Third-party Logistics Service Research Articles

AQUA: Analytical model for evaluation and selection of Third-Party Logistics service provider in supply chain

Selection of Third-Party Logistics (3PL) service provider is a strategic decision making in supply chain network. The challenge and need for supply chain analyst is to develop a real-life simple and implement-ease model, which can handle the voice of customer and internal and external business metrics for evaluation and selection of 3PL service provider. We develop a three-phase analytical model with the integration of Analytic Hierarchy Process (AHP) and Quality Function Deployment (QFD). In the current competitive scenario, the consideration of business metrics and voice of customer for evaluating the selection criteria of 3PL service provider benchmarks the agility of an organisation. The analytical model is validated and illustrated with a real-life case study.

Relationship-marketing elements and Third-Party Logistics: perspectives from an emerging nation

This paper examines the existence of distinct levels of partnerships in the outsourcing of logistics functions outsourced. The paper also investigates the significance of the various elements of the relationship marketing and relationship outcomes on the types of partnership. Using empirical research, the study identifies six elements of relationship like trust, commitment, communication, dependence, shared benefits and attachment that were perceived significantly different among the three levels of partnerships. The study findings provide useful insights into the relative importance of the elements of relationships and outcomes that may be identified as critical for firms availing Third-Party Logistics (3PL) services. Other managerial implications are also discussed.

The 2008 Survey of Indian Third-Party Logistics (3PL) Service Providers

This paper presents a survey of Indian third-party logistics (3PL) providers and compares the state of the industry with that in 2004 based on an earlier survey. The 3PL industries of India and North America are also compared. The survey finds that the Indian 3PL industry lags behind North America in terms of global reach and breadth of service. Indian 3PL providers also underperform in key variables that determine performance levels. Other problems identified by the survey are the lack of awareness among Indian shippers, shortage of management talent, inadequate infrastructure, complex documentations, and multiple tax systems. Despite these limitations, the Indian 3PL industry is growing. Many global players are entering the Indian market through direct investments, acquisitions, and alliances. The Indian government is also improving the infrastructure, reducing paperwork, simplifying taxation systems, and implementing economic policies conducive to growth. This paper provides significant insights for logistics managers, government, and other stakeholders.

An analysis of third-party logistics performance and service provision

The aim of the research described in this paper is to evaluate the relationship between the service capabilities and performance of UK and Taiwanese third-party logistics (3PL) providers. A study is presented based on a recent survey. The results identify the most important services offered by 3PLs and the most important aspects of 3PL operational performance. The results also suggest that excellence in operations is more important than wide-ranging service provision. Furthermore, the research suggests that the range of service provision offered by 3PLs does not directly influence the 3PLs’ financial performance. However, 3PL providers with service capabilities that correspond to the key priorities of customers will gain superior financial performance through a better operational performance. Similarities and differences between logistics practices in the UK and Taiwan are highlighted.

The loader problem: formulation, complexity and algorithms

In this paper we consider a new transportation model, called the loader problem, which is frequently encountered by third-party logistics service providers in practice. It is a tactical staff-planning problem with the objective of minimizing the total labour cost of staffing a sufficient number of loaders on a given fleet of trucks that serve a given set of customer sites. We formulate the problem as an integer program and show that it is strongly NP-hard. We then consider two special cases of the loader problem that occur in certain practical situations, and propose polynomial and pseudo-polynomial time algorithms for solving these cases. We also propose a linear programming relaxation-based random rounding algorithm for the general problem and report the computational results of the algorithm.

Pricing Third-Party Logistics Services: Integrating Insights from the Logistics and Industrial Services Literature

Abstract As the logistics services outsourced by companies increase in scope and complexity, the challenge of designing appropriate contracts grows. Here, the price model, which determines the remuneration, takes a central position. In practice, however, the agreed-upon contracts often fail to govern the relationship and set wrong or misleading incentives for either or both of the involved parties. In order to provide a conceptual basis and to identify promising avenues for future research in the increasingly important field of pricing third-party logistics services, this article provides a comprehensive review of the existing literature on logistics and industrial service pricing using a refined version of the established Industrial Marketing and Purchasing (IMP) group relationship management framework.

