Académique Documents
Professionnel Documents
Culture Documents
On
Study of overall 3rd party logistics at
Origin Logistics Pvt. Ltd.
FOR
THE PARTIAL FULFILLMENT OF THE AWARD OF THE DEGREE OF
MASTER OF BUSINESS ADMINSTRATION
SUBMITTED BY:
SUBMITTED
Self Declaration
I, Mr. Ajinkya V. Adurkar , Roll No.131401 of MBA 2013-15 batch of ASMs Institute of Business
Management & Research
(organization) for a duration of Seven weeks on a project title Study of Overall 3 rd Party Logistics
Operations in the Origin Logistics Pvt. Ltd., hereby declare that this project is my original piece
of work.
ACKNOWLEDGEMENT
I express my sincere thanks and deep sense of gratitude for the inspiring guidance and support
rendered by my research guide, Mr. SAINATH PATIL, Mentor , Origin Logistics Pvt. Ltd.
Bhiwandi, Mumbai.
I am thankful to Mr. Manoj More (Operational Head) & Mr. Raouf Anasari (Director) who
extended a helping hand during the course of the project, whenever needed, and to all the office
staff who have directly or indirectly contributed to the success in this project.
I thank my Internal Guide, Mr. S.G.Kulkarni Faculty at IBMR for imparting me the necessary
knowledge wherever needed and for guiding me as to how to go about with this project.
Finally, I am grateful so many ASM, SO, Retailers & Friends who shared valuable information that
helped in the successful completion of this project.
Index
Sr. No.
CHAPTERS
PAGE No.
Executive Summery
Organization Profile
Introduction
10
10
11
11
Literature Review
16
Company Profile
18
1.
Profile
19
2.
31
Project Profile
32
33
2. Research Methodology
3.
Data Analysis
34
37
47
1. Conclusion
48
2.
Recommendation
49
APPENDIX
50
10
BIBLIOGRAPHY
51
List of Tables
Table No.
Title
Pg.No.
13
the U.S.
2
Factor Matrix
10
11
12
13
14
15
30
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
Final Ranking
List of Graphs
EXECUTIVE SUMMARY
The third-party logistics industry has come a long way in its relatively short history, a maturity
curve that has been documented in the seventeen years of this study. Early on, shippers cautiously
entrusted 3PLs with a relatively limited number of core services, such as managing warehousing
and transportation, then steadily asked 3PLs to do more. 3PLs honed their craft in delivery of these
services, while gaining shippers trust and building toward more collaborative, integrated
relationships with their customers. Similar to other industries, shippers (customers) sometimes
revisit their decisions to use 3PLs, even over short periods of time. Overall, however,
results of this study suggest that far more companies increase their logistics outsourcing in any
given year than those that bring most logistics services back in-house which helps to explain
3PLs continue to rank their relationships with shippers a bit higher than shippers do, but the vast
majority (88% of shippers and 94% of 3PLs) view their relationships as successful. Openness,
transparency, and good communication as well as agility and flexibility contribute to this success.
Interestingly, figures from this years study suggest decreases in the use of gain sharing and
collaboration.
Later I went through the process of filling the questionnaires from 100 customers which using 3rd
party logistics both retailers and customers were taken into account to make this project more
effective. Secondary data from various sources like magazines, a journal etc has also been taken.
Chapter 1:
Introduction
Initially primarily domestic coverage, 3PL industry is now global in character with a
revenues approaching $150 billion in NA.
Characteristics of 3PL
Types of 3PL
There are three types of third party logistics providers:
1. Asset Based 3PL companies that use their own trucks,
warehouses and personnel to operate the clients business
2. Management Based 3PL companies that provide the technological
and managerial functions to operate the logistics functions of their
clients, but do so using the assets of other companies and do not
necessarily own any assets
Transportation-Based
Warehouse/Distribution-Based
Forwarder-Based
Financial-Based
Information-Based
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),
A third-party logistics provider is (abbreviated 3PL, or sometimes TPL) is a firm that provides
service to its customers of outsourced (or "third party") logistics services for part, or all of
their supply chain management functions. Third party logistics providers typically specialize in
integrated operation, warehousing and transportation services that can be scaled and customized to
customers' needs based on market conditions and the demands and delivery service requirements
for their products and materials. Often, these services go beyond logistics and include value-added
services related to the production or procurement of goods, i.e., services that integrate parts of the
supply chain. Then the provider is called third-party supply chain management provider (3PSCM)
or supply chain management service provider (SCMSP). Third Party Logistics System is a process
which targets a particular Function in the management. It may be like warehousing, transportation,
raw material provider, etc.
