Academic journal article Journal of Supply Chain Management

Evaluating the Performance of Third-Party Logistics Arrangements: A Relationship Marketing Perspective

Academic journal article Journal of Supply Chain Management

Evaluating the Performance of Third-Party Logistics Arrangements: A Relationship Marketing Perspective

Article excerpt

INTRODUCTION

Third-party logistics, also referred to as "logistics outsourcing" or "contract logistics," has demonstrated phenomenal growth during the past decade. Virtually unknown in the United States until the late 1980s, expenditures for third-party logistics (3PL) services reached $10 billion by 1993 (Barks 1994). By 1999, annual U.S. expenditures for 3PL services were approximately $45 billion (Cooke 2000). While similar growth rates during the first decade of the 21st century are unlikely, 3PL should nevertheless continue to be a key aspect of contemporary supply chain management. For example, recent research indicated a record high rate of 3PL usage among Fortune 500 companies. In addition, by 2005, U.S. 3PL users may be spending an average of nearly one-third of their total logistics budgets (compared to 20 percent today) to support 3PL services (Gooley 2000).

Africk and Calkins (1994) defined third-party logistics as "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." For buyers and sellers of industrial services (such as 3PL services), it is the building of these long-term interactive relationships that has been identified as the most important benefit accruing to organizations adopting a relational rather than transactional approach to their activities (Webster 1992). In fact, Gronroos (1991; 1994; 2000) argued that in situations where buyers are purchasing services, a relational approach is the most appropriate approach (see Figure 1).

While much has been written over the past 10 years in the supply chain literature concerning the benefits and costs of pursuing a relational approach with suppliers (see, for example, Stuart 1993; Graham, Daugherty and Dudley 1994; Ellram 1995; Landeros, Reck and Plank 1995; Ramsey 1996; Zaheer, McEvily and Perrone 1998), the connection between relational activities and performance in third-party logistics arrangements is lacking. Therefore, the primary objective of this research was to infuse relationship marketing theory into the study of performance outcomes of these increasingly relevant supply chain relationships. In particular, it is hoped that the findings of this study will provide supply chain practitioners with a clearer understanding of the connection between their efforts toward relational activities and the performance of their 3PL service providers.

[FIGURE 1 OMITTED]

LITERATURE REVIEW

The relative newness of third-party logistics is reflected in the academic literature, which has characterized 3PL research as "emerging" (Murphy and Poist 1998). Because several articles have summarized the academic research published through the early part of 1999 (Murphy and Poist 1998; Razzaque and Sheng 1998; Murphy and Poist 2000), this section will highlight 3PL research published since then (see Table I). It appears that while there are a few examples of researchers integrating the relationship marketing perspective into the study of 3PL relationships, no previous research has explicitly focused on the impacts of relational activities on the perceived performance outcomes of these arrangements.

Berglund et al. (1999) provided descriptive research on 3PL providers and indicate that "confusion about terminology" makes it difficult to estimate the current size of the 3PL industry. Their research also indicates that while the 3PL industry is no longer in a formative stage, it has yet to reach a mature stage. Moreover, the researchers suggest that 3PL providers can add value by creating operational efficiencies and/or by sharing resources among customers.

Research by Bhatnagar and colleagues (1999) discussed the findings from a survey of logistics outsourcing among Singaporean firms. The most common activities to be outsourced include shipment consolidation, order fulfillment and carrier selection; cost savings, customer satisfaction, and flexibility (customization) were the most important reasons for logistics outsourcing. …

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