World Review of Intermodal Transportation Research, Vol. 1, No.

1, 2006

69

Benchmarking usage of Third Party Logistics: a comparison of practices between firms in Malaysia and Saudi Arabia M. Sadiq Sohail
Department of Management and Marketing, College of Industrial Management, King Fahd University of Petroleum and Minerals, P.O. Box 210, Dhahran-31261, Saudi Arabia E-mail: ssohail@kfupm.edu.sa
Abstract: This paper presents a comparative analysis on the outsourcing of logistics services by manufacturing organisations in the Malaysia and Saudi Arabia. The study addresses key issues relating to extent of usage of third party logistics services, implementation issues, obstacles and plans of current users of contract logistics services. Results based on a survey shows that there are some differences on the use of contract logistics services in Malaysia and Saudi Arabia. Firms in Malaysia have a longer history of logistics outsourcing as compared to Saudi Arabia. The paper presents a report of these differences and similarities and makes a comparative analysis. Keywords: outsourcing; logistics; Malaysia; Saudi Arabia. Reference to this paper should be made as follows: Sohail, M.S. (2006) Benchmarking usage of Third Party Logistics: a comparison of practices between firms in Malaysia and Saudi Arabia, World Review of Intermodal Transportation Research, Vol. 1, No. 1, pp.6981. Biographical notes: Sadiq Sohail is presently an Associate Professor of Marketing at King Fahd University of Petroleum and Minerals, Saudi Arabia. He has earned a string of academic credentials that include a BS and an MS Degree in Commerce, a Law Degree and a PhD. He is the coauthor of a casebook in the field of marketing. He has published over 50 scholarly papers in internationally refereed journals. He currently serves as the Managing Editor of a Journal, as well as a Regional Editor of another. He also serves in the Editorial Board of a number of other international journals.

Introduction

A number of studies have examined the issue of logistics services outsourcing in different countries and undertaken comparative studies as well. Firms are increasingly seeking to treat logistics operations strategically to gain competitive advantage but often lack the competency to run efficient logistics operations themselves. Hence, there is a trend to outsource logistics activities (Sohail et al., 2004). Another important trend that is making a significant impact on the organisation is the increased emphasis on time-based competition (Bhatnagar et al., 1999). Logistics outsourcing has given birth to a huge TPL industry, which are currently competing in a highly fragmented but growing market
Copyright 2006 Inderscience Enterprises Ltd.

70

M.S. Sohail

(Gordon, 2003). Given the growing significance of the industry, a recent study focuses on examining the organisational dynamics of this industry in the USA (Aoyama et al., 2006). In a study, it was observed that while TPL industry has relatively become stable in the USA and Europe, while it is rapidly growing and emerging industry in Asia (Wang and Regan, 2002). Given the importance of TPL in USA and Europe, there have been studies undertaking comparative analyses, in the USEurope context. A comparative analysis of the experiences of US and European manufacturers in using third party logistic services was undertaken by Lieb et al. (1993), and the following factors were tested in defining the extent of usage levels of commitment; budget allocation; geographical coverage; services utilised and nature and length of third party contracts. The study concluded that European organisations were significantly more committed and allocated a larger share of the overall logistics budget to their outsourcing company, as compared to their US counterparts. Turning to the Asian region, there have been studies undertaken to examine the usage of TPL services, for example, Singapore (Bhatnagar et al., 1999), Malaysia (Sohail and Sohal, 2003) and Saudi Arabia (Sohail and Abdali, 2005). While the usage of TPL services has been increasing in the Asian region, it has not been at an even pace and no studies have been to make a comparison. To address this issue, the objective of this paper is to compare logistics outsourcing activities by organisations in Malaysia and Saudi Arabia. In this respect, this study is modelled on an earlier study undertaking a comparison of Australian, US and Western European firms practices of logistics outsourcing (Millen et al., 1997). We believe that this research adds to the growing body of literature in the area. Given the growing body of literature in this area, we consider this specific study to be an important from international business perspective given that Malaysia and Saudi Arabia are significantly apart on the development continuum Malaysia being considered more developed than Saudi Arabia. Malaysia and Saudi Arabia are both members of the World Trade Organisation and Organisation of Islamic Conference (OIC). Member countries within the OIC have been making efforts to collaborate and share experiences between them. With relatively a high degree of complementarity in the economies of both these countries, findings of this study could help in a comparative analysis and identify the linkages that could be established in the area of shipping and logistics. Presently these are the fields in which there are little alliances between the two countries.