a) Advantages of 3PL
1. Cost and time savings for the client
As logistics is the core competence of third party logistics providers. They possess better know how
and a greater expertise as any producing or selling company could be able. This know how together
with the global networks of the often large company size enables a higher time and cost efficiency.
Another point is, that the equipment and the IT systems of 3PL providers are constantly updated
and adapted to new requirement of their customers, so that they are able to meet the requirements of
their customers suppliers. And that is more than essential to a companys survival. Producing or
selling companies often do not have the time, resources or expertise to adapt their equipment and
systems as quickly as necessary. So in conclusion a 3PL provider can meet the technical
requirements in a faster and more cost efficient way than a company could do itself.
2. Low capital commitment
Thus the fact that most or all operative functions are outsourced to a 3PL provider there is no need
for the client to hold own warehouses or transport assets. There is very less or no tied up logistics
capital. This is very beneficial if a company has high deviations in warehouse capacity utilization,
because a bad capacity utilization ratio at equal fix cost (for warehouse) is evil for a companys
efficiency and profits.
3. Ability of client to focus on core business
The outsourcing of logistics departments permits the company to focus even more on their real core
business. If logistics is one of the firms core businesses then outsourcing doesnt make sense. But
if logistics is no core competency but rather needed or annoying attachment it should be outsourced
to a logistics provider, because the continuous increasing of business complexity makes it
impossible to be an expert in every division or sector.[4] And if you are no expert in a division, there
is always the opportunity to improve. Often only the core competency is really adding value to your
product. So it is immense important to be best in class or one of the market leaders to generate
profits, because normally the quality of the core product is the main (not the only, but the main!)
reason for the consumer to buy it.
4. 3PLs provide flexibility
Third party logistics provider can provide a much higher flexibility in geographic aspects and can
offer a much larger variety of services than the clients could provider their selves. In addition to
that, the client gets flexibility in resources and workforce size and logistics fix costs turn into
variable costs.
*Possible disadvantage of 3PL
The only big disadvantage (if you see it as one) is the loss of control a client has by working with
third party logistics. Eminently in outbound logistics when the 3PL provider completely assumes
the communication and interacting with a firms customer or supplier. By having a good and
continuous communication with their clients most 3PLs counter and try to charm away such
doubts. Some 3PLs even paint the clients logos on their assets and vest their employees like the
clients ones.
*Implementation issues
If a company gets the result that it wants to implement a third party logistics provider into their
processes, it has to work on the following implementation issues. These are points a company that
is purchasing the third party logistics services, has to fulfill.
The startup phase of such a strategic alliance is the most difficult and most critical phase. For
implementation considerations there has to be planned a time frame of between six months and a
year! Otherwise you risk quality and reliability losses. The client company has to clearly identify
their needs and expectations to the 3PL exactly to avoid misunderstandings and disaffections due to
miscommunications. Performance measure has to be set. Concrete guidelines are necessary.
Necessary guidelines:
Both parties, provider and client, must concentrate on the aim of a good collaboration concept with
mutual beneficial. Otherwise if there is no win-win situation one party suffers and reduce its
efforts.[ Just as important as the good communication between client and provider is the
communication within the workforce and employees and not only within the managers level. In the
best case the communication is informative, motivating and anticipatory. The integration of
employees should have highest priority! To avoid incertitude of employees, customers and business
partners changes in respect to structures and reliabilities have to be communicated internal and
external as early as possible. Good communication is essential within such a project, employees
want to know why a company is outsourcing and what the expectations of this step are.[Upcoming
fear in respect to employee reduction have to be faced within the different departments in an early
stage, if there is none, because fear of losing ones livelihood is paralyzing the working morale. The
employees should be motivated and mobilized to an active cooperation by understanding the change
as a chance.
