The demand for agile/leagile third party logistics services : an assessment of dairy industry needs.

Abstract

The dairy industry is one of the fasted growing industries worldwide. This industry produces products that are used daily by many households and are regarded as a very important source of nutrition. Dairy products are usually sold in bulk to retailers who then sell to thousands of consumers on a daily basis. Since this is a product that is consumed daily, the assumption is that its demand can be forecast easily. There is a general assumption that because these are commodity product they need to be produced and supplied by a very lean system. However, this does not prove to be entirely true with dairy products. The dairy industry produces products that have a very short life span and have special requirements in terms of packaging, storage and delivery. With a short shelf life these products need to be delivered to retailers every day and cannot be stored in warehouses or retail outlets for long periods of time. As the dairy industry continues to grow, competition is likely to increase. This will induce organisations to redouble their efforts to differentiate their offerings. Increasingly, the industry may be expected to use third party logistics providers (generally referred to as 3PLs) that are agile and innovative. These 3PLs should work as an integral part of the organisation and leverage collaborative efforts to add value and increase competitive advantage in the dairy industry. Despite an apparent need for 3PLs, the findings of this study indicate that at present the dairy industry cannot afford to use these service providers. The 3PLs have proved to be very expensive and the dairy industry is not making sufficient money to meet the costs of the 3PLs that they require. In future, dairy companies may be compelled to use 3PLs since they need to focus their resources on improving their products. The 3PLs should be introduced for their competences, skills and expertise to service the dairy companies’ logistics needs and to assist in gaining a competitive advantage in this area. Third party logistics providers have the potential to add value to the dairy industry supply chain by providing it with the latest technological advancements that will contribute to greater effectiveness and efficiency.