Literature review

From a review of extant literature, the origin of TPL can be traced back to the 1970s, when the concept of public warehousing emerged (Aghazadeh, 2003). By the 1980s, activity of such service providers expanded not only selling warehouse but also to providing distribution managers services related to improving customer service with their current customers (Tompkins, 1999). However, the 1990s witnessed dramatic changes, with logistics function no more restricted to merely lifting and shifting but rather to ensure that a firm gains competitive advantage (Christopher, 1993). Fuller et al. (1993) suggests that an important reason for the growth of TPL services is that companies compete in a number of businesses that are logistically distinct owing to varied customer needs. Through differentiation, most providers have managed to specialise their services by providing a variety of alternatives ranging from limited

Benchmarking usage of Third Party Logistics

71

services (for example transportation) to broad activities covering the supply chain. With the dynamics of change and innovation issues associated with supply chain management, more recent studies in TPL have focused on the strategy development by TPL service providers (for example Hertz and Alfredson, 2003) and the process of TPL integration with customer relationship management (Knemeyer et al., 2003). Existing literature on TPL has identified a number of factors that affect the usage of TPL services. Empirical studies suggest a number of reasons on why organisations outsource. Sheffi (1990) identified the reasons in making a final decision on outsourcing in USA. These include the need to focus on core businesses, better transportation solutions, cost savings and improved services, development of necessary technological expertise and computerised systems and need for more professional and better-equipped logistics services. Sink and Langley (1997) found that the most important criterion for the selection of third party providers was core competencies. Many other studies have reported a number of other reasons as drivers of the decision to outsource logistics functions (See for example, Dapiran et al., 1996; Bhatnagar et al., 1999; Gordon, 2003; Sohail et al., 2004). Most research has focused on evaluating the results of outsourcing (for example, Peters et al., 1998; Murphy and Poist, 2000; Laarhoven et al., 2000). Sink and Langley (1997) propose a sequence of five steps for effective logistics outsourcing, which concludes with a conduct of ongoing service assessment of the TPL provider. From a review of literature, we can make out the major factors that have been used in previous studies to evaluate performance of the TPL providers include benefit or advantage realised by the company, satisfaction level with the performance of TPL provider and probability of increasing usage of the service of the TPL provider in the short-term future. It is also interesting to note that managers from the developed nations of the Asian region have reported reservations when the possible utilisation of contract logistics companies was first discussed. Thirty percent of the respondents in Australia had such concerns (Dapiran et al., 1996). The most commonly expressed concerns in this study were that of potential loss of direct control of logistics activities, uncertainties about the capabilities of the contract logistics firms, the costs of outsourcing and the deployment of company personnel. Similar reservations were reported in another study by senior managers when the possible utilisation of contract logistics was first discussed (Sohail and Sohal, 2003).

Methodology

In this paper, we compare the results from two studies of logistics outsourcing. The first study to investigate logistics outsourcing was conducted by Sohail and Sohal (2003) in Malaysia. The questionnaire survey focused in the following areas: extent to which organisations use the services of contract logistics companies specific contract logistics services used and the benefits which have emerged for the user organisations obstacles encountered in implementing contract logistics relationships

72

M.S. Sohail impact of the use of contract logistics services on logistics costs, customer satisfaction and employees of the user organisation future plans of current users of contract logistics services.