The first point reported about now, is instantly the most stimulating and propulsive reason for
shippers and companies to commit their selves into strategic alliance collaborations with third party
logistics providers.
Often companies, equal what size they have, arent able to improve their market position, as fast as
the hard concurrency and competition in the national and international business requires, alone. Or
if they are able this fast adaption to the market requirements would cause immense and
disproportional costs.[16] So the companies try to get their logistics more efficient and costs
economic by working together with third party logistics provider that have the size, the experience
and the know-how to make the clients supply chain more cost efficient, more flexible and more
profitable ( see also the advantages of 3PL in chapter .The 2014 annual Third Party Logistics Study
(subtitle: The State of Logistics Outsourcing) of Capgemini investigated, that third party logistics
clients have an average logistics cost reduction of 11%, an average inventory cost reduction of 6%,
and an average fixed logistics cost reduction of even 23% by outsourcing their logistics to 3PL
providers. Another important point for shipper is, that their fill rates and their order accuracy
increase what is really important within the hard competition to satisfy, in special the challenging,
but also the general customer.
*Types of 3PL providers
Third-party logistics providers include freight forwarders, courier companies, as well as other
companies integrating & offering subcontracted logistics and transportation services.
Hertz and Alfredsson (2003) describe four categories of 3PL providers.
Standard 3PL Provider: this is the most basic form of a 3PL provider. They would perform
activities such as, pick and pack, warehousing, and distribution (business) the most basic
functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
Service Developer: this type of 3PL provider will offer their customers advanced value-added
services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique
security system. A solid IT foundation and a focus on economies of scale and scope will enable
this type of 3PL provider to perform these types of tasks.
The Customer Adapter: this type of 3PL provider comes in at the request of the customer and
essentially takes over complete control of the company's logistics activities. The 3PL provider
improves the logistics dramatically, but does not develop a new service. The customer base for
this type of 3PL provider is typically quite small.
*On-demand transportation
On-demand transportation is a relatively new term coined by 3PL providers to describe their
brokerage, ad-hoc, and "flyer" service offerings. On-demand transportation has become a
mandatory capability for today's successful 3PL providers in offering client specific solutions to
supply chain needs.
These shipments do not usually move under the "lowest rate wins" scenario and can be very
profitable to the 3PL that wins the business. The cost quoted to customers for on-demand services
are based on specific circumstances and availability and can differ greatly from normal "published"
rates.
On-demand transportation is a niche that continues to grow and evolve within the 3PL industry.
Specific modes of transport that may be subject to the on-demand model include (but are not
limited to) the following:
International Expedited
On-demand transportation is a term to reflect what have become known as "smile and dial"
brokerages that essentially work as telemarketing call centers. Brokers have no obligation to
successfully ship all loads (as opposed to contract logistics providers) and almost all sales
representatives are heavily (and 100%) commissioned, and much of the workers' day is spent coldcalling sales leads. Smile-and-dial brokerages typically require a 15% gross profit margin (the
difference between what the shipper pays the brokerage and what the brokerage pays the carrier),
and the commission compensation scheme means that the turnover of personnel in the call centers
approaches 100% per year.
For the occasional shipper, smile-and-dial brokerages can provide a convenient way to have goods
shipped. But the lack of deep expertise due to constant turnover, combined with the 15% pricing
margins, mean that a reasonably capable traffic professional can obtain transportation services
much more economically and reliably.
Warehousing Management is one of the important aspects of 3rd party logistics companies; where
companies are store their stock in large warehouses in proper manner. A warehouse is
a commercial building for storage of goods. Warehouses are used
by manufacturers, importers, exporters, wholesalers,transport businesses, customs, etc. They are
usually large plain buildings in industrial areas of cities and towns and villages. They usually
have loading docks to load and unload goods from trucks. Sometimes warehouses are designed for
the loading and unloading of goods directly from railways, airports, or seaports. They often
have cranes and forklifts for moving goods, which are usually placed on ISO
standard pallets loaded into pallet racks. Stored goods can include any raw materials, packing
materials, spare parts, components, or finished goods associated with agriculture, manufacturing
and production.
