Selection of Functional Logistics Service Providers: AHP and DEMATEL Application

Abstract

Despite the widespread establishment of logistics service providers, the largest integrated logistics service providers (ILSPs) cannot offer customers a fully customised supply chain without outsourcing some logistics functions, not their strengths, to local companies or specialised service providers. Accordingly, this study investigates the outsourcing of functional logistics activities from logistics integrators, or ILSPs, by focusing on the selection process for functional logistics service providers (FLSPs), especially on the attributes that affect the selection decision. This study uses the hybrid multiple criteria decision-making approach, the AHP-DEMATEL integrated model. The findings include the characterisation of eight main factors affecting the FLSPs’ selection decision, regarding their degree of particular importance and their reciprocal influence inside the decision-making system, from the ILSPs’ perspective. Additionally, the dominance of cost factors is emphasised through a double-analysis using the AHP and DEMATEL methods, while the importance of the remaining factors is also indicated. The final analysis results are discussed with conclusions for detailed insights. Through this study, decision-makers of ILSPs enable the review of the selection process and its standards.