Explain the issues, challenges, or disadvantages to forming a strategic alliance. Give an example to provide a context to your discussion.

 
 
 

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Explain the issues, challenges, or disadvantages to forming a strategic alliance. Give an example to provide a context to your discussion.

Please answer the following questions after reviewing the reading and lessons for Week 5.
Explain the issues, challenges, or disadvantages to forming a strategic alliance. Give an example to provide a context to your discussion.
Reading material:
Strategic Alliances and Outsourcing Strategies
Welcome to this week’s lesson in Logistics Management. Let’s get started.
By the end of this week’s lesson, you will be able to choose the appropriate use of strategic alliances when effective procurement strategies are utilized.
During this lesson we will discuss strategic alliances, 3PLs, retailer-supplier relationships, and outsourcing risks.
There are many advantages or benefits to forming strategic alliances but there are also a few disadvantages. Therefore, companies should ask a few questions to determine if a partnership will benefit the company. These are questions that are posed internally.
Does it resolve our problem with ___________?
How will this impact our operations as they currently exist?
How will this impact our fixed and variable costs?
Will this weaken our position in the market?
Will this weaken our position with our customers or suppliers?
So, you may be wondering, what is outsourcing? Outsourcing is to procure or contract parts of your services to an outside supplier. In transportation and logistics these types of companies are called 3PLs and 4PLs or third party logistics providers and fourth party logistics providers. They provide services such as warehousing, transportation, order management, and freight forwarding which provide your customers with great customer service and you get a win-win out of it.
So, what do 3PLs and 4PLs do and what is the difference between the two?
Well, a 3PL may provide several types of services to include but not limited to: warehousing, transportation, order management, freight forwarding, and reverse logistics.
Now, a 4PL is a company that is even further removed and may be the intermediary between a company and a 3PL.
The advantages of using a 3PL will differ depending on the company but usually include one of the following: speed and efficiency, reduction in costs, and experience.
First, let’s discuss speed and efficiency. Let’s face it, why not use a 3PL or 4PL to take care of all of the details and headaches associated with shipping your product. They can handle volume whereas a start-up or new product line can be very tasking on companies that are not equipped to handle call volume. A 3PL or 4PL can be viewed much like a call center; therefore, they are equipped to handle hundreds or thousands of call per day depending on the size of the 3PL or 4PL.
Another advantage of using a 3PL or 4PL is that they can help reduce overall operating costs because it reduces the number of employees a company needs to handle their shipping and receiving; likewise, it reduces implementation of IT systems, and reduces the additional costs associated with space and equipment needed by shipping and receiving or the transportation department. Not to mention, the various types of equipment needed to move your freight from point A to point B.
You see, 3PLs build their networks with carriers, trucking companies, and IT providers to provide their customers with reasonable fees to help them eliminate operating costs.
The last advantage we will discuss is experience. A 3PL has the experience needed to handle various services as well as volume. Therefore, you are paying for their expertise, knowledge, and experience. A new company may not know anything about moving their product but only knows how to manufacture or produce their widget.
Outsourcing transportation, warehousing, and other services can be great for start-up companies or larger retailers that need help with overflow shipments or reverse logistics.
Now, it’s important to note that if you outsource to a 3PL or 4PL you need to be clear on why you need their services and how the entire process will work; likewise, if it will in fact help your business activities or not.
Some key questions to consider are:
What processes do we need to outsource?
Will outsourcing decrease this cost? Or increase costs?
Is this a process that can be done internally without outsourcing?
Can we trust using a 3PL or 4PL?
What impact will this have on the overall company?
What happens if outsourcing does not work for us? Then what are our options?
These are only a few questions to ask before outsourcing any of your processes and most times comes down to trust and cost of using a 3PL or 4PL.
It is important to remember that this takes constant effort to build a relationship with the customer. The more trust that develops so does commitment. Companies using 3PLs want to know that they are a 3PLs #1 customer and that they can trust and rely on the 3PL to do what they say they will do. As trust and commitment strengthen, the relationship becomes mutually beneficial to both sides which is always a win-win.
Retailer-supplier relationships are exactly that…relationships between retailers and their suppliers. This partnership or relationship is equally beneficial because both sides are focused on the same goal – getting the product to the customer. These relationships have several strategies but it truly comes down to information flow, trust, and commitment. Each side must be clear of their responsibility. This should be negotiated and addressed in a formal contract as this eliminates potential problems and issues in the future. For example, the contracts should specify who owns the inventory, the decision maker, and division of labor.
Remember that we mentioned trust and commitment in regards to strategic partnerships. Well, other risks to these relationships are loss of competitive advantage, differing objectives, sharing of confidential information, knowledge sharing, etc.
During this lesson we discussed strategic alliances, 3PLs, retailer-supplier relationships, and outsourcing risks.

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