Pallet racking including selective, drive-in, drive-thru, double-deep, pushback, and gravity
flow
Mezzanine including structural, roll formed, racks
Vertical Lift Modules
Horizontal Carousels
Vertical Carousels
A "piece pick" is a type of order selection process where product is picked and handled in
individual units and placed in an outer carton, tote or other container before shipping. Catalog
companies and internet retailers are examples of predominantly piece-pick operations. Their
customers rarely order in pallet or case quantities; instead, they typically order just one or two
pieces of one or two items. Several elements make up the piece-pick system. They include the
order, the picker, the pick module, the pick area, handling equipment, the container, the pick
method used and the information technology used.] Every movement inside a warehouse must be
accompanied by a work order. Warehouse operation can fail when workers move goods without
work orders, or when a storage position is left unregistered in the system.Material direction
and tracking in a warehouse can be coordinated by a Warehouse Management System (WMS),
a database driven computer program. Logistics personnel use the WMS to improve warehouse
efficiency by directing pathways and to maintain accurate inventory by recording warehouse
transactions.
Warehouses enable storage of goods when their supply exceeds demand and by releasing
them when the demand is more than immediate productions. This on one hand ensures a
regular supply of goods in the market and on the other hand it helps to stabilize prices by
matching supply with demand.
Warehouses provide for safe custody of goods. Businessmen can thus minimize the risks to
goods from loss, damage, fire, theft etc. Perishable products can be preserved in cold
storage. Also, the goods kept in a warehouse are generally insured.
A warehouse provides facilities for processing, packing, blending, grading etc, of the goods
for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse.
Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse.
The owner can borrow money against the security of goods by making an endorsement on
the warehouse receipt. By keeping the imported goods in a bonded warehouse, a
businessman can pay customs duty in installments.
Types:
Warehouse management systems can be standalone systems, or supply chain execution
suite, modules of an ERP system such as Odoo. Depending on the size and sophistication of
the organization, the system can be as simple as a handwritten list that are updated when
required, spreadsheets using software such as Microsoft Excel or Access or purpose-built
software programs.
In its simplest form, the WMS can track product's data during the production process and act
as an interpreter and message buffer between existing ERP and WMS systems.
Chapter 2:
Company Profile
Company Profile
About Us:
Origin Logistics Pvt. Ltd. caters to the 3PL requirements, local distribution and express between
Mumbai-Pune of the Customers across industries. Origin today has a strong customer base of
Multinationals, Domestic Giants and New entrants.
Origin has grown from a team of few to now over 40 employees, over 60 vendors spread at multiple
locations i.e. Mumbai, Pune and Gurgaon.
Some of the Customers who using 3rd Party Logistics Services at Origin Logistics Pvt. Ltd.
1. Keeda Sunglasses :
Mission:
To be progressive company that is open to ideas, innovation, and unlocking potential.
To promote free-thinking corporate culture that recognizes individual and collective
Potential , nurtures talent and rewards contributions.
Values:
Open Minded, Transparent, Ethical & People Centric.
*Organization involves in the sector like Realty, Hospitality, Fashion, Media, and Ventures.
Chapter 3:
Industry
Profile
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,
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.
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 1.
USA
India
Usage of 3PL
71%
55%
Common activities
outsourced
Warehousing (73.7%)
Necessity of ecommerce
72%
67%
Collaborative
relationship
82%
14%
Gain sharing is
important for
relationship
80%
6.6%
Chapter 4:
Literature Review
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 2 provides a list of recent contributions that address the reasons for outsourcing
logistics activities.
Table 2. Reasons for outsourcing logistics activities.
Author, (Year)
Sheffi, (1990)
Maltz, (1994)
Author, (Year)
Rao & Young,
(1994)
Objective
Conclusion
Understand the
The main motives are to focus on
motives for the growth Core businesses
Better transportation solutions
of logistics
Cost savings and improved
outsourcing in USA
services
Development of necessary
expertise
Establish relative
The technological
study determined
that and
computerized
systems; to
and
impact of cost and
organizations
are reluctant
useneed
for more professional and
services on the
thirdbetter-equipped
party warehousing
due to
logistics
Objective
Conclusion
decision to outsource
customer
service considerations.
services
Identify
the factors
The study identified factors such as
warehousing
influencing
Centrality of the logistics
function
outsourcing of
Risk and control
logistics functions
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
Daugherty et al.,
(1996)
van Damme et al.,
(1996)
Develop a managerial
framework for the
acquisition of third
party
logistics
Find out
factorsservices
for
decision-making
process for choosing
Ascertain
benefits of
contract logistics
alliance
between
service providers.
manufacturing and
Study
global benefits
logisticsof
service
outsourcing
providers. the
logistics
activities.