A sample population of 800 firms was randomly picked from two sources. Firstly, samples were picked at random from a list of all registered companies listed under the Kuala Lumpur Stock Exchange. Secondly, a sample was drawn from a list of manufacturing and resource-based industries. Financial, banking, real estate and insurance organisations were eliminated from the group, as they were less likely to have significant logistics needs. A total of 124 questionnaires were received, representing a response rate of about 16%, which compares favourably to response rates for other recent studies of the use of contract logistics services. The second study investigated logistics outsourcing in Saudi Arabia (Sohail and Abdali, 2005). For this study, the survey instrument employed by Sohail and Sohal (2003) was used with minor modifications to suit local needs. The target population included all firms that had significant logistics requirements. As a current and comprehensive database of companies was not available, a decision was made to randomly select firms from listing of companies registered with Chambers of Commerce in the cities of Riyadh and Dammam, where most of the nations economic activities are carried out. Out of a randomly generated sample of 2000 firms who were contacted, 496 completed questionnaires were received giving a response rate of 24.8%, which was in line with expectations. In the next section, we present our analysis of the responses.

Data analysis and discussion of results

4.1 Extent of use and profile of respondents

Out of a total of 124 responses from Malaysia, 40 firms did not use the services of logistics companies. These were screened out and further analyses relate to the remaining 84 firms who reported usage of logistics services. As for responses from Saudi Arabia, of the 496 received, 181 did not use contract logistics services, leaving the remaining 315 responses for further analyses. Results from the Saudi Arabian survey reveal that out of a total of 315 usable responses, 111 respondents (36.7%) indicated that their firms utilised the services of one or more contract logistics companies, which is close to half of the response from the Malaysian survey, in which 84 out of 124 respondents (67.7%) indicated that the organisations employ similar services. Among the users of contract logistics, 73.7% of organisations in Saudi Arabia utilised more than one outsourcing organisation while 63% of the Malaysian organisations indicated that they do so. These figures are similar to the numbers reported by US organisation (65%, see Lieb and Randall, 2000). A comparison of organisations that do not use contract logistics reveals that 45% of firms in both Malaysia and Saudi Arabia are considering the possibility of using this service in the future. Table 1 provides the data that relates to the length of experience with contract logistics services in Saudi Arabia and Malaysia. We observe that Malaysian firms have a significantly longer history of logistics outsourcing.

Benchmarking usage of Third Party Logistics

Table 1 Period for which third-party logistics services have been utilised Percentage of respondents Duration in which contract logistics has been used <1 year 13 years 35 years >5 years Malaysia 10 26 18 46 Saudi Arabia 19 35 16 30

73

Table 2 exhibits information on the size of the surveyed organisations. An independent t-test did not uncover a significant difference in size between users and non-users in Malaysia and Saudi Arabia individually as well as comparatively (t-value 0.087 at 95% confidence level). At an individual level, there is a significant difference among Saudi Arabian users based on the employment size, but in Malaysia, there were not significant differences among firms with more than 500 employees (9% and 6%) even though firms with less than 500 employees did differ at large from the rest of the group. Over 50% of the organisations outsourcing logistics in Saudi Arabia were small firms, employing fewer than 200 people, as compared to 43% of the users in Malaysia. About two out of five firms (42%) of the users in Malaysia were medium sized, employing between 200500 employees as compared to approximately one in five (26%) of respondents from Saudi Arabia. Overall, the samples were fewer representatives of firms with higher levels of employment from both countries as compared to firms with lower levels of employment (less than 500).
Table 2 Number of users and non-users in each category of organisational size Malaysian respondents Approximate current employment <200 200499 500999 10005000+ Users 36 (42.9%) 35 (41.7%) 8 (9.4%) 5 (6.0%) Non-users 23 (57.5%) 14 (35.0%) 3 (7.5%) 0 (0.0%) Saudi Arabian respondents Users 60 (54.1%) 29 (26.1%) 12 (10.8%) 10 (9.0%) Non-users 101 (52.9%) 29 (15.2%) 33 (17.3%) 28 (14.7%)

