Sample Logistics Paper on Asset-Based Supply Chain

Sample Logistics Paper on Asset-Based Supply Chain

The importance of asset-based supply chain service providers has been growing over time and thus presents numerous reasons for a new comer to establish an asset-based supply business. Clients prefer asset based service providers because they own their assets, and therefore, such a service provider is easy to work with compared to non-asset suppliers. Secondly, it offers the best service because they manage all the logistic processes from distribution, warehousing, and transporting this increases efficiency and affectivity by cutting costs (both hard and soft) by decreasing the number of errors the logistics department, this in essence is a barrier for entry of non-asset based suppliers. They do not own assets and rely on other firms, this reduces their popularity because client’s belief such firms runs the risk of committing errors and causing delay in its supply chain due to various reasons.

However, there are numerous barriers to entry into such a business, many new-comers into asset-based supply chain and logistics assume that it will win many tenders to ship large and small quantities of freight because the company owns physical assets. At first glance, this line of reasoning seems correct; however, this very strength is one of the barriers to entry for new-comers into the asset-based supply chain and logistics market because establishing an asset-based supply chain and logistics company requires tremendous amount of capital to own most or all the assets, such as trucks/lorries, distribution centers, and warehouses necessary to run a client’s supply chain (Stadtler, 2015).

However, unlike the asset-based suppliers, non-asset based suppliers do not encounter this problem of pre-acquisition of trucks and warehouses because they only offer their expertise in negotiating the logistic process by hiring companies who can provide the support equipment. On the contrary, non-asset based suppliers barriers include finding and selecting reliable firms that will effectively supply, warehouse, and transport the clients’ products. This is a big barrier because a new firm may not quickly find firms to collaborate with in order to complete the logistic process.

Secondly, because the market is already saturated, a new comer into both the asset and non-asset based supply business will face fierce competition from already existing firms. According to Christopher (2016), the logistics market grew at a compound annual rate of 8% in the nominal GDP. In addition, because the market is consolidated and new entrants into this market must focus on collaborating with others in moving multiple customer shipments at the same time, an asset based supplier can find this as a barrier because they depend on solely moving products from point A to B without collaborating with other suppliers (Christopher, 2016). This however is not a barrier for new comers into the non-asset based business.

Additionally, an asset-based supply chain company might encounter a big challenge when deciding which assets to buy. This is because various clients’ needs vary from industry to industry. For instance the success of such a business may depend on the decision to buy a cargo ship, lorry, or cargo plane. Considering the changing dynamics of logistics, this is a barrier for entry by new firms. Conversely, non-asset suppliers possess a high degree of flexibility that allows them to be greatly customized and have highly developed customer services (Christopher, 2016).

However, establishing an asset-based supply business is more favorable because it is easy to manage the process; you do not have to worry about other players involved in the logistic process. Additionally, asset-based supply business more a long-term investment that is profitable throughout its lifetime. Also, many clients prefer asset-based suppliers because it represents stability and financial solvency in addition to offering lower cost on transporting and warehousing for long term clients.

Thus, regardless of establishing, new comers into asset or non-asset based supply business it is important to ensure that service provided meet the needs of the client by providing expertized and reliable customers services and offer solutions that serve clients in the long-run as the clients’ business scale and expand.

 

References

Christopher, M. (2016). Logistics & supply chain management. Pearson: UK.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning. Springer: Berlin Heidelberg. pp. 3-28.