Study growth
strategies for logistics
service providers
Examine the reasons
for outsourcing
logistics activities in
Malaysia
Author, (Year)
Objective
Conclusion
Determine customer
The main reasons for outsourcing
perceptions on
the logistics activities are
logistics outsourcing in Competencies of 3PLs
Operating flexibility
the European
Cost reduction
consumer goods
Focus on core businesses
industry
Simchi-Levi et al.,
(2008)
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 3.
Factor
Indentified by
In UK there is several research studies are made on 3rd party logistics, below are the some of the
authors research in brief format:
Title: Third Party Logistics: a literature review & research agenda
Authors : Konstatinios Selviaridis, (Department of Management Science, Lancashire
University Management School, Lancashire(UK)
Publisher: Emerald Group of Publishers Limited
Abstract:
Purpose To provide taxonomy of third party logistics (3PL) research and, based on that, to
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
I 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.
Industry Review
Literature Review
Research Issue
Research Questions
First Version
Development of
Questionnaire
Final Version
Data Collection
Data Analysis
Conclusion
5 . Data Analysis
5.1 To identify the success factors of Indian 3PL firms and its relative importance.
Table 4. 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
Component
Q1
.431
Q3
.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
.504
Q2
Q10
.688
.635
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.
Factor Name
Eigen Value
% of
Total
Variance
Reduced Cost
5.997
23.065
Operational
Performance
3.356
12.909
Information
Technology System
1.625
6.250
Versatility
1.379
5.305
Quality Management
1.249
4.802
1.161
4.467
Fixed Assets
1.098
4.225
Performance
Measurement
1.023
3.935
Items
Realized Cost Reduction
Geographical Coverage
Experience as a 3PL Provider
Continuous Improvement
Knowledge Based Skills
Project Management Skills
Global Capabilities
Skilled Logistics Professionals
Real Time Access to Information
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
Items
Loading
0.823
0.814
0.739
0.635
0.742
0.676
0.646
0.643
0.555
0.514
0.699
0.688
0.639
0.488
0.431
0.647
0.639
0.505
0.504
0.731
0.658
0.457
0.813
Investment in IT Systems
Investment in Quality Assets
Management of Key Performance
Indicators
0.760
0.502
0.772
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 7:
Sr.
No.
Success Variable
Factor
Importance
Company
Importance
Gap
Service
Quality
4.40
4.20
-0.20
Weak
Geographical Coverage
4.50
3.90
-0.60
Weak
4.30
4.20
-0.10
Weak
Continuous Improvement
4.50
4.60
0.10
Strong
5
6
4.10
3.80
4.50
4.00
0.40
0.20
Strong
Strong
Global Capabilities
4.20
4.20
0.00
Neutral
4.30
4.00
-0.30
Weak
4.10
4.00
-0.10
Weak
10
11
4.10
3.80
3.90
3.40
-0.20
-0.40
Weak
Weak
4.20
3.90
-0.30
Weak
3.60
3.90
2.90
4.30
4.10
4.40
4.30
4.00
4.10
3.80
4.60
3.70
Factor
Importance
4.425
4.100
3.680
4.275
3.967
4.600
3.700
4.20
3.20
3.60
2.40
4.10
3.90
3.90
4.30
3.90
4.20
3.00
4.40
3.50
Company
Importance
4.225
4.100
3.300
4.050
3.700
4.400
3.450
4.40
-0.40
-0.30
-0.50
-0.20
-0.20
-0.60
0.00
-0.10
0.10
-0.80
-0.20
-0.20
Weak
Weak
Weak
Weak
Weak
Weak
Neutral
Weak
Strong
Weak
Weak
Weak
Service
Quality
Weak
Neutral
Weak
Weak
Weak
Weak
Weak
Strong
12
13
14
15
16
17
18
19
20
21
22
23
24
Sr.
