A STUDY OF THIRD PARTY LOGISTICS PROVIDERS AND USERS

Dr. S. Samar Ali,

Associate Professor : Operations & Logistics Management *
JK Business School, Damdama Lake Road,Bhondsi, Gurgaon 122102, India
Telephone: +91-9971876017, Email address: sadiasamarali@gmail.com

ABSTRACT
Third party logistics (3PL) has been gaining importance in most places in the
world. The implementation of 3PL practices is just beginning and emerging
effectively. This paper examines the Indian 3 PL Supply Chain Management and
practices with respect to the key success factors and growth strategies . After
identifying the critical success factors SERVQUAL is applied to reveal the gap
between their achievement and expectation. Respondents to the survey are
categorized based on their rating of the key growth strategies on the basis of
AHP.
Key Words: 3PL; Third Party Logistics Providers; India; Factor Analysis;
SERVQUAL; AHP

1. Introduction
As conditions for doing business in a global setting have changed significantly
during the last two decades the importance of logistics and supply chain
management (LSCM) has been recognized universally. As companies realized
the need to adapt to the ever changing conditions in an environment of
globalization, technological innovation, and more sophisticated consumer
demand to survive and flourish they began to incorporate into their systems of
operations and focus on a strong LSCM component (Rushton & Walker, 2007).
Superior logistics and supply chain performance is now a well-recognized
strategic dimension for companies to gain competitive advantage.
The growth of logistics outsourcing in the USA is attributable to better
transportation solutions; greater focus on core businesses; impact on cost
reduction; improvements in services; development of necessary technological
expertise; availability of computerized systems; and the need for more
professional and better prepared logistics services (Sheffi, 1990). The growth of
business dynamics has caused outsourcing of the logistics activities to gain
increasingly greater importance. Companies have been considering various
options to manage their logistics activities including, creating in house
dedicated logistics function, setting up logistics subsidiaries or acquiring a
logistics firm. (Sahay & Mohan, 2006).
A 3PL provider is a company which supplies and/or co-ordinates logistics
functions across multiple links in the supply chain. The company acts as a
third party facilitator between seller/manufacturer (the first party) and
buyer/user (the second party), Figure 1.
1

Figure 1. Main components of 3PL.

Source: Research on India Third Party Logistics India, November 2009. www.researchonindia.com

Various authors have provided their version of 3PL definition, which are listed in
Table 1.
Table 1 Definitions of 3PL in the logistics literature.
Authors
Lieb (1992)

Definition
The use of external companies to perform logistics functions that
have traditionally been performed within an organization. The
function performed by the third party can encompass the entire
logistics process or selected activities within that process.

Andersson
(1997)
Murphy and
Poist (1998)

The procurement of an integrated set of logistics services in a longterm relationship between a shipper and a service provider.
A relationship between a shipper and third party which, compared
with basic services, has more customized offerings, encompasses a
broader number of service functions and is characterized by a longer
term, more mutually beneficial relationship.

Vab Laarhoven
et al. (1999)

Activities carried out by a logistics service provider on behalf of a

shipper and consisting of at least management and execution of
transportation and warehousing. In addition, other activities can be
included, for example inventory management, information related
activities, such as tracking and tracing, value added activities, such
as secondary assembly and installation of products, or even supply
chain management. Also, the contract is required to contain some
management, analytical or design activities, and the length of the
co-operation between shipper and provider to be at least one year,
to distinguish 3PL form traditional arms length sourcing of
transportation and/or warehousing.

Berglund
(2000)

Organizations use of external providers, in intended continuous

relationships bound by formal or informal agreements considered
mutually beneficial, which render all or a considerable number of the
activities required for the focal logistical need without taking title.

Bask (2001)

Relationships between interfaces in the supply chains and third party

logistics providers, where logistics services are offered, from basic to
customized ones, in a shorter or longer-term relationship, with the
aim of effectiveness and efficiency.

Source: Marasco, A., A Survey of Third Party Logistics Literature: Preliminary Findings. RIRL 2006 Sixth International
Congress of Logistics Research.

Since the 1980s, along with the trend to outsource non-core activates (Sink and
Langley, 1997), companies have increasingly turned to third-party logistics
providers (3PL) both in the USA (Lieb and Randall, 1996; Rabinovich et al.,
1999; Knemayer and Murphy, 2004) and in Europe (Van Laarhoven et al.,
2000). 3PL services help to achieve the strategic objectives by concentrating
more on core competency of the main business. The study by Sahay and
Mohan, 2006, has cited substantial growth in various financial indicators using
services of 3PL, for instance, various improvements in sales revenue by 13.5%,
working capital by 12.3%, returns on assets by 10%, capital assets reduction by
10%, production cost reduction by 10.5%, labor cost reduction by 10.0%, and
logistics cost reduction by 15%. 3PL users depend on 3PL service providers to
secure capacity and gain agility (Hannon, 2005) who not only provide core
services like supplying right quality product,
Figure 2. Outsourcing Development of Logistics Services and Network

Source: Hapanen and Vepsalainen, 1999.

in the right
amount, at the
right price and place, and at the right time but also provide value added
services such as tracking and tracing, sending information prior to the arrival of
products, flexibility in delivery, which are valued by customers. The role 3PL
service providers play in enhancing services and thereby satisfying customers
has been universally recognized.

The growth in 3PL service providers is seen across the world. As the logistics
service demand increases, the challenges and opportunities will continue to
increase. With the wide availability of modern decision making tools and
information technology a paradigm shift in logistics is witnessed. Figure 2
depicts the evaluation and the state of the art witnessed in logistics
outsourcing.
Companies across industries and around the world regard logistics and supply
chain management as key components of their overall business success. Many
users feel that their relationships with 3PLs have helped them achieve critical
goals related to service, cost, and customer satisfaction.
Third Party Logistics in India:
Ever since the liberalization of its economy India has been on a path to become
one of the top economic powers in the world. New avenues for progress and
development have opened up; manufacturing and retail sectors gained
popularity because of the changes in Chinas export policy of not exporting
manufactured items, from which Indian manufacturing firms have benefitted.
Hence this sector will contribute to GDP significantly in the long run. The
growth and competitiveness in these two sectors largely depend on the
efficiency of the logistics operations that facilitate the companies ability to
reach out to their customers quickly and at the desired location. Realizing this
many manufacturers and retailers are now restructuring their supply chain
processes in a manner to incorporate partnerships with expert supply chain
service providers and outsourcing such activities as domestic transportation,
international transportation, customs brokerage, warehousing, forwarding,
cross-docking, product labeling, packing, assembly, kitting, reverse logistics,
freight bill auditing and payment, IT services, fleet management, supply chain
consultancy services provided by 3PLs, order entry, processing and fulfillment
and limited liability partnership (LLP)/4PL Service.
Currently 3PL services are in their nascent stage in India. Third party logistics
will gain considerable share of the logistics sector because of the following
compelling facts.

Globally, the logistics industry is valued at US$3.5 trillion and the

Indian logistics industry is currently estimated at US$90 billion (CII) 1.
The industry has generated employment for 45 million people in the
country in comparison with the IT and ITES sector, which employs
approximately 4.3 million people1.
As per the World Bank Survey, India ranks 39th in terms of the
logistics performance index and indicators, with Singapore on top, the
UK, USA and China in 9th, 14th and 30th positions, respectively. India
spends US$1,148 in handling costs to import one cargo container and
US$820 to export it. In comparison, Singapore spends US$367 per
imported container and China US$390, according to a World Bank
study1.

