Analytical Network Process for logistics management: A case study in a small electronic appliances manufacturer

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Abstract

The purpose of this study is to present an application of Analytical Network Process (ANP) for determination of best logistics partnership strategy of a small electronic appliances manufacturer operating in Turkey. The model includes both qualitative and quantitative factors which have been determined by literature review and the expertise of the company managers. Three different logistics management alternatives, “In-house Logistics”, “Third Party Arrangements”, and “Strategic Alliance”, are evaluated by an ANP model. Pairwise comparisons have been obtained through a survey conducted with the company personnel and sector managers. The results provide a decision support for the company courting strategies for logistics management under the aspects of “Law and Regulations”, “Corporate Structure”, and “Economical Factors”; given in “Customer”, “Finance” and “Technology” Dimensions.

Introduction

Forming Strategic Alliances or using Third Party Arrangements for logistics needs is not new. Companies all over the world are increasingly forming alliances with logistics service providers in attempt both to improve their delivery services and to reduce their own logistics costs (Laarhoven & Sharman, 1994). The usage and importance of logistics outsourcing services has grown dramatically in the last 30 years. For example, the annual expenditures for third party logistics services increased up to $122 billion (Blanchard, 2008) and expected to reach up to $150 billion by 2010, while it did not even exceed $10 billion in 1993 (Barks, 1994). Growth rates are similar for Europe (Laarhoven and Sharman, 1994, Marasco, 2008), and even higher for Asia due to the rapid expansion of Asian economies, particularly China and India (Bhatnagar et al., 1999, Kim et al., 2008). The worldwide market, meanwhile, currently stands at $487 billion (Blanchard, 2008).

The reasons are clear. Increased competition of international business environment, reduced profit margins, higher customer expectations, new market opportunities, and rising logistics costs forced companies to seek new ways to succeed in the business. Logistics plays an increasingly important strategic role for organizations to successfully adopt to these changes (Meade & Sarkis, 1998).

The primary goal of this research is to produce a model for strategic logistics management and present an application of Analytical Network Process (ANP) for determination the best logistics partnership alternative of a small electronic appliances manufacturer operating in Turkey.

Section snippets

Logistics management

Logistics management, an integral part of supply chain management, aims to reduce costs while increasing customer service level through enhancing productivity by coordinating the flow of the materials and information among the supply chain members. It refers to designing, optimizing, and managing the internal and external components of the logistics system, including material supply, transforming materials and distributing finished products or services to customers, that is consistent with

ANP for logistics management

Part of the difficulty in analytically modeling strategic decisions is their basis on quantitative and qualitative information with multiple dimensions. A quantitative model that can be used to integrate qualitative information and quantitative values is Analytical Network Process (ANP). ANP is a comprehensive decision-making technique that has the capability to include all the relevant criteria, which have some bearing, in arriving at a decision (Saaty, 1996). This technique has been

Conclusion

Selection or evaluation of various logistics strategies and systems is very important for many companies for increasing their competitive advantages. Outsourcing the logistics functions or creating a strategic partnership can provide various benefits, yet not all partnerships result in a business success due to various risks associated with these kind of alliances.

This paper represents an analytical approach to select best logistics partnership strategy for a small electronic appliances

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