Third Party Logistics: Key Success Factors and Growth Strategies

Third Party Logistics: Key Success Factors and Growth Strategies

Omprakash K. Gupta (University of Houston-Downtown, USA), S. Samar Ali (Fortune Institute of International Business, India) and Rameshwar Dubey (Asian Council of Logistics Management, India)
Copyright: © 2013 |Pages: 27
DOI: 10.4018/978-1-4666-2473-3.ch006
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Third party logistics (3PL) has been gaining importance in most places in the world. In India the implementation of 3PL practices has made its beginning and it is emerging as one of the fastest growing sectors. It is still a relatively new concept and not well understood among industry or academic professionals in India. This paper examines the Indian 3PL 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.
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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.

Table 1.
Definitions of 3PL in logistics literature (adapted from Marasco, 2006)
Lieb (1992)The use of external companies to perform logistics functions that have traditionally been performed within an organization.
Andersson (1997)The procurement of an integrated set of logistics services by shipper from an agency known as service provider.
Murphy and Poist (1998)A relationship between a shipper and third party which:
     • compared with basic services
     • has more customized offerings
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 and inventory management
     • Tracking of consignment
     • Liasoning
Berglund (2000)Organizations use of external providers.
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.

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