Colliers International - Logic of Logistics - http://www.colliers.com/Content/Attachments/India/2009_Logic_Of_Logistics.pdf

India spends 13% of its GDP on logistics compared to an average of

10% in developed countries, while the U.S. spends just 8%. Better
supply chain management has reduced logistics costs by nearly 1% in
10 years1.
The Indian government plans to spend US$24 billion over the next
eight years on supply chain infrastructure1.
3PL solutions are on course to grow at a compound annual growth rate
(CAGR) of over 16% from 2007-2010. Consequently, 3PL service
providers are expected to corner an increased share of the Indian
logistics pie, from 6% in FY2006 to 13% in FY2011, at a CAGR of 25%
(CII)1.
According to the ASSOCHAM2, outsourcing of 3PL businesses in India
should reach the value range above US$ 90 million by 2012 as the
concept first introduced in US and Europe is being adopted at a pace
that will lead to increases in the efficiency of domestic operations
through better managed logistics functions.
Companies in textile, automotive, pharmaceutical, manufacturing,
retail and FMCG sectors are increasingly opting to outsource their
logistics requirements to specialized service providers.
According to a recent survey of 3PL service providers engineering,
automotive and retail sectors were top revenue earners.

3PL Market Structure in India

The 3PL market in India is comprised of two segments: the first one is asset
based in which assets like trucks, distribution centers and warehouses are
utilized in supply chain management, and the second one is non-asset based.
There is a significant difference between the nature of Indian 3PL and its
counterpart elsewhere, especially in the U.S., Table 2.
Table 2: Comparative Analysis of 3PL in India and the U.S.
Parameter
Usage of 3PL
Common
activities
outsourced

Reasons for not

outsourcing

USA
71%
Warehousing (73.7%)
Outbound Transportation
(68.4%)
Freight bill payment
(61.4%)
Inbound warehousing
(56.1%)
Control would diminish
(63%)
Costs would not be
reduced (63%)
Service commitment would
not be met (48%)

India
55%
Outbound Transportation (55%)
Inbound Transportation (52%)
Custom clearing and forwarding
(51%)

Poor infrastructure of provider

(81%)
Inability to respond to changing
needs (81%)
Unreliable promised from
providers (80%)

http://www.commodityonline.com/printnews.php?news_id=23489

Necessity of ecommerce
Collaborative
relationship
Gain sharing is
important for
relationship

Logistics is a core
competency (44%)
72%

Concerns about capability of

providers (77%)
67%

82%

14%

80%

6.6%

Source: 3PL Practices in India, Sahay. B. S.,

www.cscmpindia.com/Events/20112003/3.PDF

Considerable amount of research on the topic of the implementation of 3PL in

different countries has been published in academic and trade journals.
Viewpoints of both users and service providers have been considered to
identify the major issues, industry dynamics, current status and future
prospects of the 3PL industry. However most of the research is descriptive in
nature and does not go into in-depth statistical analysis of survey data. In the
present study Indian 3PL providers service dimensions are analyzed in terms of
the key success factors and growth strategies using various statistical tools.

2. Literature Review
In this section a review of the literature is presented, which examines the
perspectives of the 3PL users and service providers to understand the variation
in the services offered and services expected.
Table 3 provides a list of recent contributions that address the reasons for
outsourcing logistics activities.
Table 3. Reasons for outsourcing logistics activities.
Author, (Year)

Objective

Conclusion

Sheffi, (1990)

Understand the motives

for the growth of logistics
outsourcing in USA

The

Maltz, (1994)

Establish relative impact

of cost and services on
the decision to outsource
warehousing

main motives are to focus on

Core businesses
Better transportation solutions
Cost savings and improved services
Development of necessary
technological expertise and
computerized systems; and need for
more professional and betterequipped logistics services
The study determined that organizations
are reluctant to use third party
warehousing due to customer service
considerations.

Author, (Year)

Objective

Conclusion

Rao & Young, (1994)

Identify the factors

influencing outsourcing of
logistics functions

Daugherty et al., (1996)

Study the perception of

the third party logistics
service users

van Damme et al.,

(1996)

Examine outsourcing
logistics management
activities

Sink & Langley, (1997)

Develop a managerial
framework for the
acquisition of third party
logistics services

Bhatnagar et al., (1999)

Find out factors for

decision-making process
for choosing contract
logistics service
providers.
Ascertain benefits of
alliance between
manufacturing and global
logistics service
providers.
Study benefits of
outsourcing the logistics
activities.

The major reasons to outsourcing of

logistics activities were cost saving
(86.8%), customer satisfaction (76.3%)
and flexibility (75%).

Persson and Virum,

(2001)

Study growth strategies

for logistics service
providers

Sohail & Sohal, (2003)

Examine the reasons for

outsourcing logistics
activities in Malaysia

Forming relationships with 3PL providers

is an efficient and effective means of
achieving the required services without
investing heavily in assets and new
capabilities.
The major reasons reported are
Cost savings
Improved services
Better transportation solutions
Better professionalism

Author, (Year)

Objective

Bhatnagar and
Viswanathan, (2000)

Bask, (2001)

The

study identified factors such as

Centrality of the logistics function
Risk and control
Cost/service trade-offs
Information technologies and
relationships with logistics service
providers
Product-related (e.g. special
handling needs), process-related
(e.g. cycle times) and networkrelated (e.g. countries served)
drivers are believed to have an
indirect influence in the outsourcing
decision
The service users believe that they are
getting benefits like reduction in
inventory levels, order cycle times, lead
times and improvement in customer
service.
The do or buy decision is also affected
by evaluation of cost/service trade-offs.
One important determinant of the
decision is cost comparison between
alternative options. Costs associated
with performing logistics activities inhouse and investment in capital assets
are traded-off against service provider
fees. The lowest cost solution should
Concentration towards the core
competencies was the most important
factor for the acquisition of third party
logistics services.

The manufacturing firms got the

advantage of reduction in inventory
levels, order cycle times, lead times and
improvement in customer service.
The customer satisfaction increases
significantly and provides access to
international distribution networks.

Conclusion

Wilding & Juriado,

(2004)

Determine customer
perceptions on logistics
outsourcing in the
European consumer
goods industry

The main reasons for outsourcing the

logistics activities are
Competencies of 3PLs
Operating flexibility
Cost reduction

Focus on core businesses

Aktas & Ulengin, (2005)

Review the reasons for

outsourcing logistics
activities in Turkey

Turkish firms basically outsource the

transportation activities to reduce the
operating costs.

Simchi-Levi et al.,
(2008)

Determine the effect of

outsourcing of logistics
on the management of
the supply chain.

The most important reason for

outsourcing is that it allows a company
to focus on its core competencies and
hence on customer requirements.

