Critical Thinking

Name

Institution of Affiliation
What are the roles of Third party logistics firms in a smooth running of Supply chain

process of a multinational organization?

Third party logistics are external service providers offering logistic services to its clients

on contract basis (Xu yung 2014). Traditionally, third party logistics offered services such as

transportation and warehousing but nowadays they provide more services that reduce contact

between manufacturer and customer. Services provided by third party logistics include;

 Distribution strategy development – third party logistics (3PL) construct a distribution

strategy of the product which enables firms to supply their products to their customers

faster.

 Information system – 3PL has developed a way of communication such that customers

can directly contact the manufactures. This has been made possible due to the

development of information technology.

 Freight bill payment – 3PL provide bill payment service hence reducing the time the firm

would have taken to audit. This enables firms to concentrate on the core parts of the

business.

 Freight distribution – In this, 3PL ensures that products are distributed as per the category

which enables firms to deliver their products on time and at the right place.

 Product marking – In this service, 3PL reduces the time it takes to package and label

products which in turn improves the productivity of the products.

 Finding a good route – Third party logistics strive to find a good route that enables

efficient movement of the products from the manufacturer to the customers. This also

ensures that the cost of freight is reduced.

  Selection of a carrier system – Third party logistics provides a means of transportation

that ensures there is minimal or no damage to the products.

 Product returns – Third party logistics provide a product return service whereby

customers can return products easily to the manufacturer through them. After the product

is modified 3PL return it to the customers.

What are the motivational factors companies going internationally?

There are several reasons that motivates firms to go international which include;

Increase sales – If your company is making lots of sales in Saudi you would probably

want to expand it globally to increase the sales. If your firm deals with a unique product that is

not available globally, it would be a good financial decision to go international. For example, if

your company deals with software, adding more languages like French and German would

increase your market penetration.

Economies of scale – This is another reason why companies go international. Through

export to markets that your product is accepted a company can broaden its business. In

manufacturing industry like Apple take advantage of the low costs and flexibility it takes to

produce in China. Apple’s production requires to be done in an environment that allows

flexibility due to the engineering changes which China offers unlike the US.

Government incentives – Governments can give incentives to companies to encourage

them to export. This in turn encourages companies to venture into markets that they probably

wouldn’t. Export means increase in sales which in turn grows the company globally.

Competitive strike – Companies can enter a market because their competitor has

ventured into it. This is due to the belief that the competitor would have an advantage if they are
left to operate in that market alone. Another reason would be that a company enters the home

market of a competitor since they had entered theirs.

Education – A company would venture into a market not because of the financial gain it

would benefit but because it wants to learn. Entering into one of the toughest markets would

enable a company to learn and be able to improve its products and services hence standing at

higher a chance of succeeding at the global market.

On what ground companies choose developing countries location for offshoring. Use

examples. (Mention the country and decisive factors)

For firms hoping to offshore tasks to developing countries, technological improvements

in offshoring locations such as automation is tantamount to a reduction in the cost of offshoring

(Grossman and Rossi-Hansberg 2008, henceforth GRH). Many companies use offshoring to

meet some of their goals including those of the investors, shareholders, employees and for the

long-term financial benefit of the company. Low cost of production in an offshore country

motivates many companies to relocate. For example, IBM has employed over 130,000 workers

in India which is more compared to its country of origin United States since the cost of

production and supply of IT services is low in India.

The tax incentives that are offered in many offshoring countries motivates companies.

Some of the tax benefits offered in offshore countries include; lower corporate taxes, tax

holidays, duty-free importation for a period of time. Due to the tax incentives offered to

offshoring companies, they are able to operate at low costs, increase revenue and hence grow

their business in their different locations. For example, offshoring companies in Philippines are

offered tax incentives by the government agencies; Philippine Economic Zone Authority and
Board of Investments. Companies that qualify for the tax incentives are exempted 100% from

corporate taxes for up to six years.

Shortage of skilled labor in their home countries is another reason why companies

offshore some of their manufacturing operations to other countries. The offshoring countries

have workers who have the desired skills that the company is looking for.
Xu Yang, (2014). Status of Third Party Logistics – A Comprehensive Review, USA.

Grossman, G.M. and E. Rossi-Hansberg (2008) “Trading tasks: A simple theory of offshoring,”

American Economic Review 98(8): 1978-1997.

Bergin, P., R.C. Feenstra and G.H. Hanson (2011) “Volatility due to offshoring: Theory and

evidence,” Journal of International Economics 85(2), 163-173.

Heineman, Ben W. (2012) “In Defense of Responsible Offshoring and Outsourcing,” Harvard

Business Review, February. https://hbr.org/2012/02/ in-defense-of-responsible-offs

Hummels, D., Munch, J.R. and C. Xiang (2016) “Offshoring and Labor Markets,” mimeo,

Department of Economics, Purdue University