An Empirical Taxonomy for Location Strategy of Third-Party Logistics in China

Abstract

This paper examines the underlying dimensions and develops taxonomy of location strategies used by third-party logistics (3PL) firms in China based on survey data from 155 3PL firms. Four underlying location strategies are identified: economic infrastructure, economic cost, sit attributes, and market size. Three major groups of 3PL firms are identified based on location selection strategies: cost seeking, market seeking, and all seeking. This study provides valuable guidance and insights for managers in the location strategies in 3PL firms. As the largest emerging economy in the world with rapid economic boost of a nearly 10% annual GDP growth in the last decade, China’s logistics industry is developing rapidly. The total amount of social logistics increased with an average annual growth of more than 20% in 21th century (Wang, et al., 2008). In 2009, China’s logistics contributed about RMB 2.31 trillion of added-values, 16.1% of the added-value of servicing industry (National Development and Reform Commission, National Bureau of Statistics, and China Federation of Logistics and Purchasing 2010). The rapid development of the Chinese logistics industry has attracted some attention of researchers from the field of economics and management. Wang et al. (2006) investigate strategic posture of the third party logistics providers (3PL) in China, while Hong and Liu (2007) examine the current status and future prospects of the Chinese logistics industry. Based on a census database, Hong (2007) examines the transport linkage and location choice of foreign logistics firms using conditional logic model, and concludes that transport proximity plays an important role in attracting foreign logistics providers in China. This paper attempts to investigate location strategies of 3PL providers based on a recent survey on Chinese logistics providers. It enriches the literature in the following ways. First, we will try to identify the location strategies of 3PL based on a survey database. As previous studies (e.g. Hong 2007) focus on some of various determinants of firm location, this study summarizes a large number of frequently cited determinants into a small number of strategic dimensions. Second, this is the first attempt to make taxonomy about location strategies of 3PL providers in the literature. The results could provide valuable information for researchers and policymakers.