Studies based on user firms appear to indicate that outsourcing logistics

activities is appropriate if it has an impact on one or more factors depicted in
Table 4.
Table 4. Impact of outsourcing logistics activities.
Factor
Impact on customer satisfaction

Indentified by
Gooley (1992); and Lieb et al. (1993)

Impact on logistics system

performance

Lieb et al. (1993) and Dapiran et al. (1996)

and Bhatnagar et al. (1999)

Reduction in capital investment

in facilities
Reduction in capital investment
in equipment

Foster and Muller (1990) and Richardson

(1992, 1995)
Fantasia (1993), Foster and Muller (1990)
and Richardson (1992)

Reduction in investment in
information technology
Impact on employee morale

Goldberg (1990), Sheffi (1990), Trunick

(1990) and Fantasia (1993)
Bowersox (1990) and Dapiran et al. (1996)

Reduction in manpower cost

Foster and Muller (1990) and Richardson

(1992, 1995)
Minaham (1997) and McMullan (1996)

Improvement on specific
logistics function parameters
Improvement in inventory
turnover rates
Improvement in on-time delivery
Increasing productivity

Richardson (1990, 1995)

Richardson (1995)
Bradley (1995)

A list of references that address the issue of selection criteria for 3PL providers
is given in Table 5.
Table 5. Selection criteria for 3PL providers.
Reference

Objective

Conclusion

Bagchi and Virum,

(1996)

Develop a
management model for
selecting the logistic
service provider

Selection criteria typically include:

Cost
Service quality and reliability
Flexibility
Responsiveness to requests
Financial stability

Sink & Langley,

(1997)

Develop a managerial
framework for the
acquisition of 3PL
services

Menon et al., (1998)

To study the selection

criteria for 3PL
providers.

Meade and Sarkis,

(2002)

To develop conceptual
model for selecting and
evaluating third-party
reverse logistics
providers.

Aghazadeh, (2003)

To select the effective

3PL provider.

Colson and Dorigo,

(2004)

To develop public
warehouse selection
support system.

Managers of a firm assign greater

importance to qualitative factors
such as supplier reputation,
references from clients, and
response to information requests,
which are used for the initial
screening of candidate service
The firms competitiveness strategy
and its external environment affect
the selection criteria. The important
criteria for the selection of a 3PL
provider are:
On time shipment and deliveries
Superior error rates
Financial stability
Creative management
Ability to deliver as promised
Availability of top management
Responsiveness to unforeseen
occurrences
Meet performance and quality
requirements before
price\discussions occur
The most important factors for 3PL
selection are:
Time
Quality
Cost
Flexibility
The criteria for selecting 3PL
provider are:
Similar value
Information technology systems
Key management
Relationship
The
software tool select the public
warehouse on the basis of factors
like
Storage surface and volume
Dangerous items
Geographical distance to
highway connection
Certification
Assistance with customs
Use of technology such as
RFID/bar-coding, modem

H. S. Hwang et al.,
(2005)

To develop the supplier

selection and planning
model.

Efendigil et al.,
(2008)

Selection of a thirdparty reverse logistics

provider in the
presence of vagueness.

The major supplier selection

indicators are:
Serviceability - Meet the lead
time
Inventory rotation rate
Lead time
Customer satisfaction
Market share
Production flexibility
Multi-item production capability
New item
development/production
capability
Quality Quality assurance
Return
penalty
The
third party
reverse logistics
providers selection can be done by
using performance indicators like:
On time delivery ratio
Confirmed fill rate
Service quality level
Unit operation cost
Capacity usage ratio
Total order cycle time
System flexibility index
Integration level index
Increment in market share
Research and development ratio
Environmental expenditures
Customer satisfaction index

Table 6 gives Jharkharia and Shankars (2006) list of the selection criteria for 3PL
providers as identified by some authors.
Table 6. Selection criteria.
N
o

Selection Criteria

Relevance in 3PL
Selection

Reference

Compatibility with the

Users

The ability of the user,

provider and their support
systems to work together in
co-ordination.

Anderson and Norman

(2002), Lynch (2000),
Mohanty and
Deshmukh (1993).

Cost of Service

Total cost of logistics

outsourcing.

Lynch (2000), Stock et

al.(1998), Tam and
Tummala (2001).

Quality of Service

It includes many aspects like

transportation time, on-time
delivery, frequency and cost
of damages etc.

Razzaque and Sheng

(1999), Thompson
(1996), Langley et al.
(2002).

10

Reputation of Vendor

Opinion of concerned people

about 3PL firm.
Provision for periodic
evaluation of the
performance.

Lynch (2000),
Thompson (1996).
Bhatanagar et al.
(1999), Lynch (2000),
Langely et al. (2002).

Performance
Measurement

Willingness to Use
Logistics Manpower

Willingness of 3PL provider to

retain users logistics
employee, who would
otherwise become
unemployed after outsourcing
contract.
Flexibility in billing and
payment conditions which
increases goodwill between
user and supplier.

Razzaque and Sheng

(1998), Ackerman
(1996).

Flexibility in Billing

Long-Term Relationship

Includes shared risk and

rewards.

Lynch (2000), Boyson

et al.(1999).

Quality of Management

Anderson and Norman

(2002), Lynch (2000),
Boyson et al. (1999).

10

Information Sharing and

Mutual Trust

Able management not only

provides good services but
also fosters a long-term
relationship.
For continuance of agreement
and continuous improvement
of services.

11

Operational Performance

12

Information Technology
Capacity

13

Fixed Asset

Langely et al. (2002),

Tam and Tummala
(2001).
Anderson and Norman
(2002), Lynch (2000),
Langely et al. (2002),
Babbar and Prasad
(1998).
Hum (2000), Boyson et
al. (1999).

14

Experience in Similar
Product

15

Delivery Performance

Can be measured by delivery

performance, performance
monitoring capacity etc.
The advanced IT capacity
helps in reducing
uncertainties and inventory
level. Tracking of goods
becomes an easy process.
Size and Quality of fixed
asset helps in good
operational performance.
Prior experience in product
line of shipper is added
advantage.
Speed and reliability.

16

Employee Satisfaction
Level

Improves operational
performance.

17

Financial Performance

Ensures continuity in
services, regular updation of
equipments.

Lynch (2000), Boyson

et al. (1999), Langely
et al. (2002).
Anderson and Norman
(2002), Boyson et al.
(1999).

18

Market Share

It reflects its financial

performance, customer
satisfaction and reputation.

Bradley (1994).

Lynch (2000).

Razzaque and Sheng

(1998), Ackerman
(1996).
Stock et al. (1998),
Gattorna and Walters
(1996).

Thompson (1996).

11

19

20

Geographical Spread
and Range of Services
Provided
Flexibility in Operation
and Delivery

Create enhanced access to

the user.
It may enable the user to give
customized service to the
shipper, particularly in special
or non-routine request.

Maltz(1995), Boyson et
al. (1999), Bradlley
(1994).
Stank and Daugherty
(1997).

Table 7. Growth Strategies

Reference

Objective

Conclusion

Sum and Teo,

(1999)

To find out Strategic

posture of logistics
service providers in
Singapore

3PL performance and profits can

be improved by:
Cost reduction,
Market segmentation
Service differentiation
Environmental changes and the
introduction of new technologies
have an impact on LSP strategic
planning
Both vertical (shipper-LSP) and
horizontal (among LSPs) alliances
are set up mainly with the aim of
getting access to complementary
resources and capabilities. In
particular, horizontal alliances
among LSPs are deemed
necessary for the development of
cross-border logistics solutions

Hum, (2000)

van Hoek, (2000)

Stone, (2001 &

2002)

To find out the

factors that affect
the LSP strategic
planning

To find out the

reasons for doing
alliances.

To find out the

growth strategies
used by UKs 3PL
providers.