4.2 The decision-making process

Respondents who were users of contract logistics services were queried on the decision-making process to introduce these services. Firstly, the respondents were asked to specify the organisational level at which the introduction of contract logistics was determined. In order to satisfy statistical assumptions, as well as to circumvent a potential ambiguity in the question, respondents who specified two or more levels of involvement were disregarded from this analysis. From the survey in Malaysia 35% of cases reported that the decision to outsource was undertaken at the corporate level, as compared to 54.6% in Saudi Arabia. Furthermore, to 24% of responses from Malaysia specified the decision originated at the division level, in contrast to 33.8% of respondents from Saudi Arabia; the 41% response from Malaysia specified that it was a local level decision, as compared to 11.6% of the respondents from Saudi Arabia.

74

M.S. Sohail

Secondly, a comparative analysis was undertaken on the information source through which organisations learnt about the firms providing logistics outsourcing services. Table 3 presents the findings. From the Malaysian survey, three common sources of information that emerged were sales calls from logistics representatives, discussion with other logistics professionals and advertising in professional publications with sales calls from logistics representatives being the most common source. The sources of information in Saudi Arabia were quite similar, though information obtained through calls from logistics representative was more popular in Malaysia (70%) than in Saudi Arabia (40%).
Table 3 Sources of information (percentage in parentheses) Number of Malaysian respondents who utilised this source 13 (15.5) 60 (71.4) 4 (4.8) 3 (3.6) 4 (4.8) 21 (25.0) Number of Saudi Arabian respondents who utilised this source 73 (23.2) 126 (40.0) 29 (9.2) 18 (5.7) 48 (15.2) 21 (6.7)

Source of information Discussion with other logistics professionals Call from a logistics representative Sales contact at a logistics conference Direct mail advertising Advertising in professional publications Others*

*In Saudi Arabia: 1) recommendations from friends, suppliers and customers, 2) Appointed by customers; In Malaysia: 1) recommendations from friends, suppliers and customers, 2) market contacts, 3) appointed by customers.

Managers from other functional areas were involved in establishing the logistics contract. Nearly 8% of the Malaysian organisations reported the involvement of managers from other functional areas and two-thirds (63.2%) of Saudi Arabian organisations from Saudi Arabia reported the same. This is in comparison to 66% reported in the US survey (Lieb and Randall, 2000). Thirdly, managers were asked to indicate the functional areas that were involved with the decision to outsource logistics services. Table 4 provides comparative information about the degree to which manufacturing, marketing, finance, Information Systems (IS) and Human Resources (HR) and other managers are involved in various phases of this process. The involvement of each functional area varied across the phases. For instance, marketing and finance managers are more involved in the decision to introduce outsourcing of logistics. The manufacturing and HR managers were involved to a little extent in all phases in Saudi Arabia as compared to even a lesser percentage in Malaysia. In contrast, the IS managers were primarily involved in interacting with and evaluating the third party. Comparatively, responses have been fairly consistent between the two countries.

Benchmarking usage of Third Party Logistics

Table 4 Function Manufacturing Marketing Finance HR Others** Percentage of respondents in which functional managers are involved with various phases of outsourcing logistics Malaysia* 11.9 33.3 38.1 10.7 22.6 Saudi Arabia* 14.6 33.7 27.6 16.3 4.8

75

*Cumulative percentage does not add to 100 as managers from more than one functional area were involved in some instances. **Include in Saudi Arabia: administration and IS; In Malaysia: product, sales and IS.

