Selection of the 3rd/4th Party Logistics Provider: A Multi-Criteria Approach

Selection of the 3rd/4th Party Logistics Provider: A Multi-Criteria Approach

Voulgarakis Nikolaos (Alexander Technological Educational Institute, Greece), Aidonis Dimitris (Alexander Technological Educational Institute, Greece), Achillas Charisios (International Hellenic University, Greece), Triantafillou Dimitrios (Alexander Technological Educational Institute, Greece) and Moussiopoulos Nicolas (Aristotle University of Thessaloniki, Greece)
DOI: 10.4018/978-1-4666-2008-7.ch017
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Abstract

Logistics’ role in today’s global and competitive markets is critical for enterprises’ viability, since it can provide the grounds for firms to become leaders of the markets by simultaneously achieving performance maximization and cost minimization. Towards improving competitiveness and achieving their targets enterprises mostly paid attention to production and generally developing their core business. In a way to also achieve high performances in their logistics workload, enterprises often outsource non-core business, such as transportation, warehousing, et cetera. In this light, outsourcing has become lately a very common practice. However, nowadays there are numerous competitive firms that offer such services and decision-making towards selection of the most effective one is usually challenging. Towards this direction, a multi-criteria analysis approach has been developed for the selection of the optimal outsourcing strategy involving a number of service logistics providers. The approach follows the path of an outranking multi-criteria method, namely ELECTRE III. The approach is illustrated through two case studies.
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Logistics Outsourcing Services

Logistics outsourcing functions to third-party logistics (3PL) providers, involves the use of external companies to perform some or all of the firm’s logistics activities (Chen, Goan and Huang, 2011; Hertz and Alfredsson 2003, Li et al. 2011; Jayaram and Tan, 2010; Boyson et al., 1999). The use of 3PL providers has been a source of competitive advantage for most companies (Gol and Catay, 2007; McDuffie et al., 2001).

Specifically, for the case of manufacturers dealing with hazardous materials, the strategic cooperation with qualified 3PL providers is an important issue. It is widely known, that the procedures of proper handling and safety transportation of hazardous materials pose a unique array of challenges due to high level of societal and environmental risks. Historical evidence has shown that accidents due to hazardous material releases during transportation can lead to consequences as heavy as those created by releases occurring at fixed plants (Leonelli, Bonvicini and Spadoni, 1999; Vílchez, Sevilla and Montiel, 1995).

The use of qualified 3PL providers generates a large number of advantages for manufactures dealing with hazardous materials. Bardi and Tracey (1991) and Lieb and Randall (1996), have conducted surveys in order to determine the extent of logistics outsourcing penetration. Interesting findings of these surveys show that the outsourcing of logistics services has become increasingly common for firms and it is rapidly expanding source of cost savings and competitive advantage.

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