LSPs employ a variety of growth

strategies. Important means of
expansion include:
Mergers and acquisitions
(M&As)
Joint ventures
Strategic alliances
Piggybacking (i.e. following
the client's expansion and
establishing new operations
in foreign markets)
Organic growth

12

European logistics service

providers use M&As for gaining
advantage in factors like:
To identify the growth
Economies of scope
strategies used by
Expanded geographical
Carbone and Stone,
European logistics
coverage
(2005)
service provider and
Acquisition of specialized
its out come
capabilities
Requirements for
investment in IT and
equipment
Third party logistics providers use
following strategies for growth of
the company.
M&A
Service Portfolio
C. John Langley, Jr.,
To identify the growth
Ph.D., and
3PL User/Provider
strategies used by
Capgemini U.S. LLC.
Relationships.
the logistics provider
2009, 2008, 2007,
RFID and IT
in the world.
2006, 2005
Future Growth of the 4PL
Provider Concept
3PL Creation of Supply
Chain Value
Integration & Collaboration
Green Supply Chain

3. Research Methodology
The research objectives of this paper are as threefold:
1.To identify the success factors of Indian 3PL firms and their relative
importance.
2.To analyze the gap between achievement and expectation as defined by
the success factors identified.
3.To prioritize the growth strategies and their relative importance.
3.1 Type of Research Employed
In this paper we used an exploratory research to help formulate relevant
questions and hypotheses that can be the basis of subsequent inquiries into
the issues faced by 3PL providers and users. This type of research is
particularly useful when the researcher is uncertain of the theories that are
relevant, and would like to seek insights and ask questions to assess the
phenomena he has observed in a new light. The tools one may employ to
conduct exploratory research include review of the literature, and surveys of
the opinions of experts and focus groups.
3.2 Sampling Procedure
13

We employed a non-probability sampling technique, Quota Sampling. Quota

sampling is used to ensure that a set of specific characteristics that are of
interest to the investigator is present in the sample.
3.3 Sample Size
To collect data we sent out a structured questionnaire to 220 third party
logistics providers employees. 124 of the replies could be used for the
analysis.
3.5 Tools of Analysis
In our study we used factor analysis, SERVQUAL and AHP. The stages of the
research process are shown in Figure 3.
Industry
Review

Literature
Review

Research Issue

Research
Questions
First
Version
Development of
Questionnaire

Revised
Version

Final Version

Data
Collection

Data Analysis

Figure 3

Conclusion

Research Process

14

5 . Data Analysis
5.1 To identify the success factors of Indian 3PL firms and its relative
importance.
The data collected through questionnaire was analyzed through SPSS 15.0 to
find out the success factors and their relative importance. The KMO and
Bartletts test results shown in Table. 8 indicate the suitability of the data for
factor analysis. Kaiser-Meyer-Olkin Measure of Sampling Adequacy is 0.769
which is greater than 0.5. This indicates that a factor analysis will be useful
with the data. The value of significance level is 0.000, which is less than 0.05.
So there is a significant relationship among the variables. The initial extraction
shows that the communalities are very high, which indicate that the extracted
components represent the variables well. Table 9.
Table 8. KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

0.769

Bartlett's Test of
Sphericity

3167.333

Approx. Chi-Square
Df
Sig.

325
.000

Table.9 Communalities
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
Q13
Q14
Q15
Q16
Q17
Q18
Q19
Q20
Q21
Q22
Q23
Q24

Initial
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000

Extraction
.477
.611
.638
.667
.595
.670
.653
.536
.766
.661
.588
.624
.604
.664
.753
.748
.774
.589
.690
.695
.734
.671
.653
.582

15

Q25
Q26

1.000
1.000

.607
.641

Extraction Method: Principal Component Analysis.

16

Table 10. Total Variance Explained

Initial Eigen values
% of
Cumulative
Variance
%
23.065
23.065
12.909
35.974

Extraction Sums of Squared Loadings

% of
Cumulative
Total
Variance
%
5.997
23.065
23.065
3.356
12.909
35.974

Rotation Sums of Squared Loadings

% of
Total
Cumulative %
Variance
3.064
11.786
11.786
2.964
11.398
23.184

42.224

1.625

6.250

42.224

2.602

10.007

33.191

5.305

47.529

1.379

5.305

47.529

2.118

8.147

41.339

4.802

52.331

1.249

4.802

52.331

1.829

7.034

48.372

1.161

4.467

56.798

1.161

4.467

56.798

1.599

6.151

54.523

1.098

4.225

61.023

1.098

4.225

61.023

1.434

5.515

60.038

1.023

3.935

64.958

1.023

3.935

64.958

1.279

4.920

64.958

Component

Total

1
2

5.997
3.356

1.625

6.250

1.379

1.249

.936

3.598

68.557

10

.869

3.344

71.901

11

.788

3.031

74.931

12

.704

2.707

77.638

13

.671

2.580

80.218

14

.608

2.338

82.556

15

.594

2.284

84.839

16

.552

2.123

86.963

17

.542

2.083

89.046

18

.503

1.933

90.979

19

.389

1.497

92.476

20

.380

1.462

93.938

21

.343

1.318

95.256

22

.317

1.220

96.476

23

.297

1.144

97.620

24

.242

.931

98.550

25

.196

.753

99.304

26

.181

.696

100.000

Extraction Method: Principal Component Analysis.

17

Table 11. Rotated Component Matrix (a)

Component
1

Q1
Q2

.504
.760

Q4

.417

Q5

.639

Q6

.502

.488

Q7

-.407

.646

Q8

.505

Q9

.813
.739

Q11

.555

Q12

.419
.699

Q13

.647

Q14

.639

Q15

.823

Q16

.815

Q17

.772

Q18

.457

Q19

.514

.491

Q20

.658

Q21

.731

Q22

.643

Q23

.742

Q24

.676

Q25
Q26

.431

Q3

Q10

.688
.635

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
a Rotation converged in 24 iterations.

We note that about 65% (.64958) of the total variation in the 26 variables is
attributable to the first eight components, Table 10. We also observe that
Component 1 explains a variance of 3.064, which is 11.786% of total variance
of 26; Component 2 explains a variance of 2.964, which is 11.398% of total
variance and so on. The rotated component matrix contains the same
information as the component matrix, except that it is calculated after rotation,
Table 11. From this table we construct the following factor matrix, Table 12,
where the key elements of importance in relation to the eight factors are
shown.

18

Table 12. Factor Matrix

Eigen Value
Factor
No.

Factor Name

Reduced Cost

Operational
Performance

Information
Technology System

Versatility

Quality
Management

Total

5.997

3.356

1.625

1.379

1.249

% of
Variance

23.065

12.909

6.250

5.305

4.802

Items

Items
Loading

Realized Cost Reduction

0.823

Geographical Coverage

0.814

Experience as a 3PL Provider

0.739

Continuous Improvement

0.635

Knowledge Based Skills

0.742

Project Management Skills

0.676

Global Capabilities

0.646

Skilled Logistics Professionals

0.643

Real Time Access to

Information

0.555

Route & Load Optimization

0.514

Enterprise Resource Planning

0.699

Online Tracking System and

Transaction System

0.688

Transportation Management
System

0.639

Warehouse Management
System

0.488

Use of RFID Technology

0.431

Breadth of Service Offered

0.647

Integration among Internal

3PL System

0.639

Flexibility & Adaptability

0.505

Focus on specific Industry

0.504

Speed of the Delivery

0.731

Availability of Data on Time

0.658

Product Returns & Repair

0.457

Compatibility with
the Users

1.161

4.467

Good Relationship with

Service user

0.813

Fixed Assets

1.098

4.225

Investment in IT Systems

0.760

19

Performance
Measurement

1.023

3.935

Investment in Quality Assets

0.502

Management of Key
Performance Indicators

0.772

5.2 Analysis of the gap between achievement and expectation

In order to analyze the gap between achievement (factor importance) and
expectation (company importance) of identified success factor SERVQUAL
analysis was applied on the success variables. In gap analysis, a positive
difference between expectation and perception points out the strengths,
whereas a negative difference shows the weaknesses of the service quality. In
this context, the data collected from 124 3PL service providers was analyzed.
From the Table 13 and Table 14, we can say that reduced cost, information
technology system, versatility, quality management, compatibility with user
and fixed asset factor, there is scope of improvement.
Table 13.
Sr.
No
.
1