Pricing Third-Party Logistics Services: Integrating Insights from the Logistics and Industrial Services Literature

Abstract As the logistics services outsourced by companies increase in scope and complexity, the challenge of designing appropriate contracts grows. Here, the price model, which determines the remuneration, takes a central position. In practice, however, the agreed-upon contracts often fail to govern the relationship and set wrong or misleading incentives for either or both of the involved parties. In order to provide a conceptual basis and to identify promising avenues for future research in the increasingly important field of pricing third-party logistics services, this article provides a comprehensive review of the existing literature on logistics and industrial service pricing using a refined version of the established Industrial Marketing and Purchasing (IMP) group relationship management framework.

A decision-making framework for the selection of third-party reverse logistics provider

Outsourcing has provided many third-party providers with a unique opportunity to enter the reverse logistics market. The selection of partners for the specific function of reverse logistics support becomes more important. This paper proposes a structured model for evaluating and selecting Third-Party Reverse Logistics Provider (3PRLP) by considering factors such as Third-Party Logistics (3PL) services, organisational performance criteria, organisational role, reverse logistics functions, IT applications, user satisfaction and impact of use of 3PL and their respective sub-factors using the Analytic Hierarchy Process (AHP) and Fuzzy Analytic Hierarchy Process (FAHP). A usability evaluation of the AHP-based model with four 3PRLPs is discussed. The effectiveness of the AHP and FAHP models is illustrated using a company in southern part of India.

THE ROLE OF INTERPRETATION AND RECONTEXTUALIZATION IN THE ADOPTION OF MARKETING MANAGEMENT CONCEPTS: THE CASES OF MARKET ORIENTATION AND CRM

This interpretive study aims to understand the adoption of marketing knowledge, market orientation (MO) and customer relationship management (CRM) particularly. By means of a series of interviews with managers and employees of third-party logistics (TPL) service providers in Turkey, it has been found that practitioners interpret, reconstruct and reconfigure management knowledge in their own contexts. The adoption process may not be as apparent and straightforward as usually thought. Operational quality and goal relevance moderated the rate of adoption. Despite the small sample size as a major limitation, this study may form the basis for an expanded research effort that is international.

Delivery Fee Design for Logistics Partnerships

Manufacturers are increasingly relying on third-party logistics service providers to distribute their products to retail stores. Fee tables, specifying how much to pay for each delivery based on weight and distance, are commonly used as the basis for compensating distributors for their delivery services. This paper proposes and applies an optimization model and methodology to help a large building-products manufacturer design an appropriate fee table for payments to its distributors for delivering products from regional distribution centers to retail stores. The model selects the weight and distance ranges and sets the fees for each combination of ranges, taking into account the distances and distribution of shipment weights to each store, so as to ensure adequate total compensation for each distributor while satisfying fee monotonicity and other requirements. Since our mixed integer programming model is difficult to solve using commercial solvers, we develop a tailored approach to obtain near-optimal solutions quickly. Specifically, we identify valid inequalities based on the problem’s special structure to strengthen the model formulation, and develop an optimization-based procedure, that solves related network flow problems, to generate a heuristic solution. When applied to actual data from the building products manufacturer, our composite solution method, combining cutting planes and heuristic, proved to be effective (yielding heuristic solutions that are within 1% of optimality) and generated substantial savings (of nearly 10%) over the current fee table.

A contingency model for creating value from RFID supply chain network projects in logistics and manufacturing environments

In the growing literature on RFID and other network technologies, the importance of organizational transformation at the supply chain level has been recognized. However, the literature lacks conceptual model development and salient mechanisms for achieving the level of organizational transformation required for stakeholders to realize the full business benefits from RFID projects. Furthermore, the RFID adoption, use, and impact studies to date largely focus on a single firm setting and on the retail sector. Therefore, this study intends to fill this knowledge gap in the literature, and develops a contingency model for creating value from RFID supply chain projects in logistics and manufacturing environments. For our model development, we draw upon extant diverse literatures, particularly the framework for IT-enabled business transformation, and leadership and organizational learning. The framework postulates a positive relationship between the level of organizational transformation effected by the use of information technology (IT) and the level of business benefits realized from IT. The contingency model draws on the framework, and explicates five contingency factors influencing value creation from RFID supply chain projects: environmental upheaval; leadership; second-order organizational learning; resources commitment; and organizational transformation. Using the contingency model as a conceptual guide, we also perform an analysis of longitudinal real-world case data from a Canadian third-party logistics service firm's seven-layer supply chain RFID projects. The case study analysis provides evidence for the imperative of the contingency factors identified in the model for creating value from the RFID projects. Furthermore, it also reveals the differential costs for the focal firm and the up-stream manufacturing as a key barrier to realizing the full RFID benefits at the supply chain level.

