ASSIGNMENT

ON
SUPPLY CHAIN MANAGEMENT
Topic: How do third parties increase the supply chain
surplus, and risk of using of third parties
SUBMITTED TO:
Mir.Misnad Sultana
Lecturer
Faculty of business administration
BGC Trust University Bangladesh

SUBMITTED BY
ID NO NAME PARTICIPATION

1914141 Mizanur Rahman Slide

ceator&Presentation
1914147 Salma Akter Assignment
1914148 Touhidul Isalm Presentation
1914150 Pranay Devnateh Presentation
1914151 Noor Shubha shobnam Assignment
 Date of submission:13\07\2019

Define Third Parties?

 A generic legal term for any individual who does
not have a direct connection with a legal
transaction but who might be affected by it.A
third party beneficiary is an individual foe whose
benefit a contract is created even though that
person is a stranger to both the agreement and the
consideration.
For examples:If you can`t really decide exactly
how to proceed you may want to hire a third party
to come in and give you an outside opinion

HOW DO THIRD PARTIES INCREASE THE

SUPPLY CHAIN SURPLUS
 Third party increase the supply chain surplus if
the either increase value for the customer or
 decrease the supply chain cost relative to a firm
performing the task in – house.
 Third parties can increase the supply chain
surplus effectively if they are able to aggregating
supply chain assets.
 The third parties use the following mechanisms to
grow the surplus
1. Capacity aggregation: Third party can increase
the supply chain surplus by aggregating
demand across multiple firms and gaining
production economies of scale that no single
firm can on its own.
Example:Dell outsources design and production
of processors to intel and gains economies of scale as
dell cannot if it designs and produces on its own.
2. Inventory aggregation: A third party can
increase the supply chain surplus by
aggregating the inventories across a large
number of customers.
Ex: A high product variety and small customer
base.
3. Transportation aggregation by transportation
intermediaries: A third party may increase the
surplus b y aggregating transportation function to
higher level then any shipper can on its own.
Ex: UPS Fedex.T he transportation intermediary
aggregates shipment across multiple shippers.
4.Transportation aggregation by storage
intermediaries: A third stores inventory can also
increase the supply chain surplus by aggregating the
inbound and outbound transportation.
Ex:WW.Grainger stock product for more than a
thousand manufacturers and sell to hundreds of
thousands of customers.
5. Warehouse aggregation: A third party may
increase the supply chain surplus by aggregating
warehouse needs over several customers.
Ex:Safexpress owns warehouse distributed
throughout India that are used by many of its
customers.
6. Information aggregation: A third party may
increase the supply chain surplus by aggregating
information to higher level than can be achieved by
a firm performing the function in-house.this
reduces search cost for cost for customers.
 Ex: eBay providers information aggregation.
7. Lower cost and higher quality: A third party
can increase the surplus if it provides lower cost
/higher quality relative to the firm.if the focus is
on specialization and learning,they are likely to
be sustainable over a long term .

FACTORS INFLUENCING THE GROWTH OF

SURPLUS BY A THIRD PARTY
 RISKS OF USING A THIRD PARTY
 The process is broken:
 Risk of losing control of the process. poor cost
benefit analysis.
 Understanding the cost of coordination:
Understanding the effort required to coordinate
activities across multiple entities performing supply
chain task.
 Reduce customer/supplier contract:
The firm may lose contract by introducing an
intermediary. The loss in particularly significant for
firms that sell directly to customers.
 Loss on internal capability and growth in third
party power:
A firm may choose to keep a supply chain function
in-house if outsourcing will significantly increase the
third party’s power.
 Leakage of sensitive data and information:
Using third party requires the firm to share
demand information and in some cases intellectual
property.If the third party also serves the
competitor, then leakage in danger.
 Loss of supply chain visibility:
 Introducing the third parties reduce the visibility
of supply chain operations making it harder for
the firm to respond qrickly to local customer and
market demand.The los is particularly harmful
for long supply chains.
 Negative Reputational impact:
In many intances actions regarding labor or the
environment taken by the third party can have
significant negative impact on the reputation of
the firm Ex: Questionable labor practices in
China