4.3 Contract logistics services used

While 31% of organisations in Malaysia employed contract logistic provider exclusively for domestic operations, the percentage of respondents was 46 for domestic outsourcing in Saudi Arabia. As for outsourcing for international purposes, 2.4% of the respondents in Malaysia indicated that the organisations used such services for international use only in comparison to 8% of organisations in Saudi Arabia who outsourced specifically for international purposes. Two-thirds of the total organisations in Malaysia outsourced logistics function for both international and domestic operations, and less than half (46%) of the organisations in Saudi Arabia used the services of logistics firms for both domestic and international operations. Comparative information on the breadth of logistic services that are outsourced is reported in Table 5. In Malaysia, the more prevalent services have been fleet management, shipment consolidation, freight payment, carrier selection and warehouse management, while in Saudi Arabia outsourcing is more prevalent for carrier selection and shipment consolidation. Comparatively, shipment consolidation, freight payment and carrier selection services have been outsourced in Malaysia to a larger extent.

4.4 Training
Because the introduction of contract logistics services into a company represents an important shift in the way in which business is conducted, it might reasonably be assumed that related training would occur. However, only 15% of the respondents from Malaysia indicated that there was a need for retraining employees. The primary focus of the retraining efforts has been on acquiring purchasing skills, information and computer systems and familiarising with logistics procedure and documentation. About half of the total users of contract logistics services in Malaysia indicated that implementation of those arrangements did not necessitate retraining of logistics personnel. The training efforts that have been undertaken have typically focused on information and computer systems and new technologies. Only one organisation noted that it had introduced a programme in change management, while another organisation indicated that it had begun a programme in team building including personnel from the contract logistics organisations. Similarly, from the Saudi Arabian responses, 38% indicated that there was

76

M.S. Sohail

a need for retraining. This rate is a little higher than that in the US organisations where 35% reported the need for training (Lieb and Randall, 2000).
Table 5 Most frequently used contract services (Percentages provided in parentheses) Malaysia 49 (58.3) 33 (39.3) 25 (29.8) 18 (21.4) 35 (41.7) 9 (10.7) 20 (23.8) 3 (3.6) 41 (48.8) 28 (33.3) 17 (20.2) 31 (36.9) 13 (15.5) Saudi Arabia 88 (27.9) 103 (32.7) 54 (17.1) 33 (10.5) 61 (19.4) 48 (15.2) 46 (14.6) 47 (14.9) 0 0 0 0 0

Logistics service Shipment consolidation Carrier selection Order fulfilment Logistics Information Systems (IS) Freight payment Product assembly/installation Inventory replenishment Customer spare parts Fleet management/operations* Warehouse management/operations* Product returns* Rate negotiation* Order processing*

*These questions were only included in the Malaysian study, as initial focus study revealed that these were not relevant in the Saudi context.

4.5 Commitment
A comparative analysis revealed that there is considerable variation in the degree of commitment to outsourcing by the respondents in Saudi Arabia and Malaysia individually as well as comparatively (see Table 6). While 25% of the users in Saudi Arabia indicated that their firms commitment to the contract services was extensive, the percentage for the same category from the Malaysia sample was only 16.5. Less than half (45%) of respondents from Saudi Arabia indicated the commitment as moderate, which was in contrast to about 57.5% of responses from Malaysia. However, the total percentage of respondents reporting the commitment as limited and very limited has been more or less around the same percentage of around 29 and 25, respectively, from respondents of both countries. An independent t-test revealed significant difference between the extent of commitment by organisations in Saudi Arabia and Malaysia (t-value 0.033 at 95% confidence level).
Table 6 Extent of commitment to outsourcing Malaysia (% of firms) Extensive Moderate Limited Very Limited 17.8 57.5 23.5 1.2 Saudi Arabia (% of firms) 25.1 45.1 23.3 6.5

