Third Party Logistics: Key Success Factors and Growth Strategies

1. Introduction

The conventional transport system has done value addition in service based on the internal and external factors. Internally, it depends on the service provider to meet the customer’s expectation, Information Technology, infrastructure at Hub, handling equipment and streamlining the internal system. The external factors are government policy towards infrastructure developments, roads, fuel price, Sales tax documentation and Value Added Tax etc. Customer’s now are demanding more value added logistics services that can help companies to reduce lead-time and inventory. Growth of n (PL) on the Value Chain: The Indian Logistics Service Provider has gone into evolution through various stages of transportation i.e., Conventional, Semi-Express, Express, Multimode, 2(PL)…3(PL)…n(PL). 3(PL) is still in infant stage in India. 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).

Figure 1.

Main components of 3PL (Research on India, 2009)

Various authors have provided their version of 3PL definition, which are listed in Table 1.