Conceptual Warehouse Design Algorithm Using a Network Flow Model

Currently, third-party logistics (3PL) services are growing rapidly. In the current business climate, the goal of each 3PL firm is to reduce the time required for warehouse design. In this paper, a warehouse design problem is discussed. The problem is to determine the number of machines used in a warehouse and the product flow among the devices. In the conventional design process, such a problem would be solved with experimental and intuitional approaches. However, conventional approaches require large amounts of time. In addition, the design outcome is dependent on the skill of the designer. In order to provide theoretical guidelines for the design itself and shorten the design process, we propose a new design method using an extended network flow model. The network flows are expressed as the combination of the flow in the preparation time and that in the lead time. The mathematical model is constructed and solved as a threshold optimization algorithm including the mixed integer linear programming problem. We then evaluated the feasibility of the proposed model and method using real data, and confirmed the effect of the proposed method with regard to time reduction and the obtained design results.

A DECISION MODEL FOR REVERSE LOGISTICS SERVICE PROVIDERS IN DETERMINING ROBUST OPTIMAL PROCESSING QUANTITIES OF RETURNED PRODUCTS

ABSTRACT Reverse logistics covers a serial of activities in dealing with returned products from consumers, including collecting, reusing and recycling. Implementing reverse logistics is much more complicated and expensive than forward logistics to an enterprise. Meanwhile, the systematic patterns for handling transportation, storage, processing and management processes of these activities are still called for. Consequently, to reduce the reverse logistics cost and focus on its core business, an enterprise prefers outsourcing these activities in this manner. Previous studies focused on the selection of processing facilities and the infrastructure design of reverse logistics distribution channels for third-party reverse logistics service providers. In contrast, this research aims to deal with the issues of reverse logistics from different viewpoint. We propose a decision model for a reverse logistics service provider under the context of uncertain, multi-period, multi-type returned/recycled products and multiple processing facilities environment. The major focus of this model is on determining the robust optimal quantities of customer orders and robust optimal processing quantities of returned products for each processing facility. To deal with the issues of uncertainties, the model applies the scenario-based robust optimization approach. Further information on experiment results and implications can be found in this paper.

The design of vehicle routes for a third-party logistics service provider using the simulated annealing algorithm

Increased globalisation and the subsequent competitive pressures have emphasised the importance of Third-Party Logistics (3PL) in managing logistics processes as well as customer and supplier relationships in logistics and supply chain management. Organisations can gain approximately 9% of saved costs and a 15% increase in capacity and quality, on average, through outsourcing their logistics activity to 3PL service providers. Transportation planning and management is a basic service provided by 3PL service providers with the goal to provide customer value in excess of their cost to serve customers. Since the transportation cost constitutes a significant fraction of the total logistics cost, 3PL service providers are motivated to improve their efficiency by ensuring on-time deliveries and pick-ups by designing least-cost routes with efficient routing strategies. In this paper, a Simulated Annealing (SA)-based metaheuristic algorithm was developed for and used by a 3PL service provider for the efficient routing of the vehicles for pick-up for an automotive parts manufacturing company.

Benefits, Risks, Selection Criteria and Success Factors for Third-Party Logistics Services

The need to reduce logistics costs is well recognised, often, however, without identification of the factors that could contribute to such a reduction. Third-party logistics (3PL) is an augmenting activity of the transport system, which can strengthen the cooperation of different transport modes. As a new practice, conditions of success are driven from personal or empirical situations, often hiding the real causes. To tackle this problem, a major survey has been conducted among both buyers and suppliers of logistics services in the United Kingdom. From the survey, several key findings of customer perceptions of logistics services provided by 3PL companies were derived. Results of the survey show a clear difference in points of view between suppliers and buyers. The results of the survey shed light on how the architecture of logistics outsourcing can be improved.