Benchmarking usage of Third Party Logistics

77

4.6 Expenditures
To further probe the extent of commitment by the organisation, we compared the percentage of the logistics budget spent on outsourcing. About a quarter of the respondents (23%) reported an allocation of more than 70% of their budget to outsourcing; 43% of the respondents allocated 30% or less of their total logistics budget allocated and the remaining 34% of the respondents indicated that the budget allocation was between 30% and 70% of the total logistics budget (see Table 7). An independent t-test did reveal significant differences between the two countries in terms of percentage expenditure (t-value 0.527 at 95% confidence level).
Table 7 Percentage of logistics budget spent on outsourcing Malaysia 18 11 14 8 13 7 6 12 5 6 Saudi Arabia 31.2 21.2 16.1 8.7 4.8 4.5 5.1 1.6 4.2 2.6

Percentage expenditure (%) 010 1120 2130 3140 4150 5160 6170 7180 8190 91100

In comparison, the spending on logistics firms has been somewhat lower in Saudi Arabia with only 9% of the respondents in allocating 70% or more of their total logistics budget to logistics firms, 68% of the respondents had allocated 30% or less of their total logistics budget allocated to logistics firms providers while the remaining 23% of the respondents indicated that the budget allocation was between 30% and 70% of the total logistics budget. These figures indicate a low level of commitment among firms in Saudi Arabia to the use of firms providing logistics services.

4.7 Contract with service providers

Nearly 40% of the respondents surveyed in Malaysia had signed contracts with their service providers. Of these contracts, almost one-half (45%) of the organisations had entered into contracts for usage of services beyond five years. About 13% of the organisation had signed for a period of between one to three years; 7.2% of the organisations had contracts ranging for a period between three to five years and only a single firm (1.2%) reported signing for a period of less than a year. Of all these contracts, 15% had included performance incentives, 38% contained penalties for non-performance and about 20% reported including both. In comparison, the Saudi Arabian survey revealed that a little over 60% of the organisations had signed a specific contract with the third party providers. The results of the survey show that of those companies using contract logistics services, almost half are

78

M.S. Sohail

relatively experienced with the concept of using contract logistics services with 46% of them doing so for more than three years. This represents a less significant amount of experience with logistics firms amongst Saudi Arabian companies when compared with the Malaysian companies. Research in the USA indicates that shorter contracts are more common there and that these are increasing in usage. Specifically, in 1998, 78% of the contracts were for periods of less than three years in duration, whereas the percentage was 67% in 1995 (Lieb and Randall, 2000). Among the organisations in Saudi Arabia that had signed a specific contract, 31% included performance incentives and 38% had included penalties for non-performance.

4.8 Organisational impact

The most frequent benefits of logistics outsourcing reported from respondents in Malaysia were time saving, cost savings, improved customer service and freight payment/credit terms. This is in contrast to the responses on the benefits organisations from Saudi Arabia obtained from the use of contract logistics. Respondents from the survey in Saudi Arabia cited cost reduction, improved expertise and reduction in capital deployment as the major benefits form logistics outsourcing. Improved customer service and a more effective utilisation of firms HR were also mentioned as other important benefits by several other users in Saudi Arabia. On the question of the reduction of full time logistics employees, just over one-half of the respondents from Malaysia indicated that there had been no elimination of full-time positions in their company. Of those organisations that had eliminated logistics positions, 17% of the organisations reported that the elimination of employees was under 20%, 18% reported between 2040% elimination of staff, 7% reported an elimination of between 4060%, 4% reported that between 6080% of the staff were eliminated. Only one organisation in Malaysia reported eliminating more than 80% of the positions in logistics. On the related issue of addressing the displaced personnel, one-third of the respondents reported transfers within their organisation, 6% offered employment with the contract organisation and another 6% terminated employees. The trends from the Saudi Arabian responses have been on the similar lines. The survey reveals that 13% of the firms indicated that they had eliminated between 20% and 40% of their full-time logistics-related staff and another 31% of the firms indicated that they had eliminated up to 20% of their full-time logistics staff. The decision to outsource logistics would generate a substantial amount of work for the HR function. It is of concern that managers from the HR function are not involved in the outsourcing decision-making process, as indicated by the results presented earlier.

