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- W2115339905 abstract "Title Pricing from a 4PL perspective Authors Louise Kjellberg and Maria Bjorholt, master students atIndustrial Engineering and Management, Lund university Supervisors Jenny Sjoholm, Logistics Developer, Schenker DedicatedServices AB Dr. Andreas Norrman, Professor in Engineering Logistics,Department of Industrial Management and Logistics, theFaculty of Engineering at Lund University Problem discussion and purpose The interest for outsourcing of logistics services has grown in the last decades, andtherefore the fourth‐party logistics market (4PL) is expected to grow significantly. However, although the market is expanding, the 4PL provider faces competition, notonly from other third‐ or fourth‐party logistics providers, but also from companies thatprovide substitutes to some extent, e.g. IT, supply chain consulting, freight‐bill auditingand freight procurement. In order to stay competitive, it is therefore important to knowhow these companies price their services. The purpose of this study is to create knowledge about different pricing methods for the4PL industry, and to discuss potential pricing methods for the 4PL provider that is theclient of this thesis, Schenker Dedicated Services AB (SDS). Methodology The research started with a literature review. Then, six case studies were conductedwith the aim of finding convergent patterns of how different industries price theirservices. All of the cases included in the study offer services that are substitute to SDS.Finally, the findings were applied on SDS’s fourth‐party logistics context, in order to seeif there is any indication that SDS should use other pricing methods than the onecurrently used. Frame of reference The frame of reference introduces three main fields. The first field is the most commonpricing methods used within either the logistics services industry or by companies thatoffer services that are substitutes to SDS’s services. The second area of interest is serviceclassification. This part introduces a number of service characteristics that will be usedin the cross‐case analysis. The third part investigates the third‐ and fourth‐partylogistics market. The intersection of the three fields respectively is discussed in pricingof services and pricing of logistics services. Conclusion The findings of how different substitutes to SDS price their services are presentedbelow. In general, cost‐plus contracts transfer the risk to the customer while a fixedpriceor an outcome‐based agreement transfers the risk to the provider. The provider’smotivation to perform is high for outcome‐based contracts, whereas no such incentivesare created for a fixed price or cost‐plus. Supply Chain Consulting Cost‐based pricing or customer perceived value pricing is used within consulting,however, the latter is believed to be the ideal pricing method. Cost‐plus pricing is,nevertheless, industry standard. Both companies charge for consulting either with afixed price or with a running cost per hour. Information & Technology One of the case companies prices its services based on the customer perceived value,whereas the other company uses a market‐based pricing method. The difference can beexplained by the cross‐case analysis that shows that services that are more customizedand complex tend to favour customer‐perceived value pricing, whereas services that aremore standardized and simple are more likely to be priced according to the market. Thepricing method that is industry standard seems to vary depending on how complex andcustomized the service is. A transaction‐based payment principle is preferred, since it ismore profitable than a yearly fixed price. Freight‐Bill Auditing The freight‐bill auditing company that participated in the case study uses cost‐plus toprice its services. For low volume customers or standardized services, however, theprice level is partly influenced by the market. The customers are charged based on thenumber of transactions that they execute per month. Overall, the pricing within theindustry is ad‐hoc. Tendering and Freight Procurement The service is very straightforward and the savings can easily be measured, whichallows for gain‐sharing contracts. According to the freight procurement company thatparticipated in the case study, gain‐sharing is thus considered to be industry standardfor freight procurement projects. General patterns across industries The cross‐case analysis shows that services that have a high degree of complexity andcustomization either use a customer perceived value pricing, increasingly want to do soor indicated that it would be the ideal pricing method. Indications for SDS Based on the cross‐case analysis, and the fact that SDS offers services that are complexand customized in nature, we suggest that SDS should investigate whether customerperceived value pricing could be used for SDS’s services. We also suggest that SDS must be better at communicating the value that they create asa 4PL provider. One way of doing so is through the pricing method used. We believe thatcustomer perceived value pricing would fulfil that purpose. However, if SDS finds thatcustomer perceived value is a difficult approach to pursue since it often is difficult toestimate and quantify, we suggest that SDS should consider other value‐based pricingmethods that are more established within the logistics industry, such as gain‐sharing orperformance‐based pricing. We believe that the incorporation of such pricing methodsin the all‐in price would allow for SDS to better communicate the value that is createdand, hence, would distinguish SDS from the 3PL providers on the market." @default.
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