‫المملكة العربية السعودية‬

Kingdom of Saudi Arabia ‫وزارة التعليم‬

Ministry of Education ‫الجامعة السعودية اإللكترونية‬
Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 2
Deadline: 16/04/2022 @ 23:59

Course Name: Logistics Management Student’s Name:

Course Code:MGT322 Student’s ID Number:
Semester: II CRN:
Academic Year: 1443/1444 H

For Instructor’s Use only

Instructor’s Name:
Students’ Grade: Level of Marks:

Instructions – PLEASE READ THEM CAREFULLY

 The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
 Assignments submitted through email will not be accepted.
 Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
 Students must mention question number clearly in their answer.
 Late submission will NOT be accepted.
 Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
 All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
 Submissions without this cover page will NOT be accepted.
 Assignment: 2
Submission Date by students: Before the end of Week- 11th
Place of Submission: Students Grade Centre
Weight: 10 Marks
Learning Outcome:
1. Demonstrate an understanding of how global competitive environments are changing supply chain
management and logistics practice.
2. Apply essential elements of core logistic and supply chain management principles.
3. Analyze and identify challenges and issues pertaining to logistical processes.
Assignment Workload:
This assignment is an individual assignment.

Critical Thinking
Outsourcing and offshoring initiatives can help an organization fine-tune its business model to
become more resilient and profitable. At the same time, these initiatives present challenges.

In today’s highly competitive, extremely variable, and dynamic environment, many firms are
seeking solutions. Supply chain management becomes more sophisticated and the
difference between what firms want to achieve and what they can do in-house continues
to grow, firms begin to realize that doing the right thing becomes more interesting than doing
everything. Accordingly, they are becoming better focused and more specialized by
outsourcing and offshoring activities that are far from their core businesses. In many cases
firms decide to outsource this function in whole or in part to agents or third-party logistics
firms.

Using this concept of offshoring and outsourcing answer the following questions by taking any
Saudi Local company or any Multinational company.

Questions: Each Question Carrying 2 Marks.

1. Define Third party logistics firms? Discuss its working procedure? (400-500 Words)
2. Explain the motivational factors for going internationally? (400-500 Words)
3. On what ground companies choose developing country's location for offshoring? Use
examples. (Mention the country and decisive factors). (400-500 Words)
4. Why do companies outsource? (Use example of any Saudi company along its objective and
scope for outsource). (400-500 Words)
 5. Assess the reasons for using third party logistics service in Saudi Arabia? Using examples,
Explanation regarding their logistics performance and priorities. (400-500 Words)
The Answer must follow the Key word/ outline points below:
 Outsourcing ,offshoring ,Third Party logistics
 Their Main functions
 Motivational Factors /Drivers
 Any local example
 Reasons with suitable Examples
 Reference
Note: You can support your answer by reading chapter 4 of your book.
You can use secondary source available on internet. Please use APA-style referencing.

Answer 1.

Modern-day businesses take a new shape with increasing internationalization and globalization. It

becomes a nuance to deal with various supply chain operations. So the businesses lend their supply

chain operations to a third-party firm that charges a fee for this. Those firms are known as third-party

logistic firms. These firms provide services to B2B (Business to Business) and D2C (Direct to

consumer) sectors. DHL, Kuehne+Nagel, DB Schenker, Nippon Express are some of the top global

third-party logistic companies (2020). Camels party logistics, City link companies, Flexigistic LLC,

and Hala supply chain services are some of Saudi Arabia’s top firms that provide logistic services.

Inventory management is one of the key problems large businesses face. Third-party logistic firms

help businesses store and manage their inventory. They help businesses to view their real-time

inventory levels so they can check how much has been sold out and how much is left. When there is

a chance that stock may be finishing, they also help with the re-ordering of stocks.

Moreover, third-party logistic firms cater to order fulfillment. For businesses that need to store and

ship frozen goods, they provide that service of cold fulfillment. Others can store and ship heavy-

duty, bulky, or products that carry a high value. They also provide low-cost freight services which

require the transfer of products from a warehouse to a distribution center. The packing of products
can also be handled by third-party logistic firms. When an order is placed, it goes to the fulfillment

center, where it is packed, labels are inserted, and is ready for shipment. The shipping process takes

place on the same day so that customers receive their products in a minimal time period. In e-

commerce businesses such as clothing and footwear, return orders are common. It is important to

accept these orders and gauge them for any faults/problems. This task is also provided by third-party

logistic firms and is referred to as reverse logistics.