4.9 Plans for the future

It is interesting to note that respondents from both countries that have been using the contract logistics have been pleased with the services. The Saudi Arabian survey indicates 20% of the respondents indicated that they were Very Satisfied with the performance of their contract services providers and 66% indicated they were Satisfied. About 10% of the firms stated, that they were Dissatisfied and only 4% of firms indicated that they were Very Dissatisfied with the performance of the contract logistics firms. From the Malaysian survey, 11% indicated that they were very satisfied and 87%

Benchmarking usage of Third Party Logistics

79

indicated that they were satisfied. Only one organisation indicated that it was dissatisfied. Not surprisingly, 94% of the Malaysian respondents indicated that the use of contract logistics services had been a positive development, which is consistent with 86% of respondents from Saudi Arabia who regarded outsourcing as a positive development.

Summary and implications

The comparison presented in this paper shows that there are many similarities on the use of contract logistics in Saudi Arabia and Malaysia. Among other measures, similar trends were observed for the proportion of organisations utilising such services, information sources, using of such services for whether domestic and international purposes, satisfaction with such services and the specific activities outsourced. On the other hand, there are some noticeable differences between the two countries. Of particular interest is the process used for making the outsourcing decision. While a majority of respondents from Saudi Arabia reported that the decision was made at the corporate level, it has generally been a local level decision in Malaysia. On the question of benefits the organisations obtained, responses from the two countries have varied except for cost reduction/saving. Malaysian respondents indicated time saving, improved customer services and payment/credit terms as major benefits, in contrast to the responses from the Saudi Arabian survey, which reported cost reduction, improved expertise and reduction in capital deployment. Another interesting difference that was identified in this study was that Saudi Arabian firms have lesser experience with using contract services than do Malaysian firms. Added, Malaysian firms spend considerably higher amount on utilising contract services than do Saudi Arabian firms. Interestingly, the two-abovementioned differences seem to be quite interrelated. The findings of this study have some important implication for managers of firms in both these countries. Often firms in the countries under study adopt practices implemented in developed economies. This study, which shares the experiences of firms that have outsourced logistics function, provides valuable to firms that are planning to outsource. The implementation plan by the firms must include enlightening the logistics service provider of the firms requirements and developing programmes to retrain redundant employees. The findings of this study are also reassuring to providers logistics outsourcing services. Experience of companies in Saudi Arabia and the Malaysia in their usage of contract logistics services indicates that there is wide scope for increasing the usage of TPL services in both these countries. While some organisations have not outsourced their logistics functions, we believe that competitive pressures will further enhance the use of the contract logistics services in the years to come. While TPL services have a good potential for further development, logistics service providers should take note of the fact that in a competitive industry characterised by time based competition; technological effort becomes a key variable and a means of differentiation between the various third-party logistics providers (Sauvage, 2003). Building a successful logistics outsourcing relationships is embedded in the service providers technological ability to improve value added services.

80

M.S. Sohail

While this study provides a comprehensive comparative analysis of the current situation of logistics outsourcing in Saudi Arabia and Malaysia, there are several worthwhile directions for further work on this topic. One area is to examine the trends over time. It is suggested that similar studies be conducted in future to provide insights into the trends and direction of the different practices relating to logistics outsourcing.

Acknowledgement
The author acknowledges the facilities and support received from King Fahd University of Petroleum and Minerals, Saudi Arabia in completion of this research.