Company
Importanc
e
4.20

Gap

Service
Quality

Realized Cost Reduction

Factor
Importanc
e
4.40

-0.20

Weak

Geographical Coverage

4.50

3.90

-0.60

Weak

Experience as a 3PL Provider

4.30

4.20

-0.10

Weak

4
5
6

Continuous Improvement
Knowledge Based Skills
Project Management Skills

4.50
4.10
3.80

4.60
4.50
4.00

0.10
0.40
0.20

Strong
Strong
Strong

Global Capabilities

4.20

4.20

0.00

Neutral

Skilled Logistics Professionals

4.30

4.00

-0.30

Weak

Real Time Access to Information

4.10

4.00

-0.10

Weak

10
11

Route & Load Optimization

Enterprise Resource Planning
Online Tracking System and
Transaction System
Transportation Management
System
Warehouse Management System
Use of RFID Technology
Breadth of Service Offered
Integration among Internal 3PL
System
Flexibility & Adaptability
Focus on specific Industry
Speed of the Delivery
Availability of Data on Time
Product Returns & Repair
Good Relationship with Service
user
Investment in IT Systems
Investment in Quality Assets

4.10
3.80

3.90
3.40

-0.20
-0.40

Weak
Weak

4.20

3.90

-0.30

Weak

3.60

3.20

-0.40

Weak

3.90
2.90
4.30

3.60
2.40
4.10

-0.30
-0.50
-0.20

Weak
Weak
Weak

4.10

3.90

-0.20

Weak

4.40
4.30
4.00
4.10
3.80

3.90
4.30
3.90
4.20
3.00

-0.60
0.00
-0.10
0.10
-0.80

Weak
Neutral
Weak
Strong
Weak

4.60

4.40

-0.20

Weak

3.70
3.70

3.50
3.40

-0.20
-0.30

Weak
Weak

12
13
14
15
16
17
18
19
20
21
22
23
24
25

Success Variable

20

26

Management of Key
Performance Indicators

4.20

4.40

Factor
Importanc
e
4.425

Company
Importanc
e
4.225

0.20

Strong

Gap

Service
Quality

-0.200

Weak

Table 14.
Sr.
No
.
1

Success Factor
Reduced Cost

Operational Performance

4.100

4.100

0.000

Neutral

Information Technology System

3.680

3.300

-0.380

Weak

Versatility

4.275

4.050

-0.225

Weak

Quality Management

3.967

3.700

-0.267

Weak

Compatibility with the Users

4.600

4.400

-0.200

Weak

Fixed Assets

3.700

3.450

-0.250

Weak

Performance Measurement

4.20

4.40

0.20

Strong

5.3 Prioritizing the growth strategies and their relative importance

The Analytic Hierarchy Process (AHP) is a rational framework for structuring a
decision problem. It has been used in a wide range of decision-making
situations to evaluate alternative courses of action and identify the one that is
most desirable in view of the decision makers preferences (Roger 1987). The
stages of the process require the decomposition of the decision problem into
a hierarchy of easier sub-problems that can be considered independently. The
hierarchical elements can relate to any aspect of the decision problem. After
building the hierarchy the elements of the decision situation are compared to
one another in a pair wise manner using judgments about their relative
importance. These evaluations are converted to numerical values that
represent the weight or priority of each element of the hierarchy. Finally
numerical priorities are calculated for each of the decision alternatives.
We applied AHP to prioritize growth strategies for Indian 3PL providers. The
chart of the model for growth strategies used by the companies is shown in
Figure 4. The growth strategies have been identified through extensive
literature review.
In this section the most important growth strategies are identified and then
after the ranking is given to selected companies like RAS India, Unique Air
Express, AFL Pvt. Ltd and FEDX.
Description of the Model:
Growth strategies have been determined through literature review and the
relevant attributes have been selected for the AHP model for the selection of
growth strategies. The attributes are:
1. Direct Investment

[DI]

21

Merger & Acquisitions

[MA]

Alliance

[AL]

RFID & IT

[RI]

Regional Expansions

[RE]

2. Service Portfolio

[SP]

Broadening Service Lines

Industry Specialization

[IS]

Global Service

[GS]

Integration

[IN]

Supply Chain Security

[SS]

Quality of Services

[BS]

[QS]

3. Green Supply Chain

[GS]

4. 3PL User/Provider Relationship

[UP]

Growth
Strategy

GOAL

CRITERIA

UP

DI

GS

SP

SUB
CRITERIA
MA

AL

RI

RE

BS

IS

GS

IN

SS

QS

ALTERNATIVE
S

RAS,
India

Unique Air
Express

AFL Pvt. Ltd

FEDX
22

Figure 4. The AHP Model

Growth strategies are selected on the basis of judgment based on observation
are fed into AHP for each criterion and sub criterion of all levels of the
hierarchy. Pair-wise comparisons of the criteria at each level are performed on a
relative importance scale where 1 reflects equal weight and 9 reflects absolute
importance (See Annex - III).
The steps described below follow Roger (1987):
1. Define the problem and determine the objective.
2. Structure the hierarchy from the top through the intermediate levels to
the lowest level. See Figure 4.
3. Construct a set of pair-wise comparison matrices for each of the lower
levels. As element in the higher level is said to be a governing element
for those in the lower level, since it contributes to it or affects it. The
elements in the lower level are then compared to each other based on
their effect on the governing element above. This yields a square matrix
of judgments. The pair-wise comparisons are performed to determine
which element dominates the others. These judgments are then
expressed as integers. If element A dominates element B, then an integer
number is entered in row A, column B and reciprocal is entered in row B,
column A. If the elements being compared are equal, a one is assigned
to both positions. Table 1 shows the pair-wise comparison matrix for level
II criteria.
4. There are

judgments required to develop the set of matrices in

step 3 (reciprocals are automatically assigned in each pair-wise

comparisons).
5. Having done all the pair-wise comparisons and entered the data, the
consistency is determined using the Eigen value. To do so, normalize the
column of numbers by dividing each entry by the sum of all entries. Then
sum each row of the normalized values and take the average. This
provides Principal Vector [PV]. Table 2 illustrates the normalized
comparison matrix. The check of the consistency of judgments is as
follows:
Let the pair-wise comparison matrix be denoted M1 and principal vector
be denoted M2.
Then define M3=M1*M2; and M4=M3/M2. max = average of the elements
of M4.
23

Consistency Index (CI) = (max N) = N - 1

Consistency Ratio (CR) = CI/RCI corresponding to N
Where RCI: Random Consistency Index and
N: Number of elements
Random Index Table
N

RCI 0

0.5
8

0.9

1.1
2

1.2
4

If CR is less than 10%, judgments are considered consistent. And if CR is

greater than 10%, the quality of judgments should be improved to have
CR less than or equal to 10%.
6. Steps 35 are performed to have relative importance of each attribute for
all levels and clusters in the hierarchy.
First the pair wise comparison matrix for growth strategies was formed and
then after normalizing the same matrix the weight of particular strategies was
find out. The same procedure was followed for all the level of the hierarchy.
Table 15. Pair Wise Comparison Matrix for Growth Strategies
DI
SP
GS
UP