No.
1
2
3
4
5
6
7
8
Success Factor
Reduced Cost
Operational Performance
Information Technology System
Versatility
Quality Management
Compatibility with the Users
Fixed Assets
Performance Measurement
Gap
-0.200
0.000
-0.380
-0.225
-0.267
-0.200
-0.250
0.20
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.
[DI]
Alliance
[AL]
RFID & IT
[RI]
Regional Expansions
[MA]
[RE]
2. Service Portfolio
[SP]
Industry Specialization
[IS]
Global Service
[GS]
Integration
Quality of Services
[BS]
[IN]
[SS]
[QS]
[GS]
[UP]
Growth Strategy
GOAL
CRITERIA
UP
DI
GS
SP
SUB
CRITERIA
MA
AL
RI
RE
BS
IS
GS
IN
SS
QS
ALTERNATIVES
RAS, India
Unique Air
Express
FEDX
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.
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
RCI
0.58
0.9
1.12
1.24
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.
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
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
The Indian 3PL provider largely uses Service Portfolio and 3PL User/Provider Relationship for the growth
of the business.
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
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
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 11. Weights in Direct Investment
MA
AL
RI
RE
Weight in DI
0.040
0.056
0.048
0.064
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
BS
IS
GS
IN
SS
QS
BS
6.00
6.00
5.25
5.25
6.00
6.00
IS
6.00
6.00
5.25
5.25
6.00
6.00
GS
6.86
6.86
6.00
6.00
6.86
6.86
IN
6.86
6.86
6.00
6.00
6.86
6.86
SS
6.00
6.00
5.25
5.25
6.00
6.00
QS
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
BS
IS
GS
IN
SS
QS
Now the ranking of the company can be obtained by constructing comparison matrices with respect to
various growth strategies used by the company.
Table 15. Pair Wise Comparison Matrix for Merger & Acquisition
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
0.20
1.00
1.20
FEDX
0.83
0.17
0.83
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
0.80
4.00
4.80
FEDX
3.33
0.67
3.33
4.00
SUM
SUM
31.33
6.27
31.33
37.60
106.53
Eigen Vector
0.29
0.06
0.29
0.35
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
0.63
0.88
0.88
FEDX
1.14
0.71
1.00
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
2.50
3.50
3.50
FEDX
4.57
2.86
4.00
4.00
SUM
SUM
19.54
12.21
17.10
17.10
65.96
Eigen Vector
0.18
0.11
0.16
0.16
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
1.13
0.63
1.13
FEDX
0.89
1.00
0.56
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
4.50
2.50
4.50
FEDX
3.56
4.00
2.22
4.00
SUM
SUM
17.51
19.70
10.94
19.70
67.86
Eigen Vector
0.16
0.18
0.10
0.18
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
0.43
1.14
1.29
FEDX
0.78
0.33
0.89
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
1.71
4.57
5.14
FEDX
3.11
1.33
3.56
4.00
SUM
SUM
19.94
8.55
22.79
25.64
76.93
Eigen Vector
0.19
0.08
0.21
0.24
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
1.00
0.78
0.78
FEDX
1.29
1.29
1.00
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
4.00
3.11
3.11
FEDX
5.14
5.14
4.00
4.00
SUM
SUM
18.29
18.29
14.22
14.22
65.02
Eigen Vector
0.17
0.17
0.13
0.13
SUM
18.97
11.86
18.97
16.60
66.40
Eigen Vector
0.18
0.11
0.18
0.16
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
0.63
1.00
0.88
FEDX
1.14
0.71
1.14
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
2.50
4.00
3.50
FEDX
4.57
2.86
4.57
4.00
SUM
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
1.13
0.50
0.88
FEDX
1.14
1.29
0.57
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
4.00
4.50
2.00
3.50
FEDX
4.57
