGVs).
As the Manufacturing Director and Van
Hoek, Ellinger and Johnson (2008) mentions
supply chains are increasingly dependent on the
substitution of information for inventory through
the use of logistics information and enterprise
resource planning systems, and RFID
technology. RFID continues to be a focus of
optimism, but has not yet met with widespread
adoption. In 2008, according to the 3PL report,
13% of 3PL users currently report use of RFID
from their 3PLs, while 61% indicate plans to do
so in the future (Langley, 2008). Kumar et al.
(2009) underline three keys to success in moving
forward with RFID technology: collaboration,
long-term relationships, and capital investment.
Thus, costs can be drastically reduced and
justified with the proper collaboration within the
supply chain. Improving relationships, sharing
the high capital costs and jointly choosing
technological standards improves the likelihood
of end users saving money and receiving better
service (Langley, 2007; Kumar et al., 2009).
According to Wang & Regan (2003),
many companies can often meet the increasing
demand for new information systems, resources
and real time visibility into production and other
areas move efficiently through outsourcing. The
efficiency can be seen “as cost savings related to
reduced packaging and more effective design for
reuse and recycling as well as reduced turnover
and recruitment costs due to safer warehousing
and transport and improved working conditions,
reduced labor costs in the form of higher levels
of motivation and productivity and less
absenteeism resulting from improved working
conditions (…) and lower disposal costs
resulting from the implementation of ISO 14000
standards” (Carter & Easton, 2011).
FUTURE RESEARCH DIRECTIONS
Besides theoretical implications, the key
findings
will
have
some
managerial
implications. Logistics efficiency relies on
operations coordination performance which is
one of the most influential factors on the overall
business performance. The coordination between
these two important functions will also have
major advantages in terms of procurement, just
in time production, cost reductions, and fast
delivery. If the goal of customer is cost
reduction it may be satisfactory to select a 3PL
that achieved this goal, and if the goal is to
increase logistics quality level than will choose a
supplier that improves the logistics process
continuously. The approach illustrated in this
paper has a few limitations as well. In retrospect,
the methodology chosen could be improved by
interviewing not only the top managers who is
involved in logistic outsourcing, but the front
line and lower- middle managers too. The
opinions and information of the lower-middle
managers could give to this research a
multilateral aspect of the effectiveness of the
outsourcing of logistics. In addition, the opinion
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
21
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
of the 3PL providers could add more detailed
background of success and failure in
accomplishment of their services. The findings
described in this research project at ColgatePalmolive Company cannot necessarily be
generalized to other companies and sectors.
Further authentication would be essential to
establish the value and efficiency of outsourcing
logistics services. Actually the 3PL business
sector is moving forward and beginning to show
signs of progress toward maturity (Eckler,
2010). For a better understanding of these
dynamics and to identify the efficiency of 3PL
providers, there is a need for continuous
observation regarding directions for 3PL
providers’ abilities, as well as the need for
relationship
re-invention
and
continual
improvement.
CONCLUSIONS
This paper, as well the previous research,
suggested that the outsourcing of logistics
services has become a useful tool to increase the
efficiency of firms. In comparison with other
studies the study applies existing literature in
Colgate-Palmolive Greek Company through a
case study approach which allows for a deeper
understanding of the issues involved. The paper
verified the degree to which proposed
performance measures are utilised by a client
who is regarded as sophisticated and efficient. It
is noticed slight differentiations depending on
the hierarchical position of the interviewee.
The first part of the research questions
take into account the customer satisfaction with
3PL achievements. The services outsourced to
3PL depend on the goal and needs of the client
company. The 3PL suppliers cover several needs
of Colgate –Palmolive Company in terms of in
and out-bound logistics. These needs are:
warehousing and storage, co-packing, orders
management, physical distribution of the
products to customers, transportation of daily
production from factory to distribution center
(shuttling), picking promotional packs, and
reconditioning activities.
According to the company’s needs the
criteria of selecting a 3PL provider are focused
on historical financial records, assurance for
stable quality service, proven expertise,
relationship with other exporters at a local
and/or global level, possession of relative IT
tools and potential growth for innovation.
The
main
customers’
expectation
regarding these needs is related to efficiency of
the outsourcing. The efficiency depends on
lower operational costs and reliable service,
continuous
improvement
of
operations,
innovations, interruptions and flexibility of the
3PL providers to manage exceptions quickly and
successfully without customer complaints.
Also the customer has expectations about
the effectiveness of the 3PL supplier. Some of
these expectations are existence of a trustworthy,
long partnership with mutual benefits. In the
experience of the Company, the openness,
transparency, and communication received from
suppliers are the most important features of the
collaborative relationship. The successful
Grigorenco, Aliona, Philippos Papadopoulos and Konstantinos Rotsios. "Does the Outsourcing of Logistics Services
Keep its Promise of Increased Efficiency?: The Case of Colgate-Palmolive, Greece." Outsourcing Management for
Supply Chain Operations and Logistics Service. IGI Global, 2013. 162-184. Web. 30 Aug. 2012. doi:10.4018/978-14666-2008-7.ch010
22
Does the Outsourcing of Logistics Services Keep its Promise of Increased Efficiency?
relationship helps to understand the gaps and
potential consequences of logistics outsourcing
which will prevent risks and determine the
capabilities of the provider and will drive to
efficiency and effectiveness in better service at
lower cost.
The complexity of the customer’s
performance measurement systems used to
evaluate 3PL suppliers is based on industry
world-wide standards and its KPIs. This
approach does not appear to rely exclusively on
financial and traditional efficiency-based
measures. The top performance measures are
operational effectiveness, rating of losses and
damages, punctuality, damages and product
quality for co-packing. Outsourcing of logistics
services in some degree improved the
performance system of the Company in
comparison with in-house logistics; however,
there are cost barriers in achieving full details of
the measurements.
The expectations of the ColgatePalmolive
Company
regarding
better
achievement of their needs are based on the
technological advances and incorporation in
3PL’s tools of WMS, RFID, Enterprise
Resource
Planning
Systems,
automated
warehouse systems and the latest technology in
moving pallets and moving equipment like
Automatic Guided Vehicles. These information
systems will provide clients with more visibility
about 3PL activities.
The Colgate-Palmolive case study shows
that users of 3PL services are satisfied with their
providers and are likely to increase their usage
of contact logistics in the future. This study
reaffirms a consistent consensus that the major
positive impact of using 3PL services relates to
the internal logistics system performance and
logistics costs.
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