DI
1.00
1.33
1.17
1.33

SP
0.75
1.00
0.88
1.00

GS
0.86
1.14
1.00
1.14

UP
0.75
1.00
0.88
1.00

Table 16. Normalized Matrix for Growth Strategies

DI
SP
GS
UP

DI
4.00
5.33
4.67
5.33

SP
3.00
4.00
3.50
4.00

GS
3.43
4.57
4.00
4.57

UP
3.00
4.00
3.50
4.00
SUM

SUM
13.43
17.90
15.67
17.90
64.90

Eigen Vector
0.207
0.276
0.241
0.276

RANK
3
1
2
1

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

The Indian 3PL provider largely uses Service Portfolio and 3PL User/Provider
Relationship for the growth of the business.
Table 17. Pair Wise Comparison Matrix for Direct Investment
MA
AL
RI
RE

MA
1.00
1.40
1.20
1.60

AL
0.71
1.00
0.86
1.14

RI
0.83
1.17
1.00
1.33

RE
0.63
0.88
0.75
1.00

24

Table 18. Normalized Matrix for Direct Investment

MA
AL
RI
RE

MA
4.00
5.60
4.80
6.40

AL
2.86
4.00
3.43
4.57

RI
3.33
4.67
4.00
5.33

RE
2.50
3.50
3.00
4.00
SUM

SUM
10.19
14.27
12.23
16.30
52.99

Eigen Vector
0.192
0.269
0.231
0.308

RANK
4
2
3
1

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

From the table18 one can say that Indian 3PL providers uses Regional
Expansion and Alliance as Direct Invest for the growth of the business.
So, waitage of MA, AL, RI & RE in Direct Investment can be found out by,
MA = 0.207*0.192 + 0.207*0.269 + 0.207*0.231 + 0.207*0.308 = 0.040
Table 19. Weights in Direct Investment
MA
AL
RI
RE

Weight in DI
0.040
0.056
0.048
0.064

Table 20. Pair Wise Comparison Matrix for Service Portfolio

BS
IS
GS
IN
SS
QS

BS
1.00
1.00
0.88
0.88
1.00
1.00

IS
1.00
1.00
0.88
0.88
1.00
1.00

GS
1.14
1.14
1.00
1.00
1.14
1.14

IN
1.14
1.14
1.00
1.00
1.14
1.14

SS
1.00
1.00
0.88
0.88
1.00
1.00

QS
1.00
1.00
0.88
0.88
1.00
1.00

Table 21. Normalized Matrix for Service Portfolio

BS
IS
GS
IN
SS
QS

BS

IS

GS

IN

SS

QS

6.00
6.00
5.25
5.25
6.00
6.00

6.00
6.00
5.25
5.25
6.00
6.00

6.86
6.86
6.00
6.00
6.86
6.86

6.86
6.86
6.00
6.00
6.86
6.86

6.00
6.00
5.25
5.25
6.00
6.00

6.00
6.00
5.25
5.25
6.00
6.00
SUM

SUM
37.71
37.71
33.00
33.00
37.71
37.71
216.86

Eigen
Vector
0.174
0.174
0.152
0.152
0.174
0.174

RANK
1
1
2
2
1
1

max = 6, CI = 0 and CR = 0 (Perfect Consistency)

Broadening Service Lines, Industry Specialization, Supply Chain Security and
Quality of Services are the most important strategies used by the third party
logistics provider to enhance the service portfolio and hence augment the
market share.
Table 22. Waitage in Service Portfolio
25

BS
IS
GS
IN
SS
QS

Weight in Service
Portfolio
0.048
0.048
0.042
0.042
0.048
0.048

Now the ranking of the company can be obtained by constructing comparison

matrices with respect to various growth strategies used by the company.
Table 23. Pair Wise Comparison Matrix for Merger & Acquisition

1.00

Unique Air
Express
5.00

0.20

1.00

0.20

0.17

1.00
1.20

5.00
6.00

1.00
1.20

0.83
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

AFL Pvt Ltd

FEDX

1.00

0.83

Table 24. Normalized Matrix for Merger & Acquisition

4.00

Unique Air
Express
20.00

AFL Pvt
Ltd
4.00

0.80

4.00

4.00
4.80

20.00
24.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

FEDX

SUM

3.33

31.33

Eigen
Vector
0.29

0.80

0.67

6.27

0.06

4.00
4.80

3.33
4.00

31.33
37.60
106.5
3

0.29
0.35

SUM

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 25. Pair Wise Comparison Matrix for Alliance

1.00

Unique Air
Express
1.60

0.63

1.00

0.71

0.71

0.88
0.88

1.40
1.40

1.00
1.00

1.00
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

AFL Pvt Ltd

FEDX

1.14

1.14

Table 26. Normalized Matrix for Alliance

4.00

Unique Air
Express
6.40

AFL Pvt
Ltd
4.57

2.50

4.00

3.50
3.50

5.60
5.60

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

FEDX

SUM

Eigen Vector

4.57

19.54

0.18

2.86

2.86

12.21

0.11

4.00
4.00

4.00
4.00
SUM

17.10
17.10
65.96

0.16
0.16

26

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 27. Pair Wise Comparison Matrix for Regional Expansion

RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

RAS, India
1.00

Unique Air
Express
0.89

AFL Pvt Ltd

1.60

FEDX
0.89

1.13

1.00

1.80

1.00

0.63
1.13

0.56
1.00

1.00
1.80

0.56
1.00

Table 28. Normalized Matrix for Regional Expansion

4.00

Unique Air
Express
3.56

AFL Pvt
Ltd
6.40

4.50

4.00

2.50
4.50

2.22
4.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

FEDX

SUM

Eigen Vector

3.56

17.51

0.16

7.20

4.00

19.70

0.18

4.00
7.20

2.22
4.00
SUM

10.94
19.70
67.86

0.10
0.18

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 29. Pair Wise Comparison Matrix for RFID & IT

1.00

Unique Air
Express
2.33

0.43

1.00

0.38

0.33

1.14
1.29

2.67
3.00

1.00
1.13

0.89
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

AFL Pvt Ltd

FEDX

0.88

0.78

Table 30. Normalized Matrix for RFID & IT

RAS, India

Unique Air
Express

AFL Pvt Ltd

FEDX

SUM

Eigen Vector

RAS, India

4.00

9.33

3.50

3.11

19.9
4

0.19

Unique Air
Express

1.71

4.00

1.50

1.33

8.55

0.08

AFL Pvt Ltd

4.57

10.67

4.00

3.56

FEDX

5.14

12.00

4.50

4.00
SUM

22.7
9
25.6
4
76.9
3

0.21
0.24

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 31. Pair Wise Comparison Matrix for Broadening Service Lines
RAS, India

Unique Air
Express

AFL Pvt Ltd

FEDX

27

RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

1.00

1.00

1.29

1.29

1.00

1.00

1.29

1.29

0.78
0.78

0.78
0.78

1.00
1.00

1.00
1.00

Table 32. Normalized Matrix for Broadening Service Lines

4.00

Unique Air
Express
4.00

AFL Pvt
Ltd
5.14

4.00

4.00

3.11
3.11

3.11
3.11

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

FEDX

SUM

5.14

18.29

Eigen
Vector
0.17

5.14

5.14

18.29

0.17

4.00
4.00

4.00
4.00
SUM

14.22
14.22
65.02

0.13
0.13

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 33. Pair Wise Comparison Matrix for Industry Specialization