5.14
2.29
4.00
SUM
SUM
20.13
22.64
10.06
17.61
70.44
Eigen Vector
0.19
0.21
0.09
0.17
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
1.00
0.71
1.00
1.00
FEDX
1.00
0.71
1.00
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
Unique Air
Express
FEDX
SUM
Eigen Vector
4.00
2.86
4.00
4.00
5.60
4.00
5.60
5.60
4.00
2.86
4.00
4.00
4.00
2.86
4.00
4.00
SUM
17.60
12.57
17.60
17.60
65.37
0.17
0.12
0.17
0.17
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
FEDX
1.00
0.88
1.00
0.88
1.14
1.00
1.14
1.00
1.00
0.88
1.00
0.88
1.14
1.00
1.14
1.00
RAS, India
Unique Air Express
AFL Pvt Ltd
FEDX
RAS, India
Unique Air
Express
AFL Pvt
Ltd
4.00
3.50
4.00
3.50
4.57
4.00
4.57
4.00
4.00
3.50
4.00
3.50
FEDX
SUM
Eigen Vector
4.57
4.00
4.57
4.00
SUM
17.14
15.00
17.14
15.00
64.29
0.16
0.14
0.16
0.14
RAS, India
FEDX
1.00
0.78
0.78
1.00
1.29
1.00
1.00
1.29
1.29
1.00
1.00
1.29
1.00
0.78
0.78
1.00
RAS, India
Unique Air Express
AFL Pvt. Ltd
FEDX
RAS, India
FEDX
SUM
Eigen Vector
4.00
3.11
3.11
4.00
5.14
4.00
4.00
5.14
5.14
4.00
4.00
5.14
4.00
3.11
3.11
4.00
SUM
18.29
14.22
14.22
18.29
65.02
0.17
0.13
0.13
0.17
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
RAS, India
Unique Air Express
Ranking Weight
Rank
0.200
0.118
2
4
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 37. Matrixes for Service Portfolio
RAS, India
FEDX
0.17
0.18
0.19
0.17
0.16
0.17
0.17
0.11
0.21
0.12
0.14
0.13
0.13
0.18
0.09
0.17
0.16
0.13
0.13
0.16
0.17
0.17
0.14
0.17
RAS, India
Unique Air Express
AFL Pvt. Ltd
FEDX
Ranking Weight
Rank
0.173
0.147
0.145
0.155
1
3
4
2
RAS, India
Unique Air Express
AFL Pvt. Ltd
FEDX
Ranking Weight
Rank
0.372
0.265
0.326
0.378
2
4
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.
GOAL
CRITERIA
SUB
CRITERIA
ALTERNATIVES
RAS, India
0.372
Unique Air
Express
0.265
AFL Pvt.
Ltd.
0.326
FEDX
0.378
Merger &
Acquisitions
0.040
Direct
Investment
0.207
Alliance
0.056
RFID & IT
0.048
Regional
Expansions
Growth Strategies
3PL
User/Provider
Relationship
0.276
0.064
Broadening
Service Lines
0.048
Green Supply
Chain
0.241
Service Portfolio
0.276
Industry
Specialization
0.048
Global
Service
0.042
Integration
0.042
Supply Chain
Security
0.048
Quality of
Services
0.048
*Conclusion*
3rd Party logistics having good scope in India as well as in foreign Market.
It manage, support and fulfill customer demand in all serviced regions.
It resulted in increasing the customer by fulfilling their demand in short
period of time.
Attain a continuous and unrivalled 100 % customer satisfaction.
Faster turnaround time to deliver goods to customer.
Optimize price setting, increase sales, and reduce shipping cost to maximize
customer satisfactions.
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 companys focus on Regional Expansion so as to give better services to the
customer and to reduce the cost. The companies are focusing on Alliance for risk sharing and
reduce the fixed asset cost.
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 assets 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.
References
Aghazadeh S.M. (2003), How to choose an effective third party logistics provider?,
Management Research News, Vol. 26, No. 7, pp. 50-58.
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http://www.businesswireindia.com/news/news-details/r-chrysal-fashions-pvt-ltd-launchesmybagsdirectcom/37757
http://whatsurkeeda.com/about-us
http://onlinelibrary.wiley.com/doi/10.1111/j.2158-1592.2011.01004.x/full
http://www.research.lancs.ac.uk/portal/en/projects/search.html
http://originlogistics.co.in/