For some businesses, their data is very important to store and protect. They need to store and analyze

data to deduce information about their performance. Third-party firms provide a detailed analysis of

a business’s data in form of charts, and graphs so that they may get an insight into their operations

and predict future values and performance. It must be noted that for an e-commerce business to

thrive, it needs to sell its products on multiple channels rather than relying on a single source. Third-

party logistic firms help them to connect with different sales platforms where they can feature their

products and services. Finally, it will not be wrong to say that third-party companies can prove to be

beneficial for companies as they help them in their operations and play a part in achieving their

strategic goals.

Answer 2.

No matter which industry a business belongs to, It is evident that its goal is to generate profits. When

a business operates within the confines of a locality, it limits itself to various opportunities. There is

a lot of potential for generating profits in the international market. if a business serves inside local

borders, it cannot scale as much as it could if it went global. In order to generate more profits, it is

necessary to make more sales. There will be more sales when there are more customers. In the

international market, there is a huge amount of consumer pool that wants a certain product or service.

The market size is huge therefore there is a huge opportunity of generating more sales when a

company chooses to go international. When the consumer demand increases, companies start making

their products in bulk. When they do this, their cost-per-unit decreases, which is also referred to as
achieving economies of scale. And when profits increase, they are spread over a large customer base,

hence profit margins also increase. Businesses can use high profits to spend that capital on research

and development (R&D) which will help them further develop their business. To go international, a

business competes not only with local players but international ones too. This competition helps

them develop their business efficiently as they would always want to be one step ahead of their

competitors. They will grab every opportunity to gain a competitive advantage. This will also be

beneficial for companies as their technology base will further develop and their employees will have

a diversity of skills. talking about diversity, going global also helps to diversify a business. With

growing consumer demand in the international market, a business looks for opportunities to

innovate. They look forward to producing and launching new products every year (such as Apple) so

that they attract their consumers. With going global, they need to diversify their team of employees

too. So going global gives them the opportunity to effectively recruit new talent and train them to

achieve the company’s goals. Going into a country with strong law enforcement can help a business

protect the patent of their products from imitation by competitors. Going international also provides

access to cheap labor and low-cost opportunities for a business. Operating in multiple countries

strengthens the organization with feasible resource inputs such as raw materials, processes, etc.

therefore, it can be concluded that because of the rising opportunities that lie abroad, companies are

compelled to expand their operations globally.

Answer 3.

The primary purpose of a business offshore is to incur low costs in its operations. When it came to

foreign site decisions, companies have used a restricted number of quantitative indicators

(MacCarthy and Atthirawong, 2003). Today's perspective is broader and encompasses a number of

qualitative features (Benstead et al., 2017). Firstly, a business will look towards low labor costs. In

some countries such as developing countries, the labor available is cheaper as compared to

developed countries. For example, many large coffee companies of the world use labor from poor
African countries just because it is cheap. In countries where labor is cheap, mostly the land is also

cheap. It is to the business’s advantage to get cheaper land and use it for its operations rather than

expensive land at their local location which doesn’t make much of a difference as commute has been

made easy by modern technology. Developing countries also have lower energy and other fixed

costs, so the overall cost incurred by a business is lesser if it chooses a location where all these

resources are cheaper. Other than that, the resources required for producing products are the most

important. So it would be feasible to choose a location where there is better accessibility to raw

materials.

Market proximity matters a lot. The location where production is far away from the operations of a

business will create a nuance for the business as it will be difficult to manage it and will be costly

too. so the production of products should be as close as possible to the market. moreover, conditions

inside a country must be taken into consideration. Factors such as political, cultural, social, and

economic are key when choosing a location for offshoring. It would not be feasible to invest in a

country with political instability, weak laws, poor economic conditions, social problems, etc. the

support government of a country provides is vital. A county with strict business rules and regulations

will create hindrances for the company. Furthermore, the quality of infrastructure available in the

country must be looked at. The opportunities for IT development, office spaces, etc are key. It also

encompasses real estate availability and quality, transportation quality, and power quality in terms of

durability and supply of power.

Lastly, it is important to consider the risk profile of a country. a place with a reputation for high risk

and losses might not be a suitable location for offshoring. It is clear that a firm will require a brief

assessment of the place for offshoring in order to select a suitable location that will help it achieve its

objectives.

Answer 4.
There are a lot of activities involved while running a business. Some activities are a part of a

business’s main operations and are known as the core activities of a company. Other activities are

some which provide less value to a company however are important too. It might be very difficult for

a company to entirely manage all its operations on its own. While focusing on a lot of tasks, their

quality can be affected. Thus, they decide to outsource these activities to other firms known as third-

party firms. These firms are specialized in doing their job and provide specific services which a

company needs. So in theory, outsourcing allows a company to concentrate on its core competencies.

It need not be concerned about non-core tasks because they are handled by outsourcing companies.