1.00

Unique Air
Express
1.60

0.63

1.00

0.63

0.71

1.00
0.88

1.60
1.40

1.00
0.88

1.14
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

AFL Pvt Ltd

FEDX

1.00

1.14

Table 34. Normalized Matrix for Industry Specialization

4.00

Unique Air
Express
6.40

AFL Pvt
Ltd
4.00

2.50

4.00

4.00
3.50

6.40
5.60

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

FEDX

SUM

4.57

18.97

Eigen
Vector
0.18

2.50

2.86

11.86

0.11

4.00
3.50

4.57
4.00
SUM

18.97
16.60
66.40

0.18
0.16

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 35. Pair Wise Comparison Matrix for Global Services

1.00

Unique Air
Express
0.89

1.13

1.00

2.25

1.29

0.50
0.88

0.44
0.78

1.00
1.75

0.57
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

AFL Pvt Ltd

FEDX

2.00

1.14

Table 36. Normalized Matrix for Global Services

RAS, India

Unique Air
Express

AFL Pvt
Ltd

FEDX

SUM

Eigen Vector

28

RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

4.00

3.56

8.00

4.57

20.13

0.19

4.50

4.00

9.00

5.14

22.64

0.21

2.00
3.50

1.78
3.11

4.00
7.00

2.29
4.00
SUM

10.06
17.61
70.44

0.09
0.17

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 37. Pair Wise Comparison Matrix for Integration

1.00

Unique Air
Express
1.40

0.71

1.00

0.71

0.71

1.00
1.00

1.40
1.40

1.00
1.00

1.00
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

AFL Pvt Ltd

FEDX

1.00

1.00

Table 38. Normalized Matrix for Integration

RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

RAS,
India
4.00

Unique Air
Express
5.60

AFL Pvt Ltd

FEDX

SUM

4.00

4.00

17.60

Eigen
Vector
0.17

2.86

4.00

2.86

2.86

12.57

0.12

4.00
4.00

5.60
5.60

4.00
4.00

4.00
4.00
SUM

17.60
17.60
65.37

0.17
0.17

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 39. Pair Wise Comparison Matrix for Supply Chain Security

RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

RAS, India
1.00

Unique Air
Express
1.14

AFL Pvt Ltd

1.00

FEDX
1.14

0.88

1.00

0.88

1.00

1.00
0.88

1.14
1.00

1.00
0.88

1.14
1.00

Table 40. Normalized Matrix for Supply Chain Security

4.00

Unique Air
Express
4.57

AFL Pvt
Ltd
4.00

3.50

4.00

4.00
3.50

4.57
4.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

FEDX

SUM

Eigen Vector

4.57

17.14

0.16

3.50

4.00

15.00

0.14

4.00
3.50

4.57
4.00
SUM

17.14
15.00
64.29

0.16
0.14

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

29

Table 41. Pair Wise Comparison Matrix for Quality of Services

1.00

Unique Air
Express
1.29

0.78

1.00

1.00

0.78

0.78
1.00

1.00
1.29

1.00
1.29

0.78
1.00

RAS, India
RAS, India
Unique Air
Express
AFL Pvt. Ltd
FEDX

AFL Pvt. Ltd

FEDX

1.29

1.00

Table 42. Normalized Matrix for Quality of Services

4.00

Unique Air
Express
5.14

3.11

4.00

4.00

3.11

14.22

0.13

3.11
4.00

4.00
5.14

4.00
5.14

3.11
4.00
SUM

14.22
18.29
65.02

0.13
0.17

RAS, India
RAS, India
Unique Air
Express
AFL Pvt. Ltd
FEDX

AFL Pvt. Ltd

FEDX

SUM

Eigen Vector

5.14

4.00

18.29

0.17

max = 4, CI = 0 and CR = 0 (Perfect Consistency)

Table 43. Matrixes for Direct Investment

Merger &
Acquisitions
Alliance
RFID & IT
Regional Expansions

RAS, India

Unique Air
Express

AFL Pvt Ltd

FEDX

0.29

0.06

0.29

0.35

0.18
0.19
0.16

0.11
0.08
0.18

0.16
0.21
0.10

0.16
0.24
0.18

Table 44. Ranking on the basis of Direct Investment

RAS, India
Unique Air
Express
AFL Pvt Ltd
FEDX

Ranking Weight
0.200

Rank
2

0.118

0.181
0.224

3
1

Ranking waitage for RAS, India = 0.29*0.192 + 0.18*0.269 + 0.19*0.231 +

0.18*0.308 = 0.200
Table 45. Matrixes for Service Portfolio

Broadening Service
Lines
Industry Specialization
Global Services
Integration
Supply Chain Security

RAS, India

Unique Air
Express

AFL Pvt Ltd

FEDX

0.17

0.17

0.13

0.13

0.18
0.19
0.17
0.16

0.11
0.21
0.12
0.14

0.18
0.09
0.17
0.16

0.16
0.17
0.17
0.14

30

Quality of Services

0.17

0.13

0.13

0.17

Table 46. Ranking on the basis of Service Portfolio

RAS, India
Unique Air
Express
AFL Pvt. Ltd
FEDX

Ranking
Weight
0.173

Rank
1

0.147

0.145
0.155

4
2

Table 47. Final Ranking

RAS, India
Unique Air
Express
AFL Pvt. Ltd
FEDX

Ranking Weight
0.372

Rank
2

0.265

0.326
0.378

3
1

Figure 5 shows the relative weights of all elements in AHP model. Service
portfolio (0.276) and 3PL User/Provider Relationship (0.276) is very important
and common criterion followed by the Indian 3PL Service provider when it
comes for selecting the growth strategy. It is followed by Green Supply Chain
(0.241) and Direct Investment (0.207). Green Supply Chain is getting
importance due to the ever-changing environment of the world. This is very
important to control the green house effect and hence to control the
temperature of the world. On the basis of the sub criterion FEDX secure the
first rank in terms of using proper strategy as per change of the business
condition in India. While RAS, India secure second rank.

31

GOAL

CRITERIA

SUB
CRITERIA

ALTERNATIVE
S
RAS, India

Merger &
Acquisitio
ns

0.3
72

0.0
40
Direct
Investment
0.207

Alliance
0.0
56
RFID & IT
0.0
48

Growth
Strategies

3PL
User/Provid
er
Relationship
0.276

Regional
Expansion
s
0.0
64

Unique Air
Express

0.2
65

Broadening
Service Lines
0.0
48

Green
Supply
Chain
0.2
41
Service
Portfolio
0.2
76

Industry
Specialization
0.0
48
Global
Service

AFL Pvt. Ltd.