A study into the impact of logistics sophistication of Brazilian shippers in the pattern of contracting the services of logistics operators

The main objective of this study is to evaluate the impact of the logistics sophistication of Brazilian shippers on the acquisition pattern of 3PL (third-party logistics) service providers. The conceptual model of logistics sophistication and the major dimensions and variables relating to the acquisition pattern were defined and a questionnaire was sent to 218 Brazilian shippers listed on the Revista Exame ranking. Based on the 93 questionnaires returned, the analyses conducted indicate that the most sophisticated shippers are durable goods manufacturers and that they contract 3PL services providers for inventory management and higher value added services. In essence, these results indicate that the most sophisticated shippers seek 3PL service providers capable of managing logistics trade-offs such as inventory levels vs. asset utilization levels. These implications on the selection criteria of 3PL service providers are also discussed.

The dynamic design of a reverse logistics network from the perspective of third-party logistics service providers

Traditionally, product returns have been viewed as an unavoidable cost of doing business, forfeiting any chance of cost savings. As cost pressures continue to mount in the competitive logistics industry, a growing number of third-party logistics providers (3PLs) have begun to explore the possibility of managing product returns in a more cost-efficient manner. However, few studies have addressed the problem of determining the number and location of repair facilities where returned products from retailers or end-customers were inspected, repaired, and refurbished for redistribution. To fill the void in such a line of research, this paper proposes a mixed-integer programming model and a genetic algorithm that can solve the reverse logistics problem involving the location and allocation of repair facilities for 3PLs. The usefulness of the proposed model and algorithm was validated by its application to an illustrative example encountering 3PLs offering value-added services.

EVALUATING THE SERVICE QUALITY OF THIRDPARTY LOGISTICS SERVICE PROVIDERS USING THE ANALYTIC HIERARCHY PROCESS

In this study we apply the analytic hierarchy process (AHP) to evaluate the service quality of third-party logistics (3PL) service providers. We first conceptualize five dimensions of 3PL service quality (i.e. tangibles, reliability, responsiveness, assurance and empathy). We then apply the AHP method to determine the relative weights of the five service quality dimensions and eventually select the best 3PL service provider. To implement this idea in practice, we conduct an empirical case study on four companies providing 3PL services in Korea. The results indicate that Responsiveness out of the five service quality dimensions is the most important factor in the perception of 3PL customers.

Logistics outsourcing practices in the UK: a survey

Outsourcing is widely regarded as a useful approach to lowering costs and gaining competitive advantage. Logistics and transportation were among the most popular areas that used outsourcing during the 1980s and 1990s. Thus, the strategy of employing the third-party logistics (TPL) providers’ services has attracted growing interest. However, studies that involve TPL providers have received considerably less academic attention. This paper presents current logistics outsourcing practices of UK firms as well as the trends from 1990 to 2003 based on a series of surveys by PE Consulting. The study is based on a mail survey of 224 logistics managers from various industries in the UK. It also provides insights into the reasons why some firms do not use the TPL services. Among the key findings, a change was found in the customers’ main concern about outsourcing their logistics functions from service to cost-related factors. The study displays the trend towards the development of longer term partnerships, and relatively little change in the levels of satisfaction is exhibited.

The multistage stochastic integer load planning problem

Time-definite freight delivery common carriers, who pickup, consolidate and deliver small shipments are a key third-party logistics service provider in the supply chains. Under uncertain demands, carrier’s multistage stochastic integer load planning in the pure hub-and-spoke line-haul operations network is to determine multistage freight paths and distribute trailers over time while meeting operational restrictions, service requirements, and balancing trailer inventory at the termination of planning horizon. We developed a heuristic approach, scenario aggregation with embedded branching on the binary variables. The numerical experiments showed a proactive operations strategy with a lower operating cost than the conventionally deterministic approach.