The entire focus of third-party companies is on providing a company with the best quality service

available so that it can facilitate its growth. Outsourcing allows a company to save money by only

paying for services when they are required and paying little on software, infrastructure, and

personnel. Outsourcing businesses improve a company's pool of innovation and fresh ideas, so when

a company hires one, it expects a great quality job with constructive feedback that supports the

company's growth.

A business can face capacity issues while operating. Third-party firms help businesses facing these

issues by providing them with efficient solutions. Saudi Aramco is one of the world's largest oil

businesses. It was expected to be worth 7000 billion dollars in 2010. Saudi Aramco has around 100

subsidiaries around the world in terms of intellectual property (Elsayed, 2014). The company made a

lot of mistakes in regards to their operations due to which they suffered losses. At one time they

realized that they cannot focus on all of the tasks hence outsourcing was a suitable option. They've

hired around 500 scientists and engineers from all over the world. The company operates in many

countries across the world so security issues arise usually. In order to solve them, Saudi Aramco has

tied up with a lot of security companies. Outsourcing has proven to be beneficial for the company as

they have not repeated its mistakes and continued to grow over the years. Lastly, it should be made

clear that outsourcing increases the potential for a business to scale. It helps them focus better on the

activities which are high in priority while the low priority ones are taken care of by the third-party

companies in an effective manner.

Answer 5.

There has been a slew of new businesses in recent years. Every day, a slew of new enterprises spring

up. These organizations, both small and large, have embraced the concept of outsourcing activities,

and the model is gaining traction throughout the country. The outsourcing sector in Saudi Arabia is

developing every year as a result of rising industrialization, industrial zone development, the

presence of quality offshoring companies, and cheap opportunities. The Saudi Arabian third-party

logistics industry is predicted to increase by more than 5.5 percent from 2022 to 2027. According to

reports, 90% of Saudi Arabia's population had an internet connection in 2020. As a result, there was

a shift in the country's e-commerce activity, which increased demand for third-party logistics

companies. Kintetsu world logistics, DHL, and agility logistics are some of the third-party logistic

companies in Saudi Arabia. There are many more who use outsourcing to focus on their core

business.

Agility Logistics provides freight forwarding, freight transportation, warehousing, third-party

logistics, and fair and event logistics. Their main services include airfreight, ocean freight, road

freight, supply chain solutions, warehousing and distribution, and systems & technology. Their areas

of expertise include project and contract logistics, chemical logistics, and fairs and events logistics.

They also provide aircraft and ground-handling services, as well as real estate management. They

also assist with federal assistance. The primary warehouse of Agility Logistics is in Riyadh, Saudi

Arabia.  The Hub is in charge of the company's local distribution, while other warehouses are in

charge of international activities. Agility Logistics aims to improve a company's current performance

by implementing cutting-edge technological solutions. It also aims to help small and medium-sized

enterprises by delivering the best service possible. The company generates revenue from freight
forwarding by purchasing access from independent air, sea, and land transportation providers and

selling it to consumers.

Large companies such as Google, Whatsapp, basecamp, and Alibaba also outsource their activities to

third-party firms.

Google is a technological company, and technology is both its strength and its business. They are one

of the largest outsourcers, and they have been indulging in offshoring their non-core tasks such as

administration and IT for many years. Outsourcing has helped google incur lower costs, solve

capacity problems, better access to great skills and talent, and increase the quality of the service that

they provide. Hence, it can be concluded that outsourcing provides a business with great benefits

which develop its prospects to grow in the future.

References

IvyPanda. (2020, May 16). The Saudi Aramco's Security Company Outsourcing

Strategy. https://ivypanda.com/essays/the-saudi-aramcos-security-company-outsourcing-strategy/

Johansson, M., & Olhager, J. (2022). Comparing offshoring and backshoring: The role of
manufacturing site location factors and their impact on post-relocation performance. ScienceDirect.
Retrieved 16 April 2022, from.

Rheude, J. (2022). What is a 3PL? Third-Party Logistics Definition, Process & Resources. Red Stag
Fulfillment. Retrieved 16 April 2022, from https://redstagfulfillment.com/3pl-definition-process-
resources/

Kokemuller, N. (2022). Why Do Companies Go International?. Bizfluent. Retrieved 16 April 2022,

from https://bizfluent.com/info-8118618-definition-multinational-company.html

Mordorintelligence.com. 2022. Saudi Arabia Third-Party Logistics (3PL) Market | 2022 - 27 |

Industry Share, Size, Growth - Mordor Intelligence.

NIX United – Custom Software Development Company in US. 2022. Why Companies Outsource
[with Outsourcing Examples] – NIX United.