0.0
42
Integratio
n

0.3
26

0.0
42
Supply Chain
Security
0.0
48
Quality of
Services
0.0
48

FEDX

0.3
78

Figure 5. Weight of all elements

32

6. Conclusion
Logistics and supply chain management plays very important role in
manufacturing organization. Most of the companies are outsourcing these
activities to concentrate on their core business. So the outsourcing companies
are giving importance to the reduction in the cost to gain the advantage of the
lower cost in the competitive business. So most of the Indian 3PL service
provider gives importance to Reduced Cost for most important success factor.
This can be achieved by giving more emphasis on variables like geographical
coverage, experience as a 3PL provider and continuous improvement. The cost
can be reduced by vast geographical coverage; higher experience for giving
particular types of the service and emphasis on continuous improvement. The
second most important factor for success is Operational Performance.
Knowledge based skills and project management skills can help the growth of
the organization and can become the important success factor for the service
provider. Information technology system is also important for success of the
business. By concentrating more on this factor the company can easily and
effectively share and convey the information with the end user. This can also
improve the speed and accuracy of the work and hence better satisfaction to
the customer. This would increase the profit and improves the brand image of
the company.
The gap analysis was done to identify the gap between achievement and
expectation of identified success factors. There is a weak service quality in
most of the success factors like reduced cost, information technology system,
versatility, quality management, compatibility with users and fixed assets. This
can be improved by giving special attention to product return & repair,
geographical coverage, flexibility and adaptability, use of RFID technology,
enterprise resource planning, transportation management system, skilled
logistic professionals, online tracking system & transaction system, ware house
management system, investment in quality of assets, route and load
optimization, breadth of service offered, integration among internal 3PL
system, good relationship with service user, investment in IT system,
experience as a 3PL provider, real time access to information and speed of
delivery to get the competitive advantage and market share. Most of the 3PL
service provider has to improve the Information Technology System because
there is a large gap.
Service Portfolio and 3PL User/Provider Relationship is the most important and
common growth strategy used by the Indian 3PL service provider. One of the
interesting result found that now most of the 3PL service provider emphasis on
Green Supply Chain for growth. The world is facing the problem of global
warming and the meeting on Kyoto Protocol between developing and
developed countries was failed, if one can implement the green supply chain
then the organization will be able to get advantage of good brand image. By
doing this organization will be able to get advantage of carbon trading also and
hence improve the profit of the organization. Also most of the companies focus
on Regional Expansion so as to give better services to the customer and to

33

reduce the cost. The companies are focusing on Alliance for risk sharing and
reduce the fixed asset cost.

7. Limitations of the Study

The study focuses only on the third party logistics service providers. This study
has not taken into consideration towards the perspective of 3PL service users.
The view of the 3PL service user could affect the result of the success factor for
the 3PL service provider.
This study is limited to only organized 3PL service provider. The research can
be improved by taking consideration of the unorganized 3PL service provider.

7. Managerial Implications
This study presents important findings for logistics managers. Realized cost
reduction, geographical coverage, continuous improvement, knowledge based
skills, project management skills, global capabilities, skilled logistics
professionals, real time access to information and route & load optimization are
the most important factors for success as a third party logistics provider. Also
expertise in information technology system is gaining importance to provide
faster and better service-to-service user. This will not only give competitive
advantage but also help to gain market share. As the organization increase its
market share it has to give more importance to breadth of service offered,
integration among internal 3PL system, flexibility & adaptability and focus on
specific industry for continuous growth of the business. This study also throws
some light to improve in particular segment for better growth of the
organization. For this the gap between achievement and expectation of
identified success factor was measured. Success factors like reduced cost,
information technology system, versatility, quality management, compatibility
with the users and fixed assts indicate weak service quality. This can be
improved by giving special attention to product return & repair, geographical
coverage, flexibility and adaptability, use of RFID technology, enterprise
resource planning, transportation management system, skilled logistic
professionals, online tracking system & transaction system, ware house
management system, investment in quality of assets, route and load
optimization, breadth of service offered, integration among internal 3PL
system, good relationship with service user, investment in IT system,
experience as a 3PL provider, real time access to information and speed of
delivery. The strategies are playing very important role for the growth of the
business and to gain competitive advantage over others. In the service industry
service portfolio plays major role. One can improve the service to the user by
concentrating on broadening of service line and industry specialization this not
only increase the customer base but also increase the market share. Today the
business is became globalized so the company should also give more
importance to global service for growth of the business. The relationship
between third party user and provider plays very important role for the
business of the both. If there is a good relationship between the user and
provider then both can understand the need of their business. Both parties can
share the risk and augment the profit of the organization. Direct investment is
also one of the important growth strategies for the logistics service provider.
Regional expansion and alliance can be used for growth of the business.
34

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38

ANNEX I - COVERING LETTER

1. Name of the Company:
_______________________________________________________
2. Geographic Coverage in India (Please ):
North East

South

West

3. Geographic Coverage out side India Please Specify:

________________________________
4. Year of Starting 3PL Operations:
_______________________________________________
5. Annual 3PL Revenue in 2009 (Rs.):
____________________________________________
6. Asset Base (Please ): Owned

Outsourced

Both

7. Please one or more of the following services offered by your company.

Customs Clearances
Freight Forwarding Carrier Selection Rate
Negotiation
Consulting Services
Cargo Insurance

Contract Manufacturing

Order Fulfillments

Fleet Management
Distribution

Inventory Management

Reverse Logistics

Assembly/Installation
Trade Finance

Packaging & Labeling Order Processing

After Sales Support

Payment Collection

Vendor Management

8. How much importance will you give to the following factors for making
growth strategies?
(1: Very Low, 2: Some what Low 3: Low, 4: Average,
5: High, 6: Some what High, 7: Very High) Please
Factor Importance
1

Regional Expansions

Broadening Service Lines

Direct Investments
Merger & Acquisitions

Industry Specialization

Service Portfolio

Global Services

39

3PL User/ Provider Relationships

RFID & IT

Alliance

Integration

Factor Importance
1

Quality of Services

Green Supply Chain

Supply Chain Security

9. How much importance will you give to the

success in the 3PL industry? Also, how will you
respect to these factors? (1: Very Low, 2: Low,
Very High) Please
Factor Importance
Rating
1
4

following factors for

rate your company with
3: Average, 4: High, 5
Company
5

5
Continuous Improvement
Realized Cost Reduction

Project Management Skills

Management of Key -

Performance Indicators
Knowledge Based Skills
Global Capabilities

Good Relationship with -

Availability of Data on Time

Breadth of Service Offered

Investment in Quality Assets

Service user
Integration among Internal 3PL System

Focus on specific Industry

40

Online Tracking System and

Online Transaction System

Investment in IT Systems
Skilled Logistics Professionals

Factor Importance
Company Rating
1
4

Experience as a 3PL Provider

Warehouse Management System

Geographical Coverage
Flexibility & Adaptability

Enterprise Resource Planning

Product Returns & Repair

Use of RFID Technology

Route & Load Optimization

Real Time Access to Information

Speed of the Delivery

Transportation Management

System

Thank you for taking your precious time off to fill up this questionnaire.
Name of Respondent: ______________________
Designation:________________________
Email:

__________________________________ Date: _________________

41

ANNEXURE III FUNDAMENTAL OF SCALE USED IN AHP

Intensity of
Definition
Importance
1

Equal Importance

Weak or slight

Moderate importance

Moderate plus

Strong importance

Strong plus
Very strong or
demonstrated
importance
Very, very strong

Extreme importance

1.11.9

When activities are

very close a decimal
is added to 1 to show
their difference as
appropriate

Reciprocals
of above

If activity i has one of

the above nonzero
numbers assigned to
it when compared
with activity j, then j
has the reciprocal
value when compared
with i

Measuremen
ts from ratio
scales

Explanation
Two activities contribute equally to the
objective
When compromise is needed
Experience and judgment slightly favor
one activity over another
When compromise is needed
Experience and judgment strongly favor
one activity over another
When compromise is needed
An activity is favored very strongly over
another; its dominance demonstrated in
practice
When compromise is needed
The evidence favoring one activity over
another is of the highest possible order
of affirmation
A better alternative way to assigning the
small decimals is to compare two close
activities with other widely contrasting
ones, favoring the larger one a little over
the smaller one when using the 19
values.

A logical assumption

When it is desired to use such numbers

in physical applications. Alternatively,
often one estimates the ratios of such
magnitudes by using judgment

42