References
Aghazadeh, S. (2003) How to choose an effective third party logistics provider, Management Research News, Vol. 26, No. 7, pp.5058. Aoyama, Y., Ratick, S. and Schwarz, G. (2006) Organizational dynamics of the US logistics industry: an economic geography perspective, The Professional Geographer, Vol. 58, No. 3, pp.327340. Bhatnagar, R., Sohal, A. and Millen, R. (1999) Third party logistics services: a Singapore perspective, International Journal of Physical Distribution and Logistics Management, Vol. 29, No. 9, pp.569587. Christopher, M. (1993) Logistics competitive strategy, European Management Journal, Vol. 2, pp.258261. Dapiran, P., Lieb, R., Millen, R. and Sohal, A. (1996) Third party logistics services usage by large Australian organisations, International Journal of Physical Distribution and Logistics Management, Vol. 26, No. 10, pp. 3645. Fuller, J.B., OConor, J. and Rawlinson, R. (1993) Tailored logistics: the next advantage, Harvard Business Review, May, pp.8797. Gordon, B.H. (2003) The changing face of 3rd party logistics, Supply Chain Management Review, MarchApril, Vol. 7, No. 2, pp.5057. Hertz, S. and Alfredsson, A. (2003) Strategic development of third party logistics providers, Industrial Marketing Management, Vol. 32, pp.139149. Knemeyer, A.M., Coris, T. and Murphy, P.R. (2003) Logistics outsourcing relationships: customer perspectives, Journal of Business Logistics, Vol. 24, No. 1, pp77109. Laarhoven, P.V., Berglund, M. and Peters, M. (2000) Third-party logistics in Europe five years later, Journal of Physical Distribution and Logistics Management, Vol. 30, No. 5, pp.425442. Lieb, R.C. and Randall, H. (2000) The use of third party logistics services by large American manufacturers: the 1998 survey, Chapter 2, in Lieb, R.C. (Ed.): Third Party Logistics: A Managers Guide, JKL Publications, Houston, TX, pp.2443. Lieb, R.C., Millen, R.A. and Wassenhove, L.N.V. (1993) Third party logistics services: a comparison of experienced American and European manufacturers, International Journal of Physical Distribution and Logistics Management, Vol. 23, No. 6, pp.3544. Millen, R., Sohal, A., Lieb, R. and Wassenhowe, L. (1997) Benchmarking Australian firms usage of contract logistics services: a comparison with American and Western European practice, Benchmarking for Quality Management and Technology, Vol. 4, No. 1, pp.3446. Murphy, P. and Poist, R. (2000) Third-party logistics: Some user versus provider perspectives, Journal of Business Logistics, Vol. 21, No. 1, pp.121134.

Benchmarking usage of Third Party Logistics

81

Peters, M., Cooper, M., Lieb, R.C. and Randall, H.L. (1998) The third-party logistics industry in Europe: provider perspectives on the industrys current status and future prospects, International Journal of Logistics: Research and Applications, Vol. 1, No. 1, pp.925. Sauvage, T. (2003) The relationship between technology and logistics third-party providers, International Journal of Physical Distribution and Logistics Management, Vol. 33, No. 3, pp.236253. Sheffi, Y. (1990) Third party logistics: present and future prospects, Journal of Business Logistics, Vol. 11, No. 2, pp.2739. Sink, H. and Langley Jr., C.J. (1997) A managerial framework for the acquisition of third-party logistics services, Journal of Business Logistics, Vol. 18, No. 2, pp.16389. Sohail, S. and Sohal, A. (2003) The use of third party logistics: a Malaysian perspective, Technovation, Vol. 23, pp.401408. Sohail, S., Nathan, A. and Rushdie, M. (2004) The use of third party logistics services: evidence from a Sub-Sahara African Nation, International Journal of Logistics: Research and Applications, Vol. 7, No. 1, pp.4557. Sohail, S.M. and Abdali, O. (2005) The usage of third party logistics in Saudi Arabia: current position and future prospects, International Journal of Physical Distribution and Logistics Management, Vol. 35, No. 9, pp.637653. Tompkins, J. (1999) Third party logistics: only the name remains the same, Food Logistics, JulyAugust, p.8. Wang, X. and Regan, A.C. (2002) Local truckload pickup and delivery with hard time window constraints, Transportation Research, Part B, Methodological, Vol. 36, No. 2, pp.97112.