You are on page 1of 14

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES, DEHRADUN

SYNOPSIS

ROLE OF 3 PL IN E-COMMERCE

Associate Professor
DR. SAURABH TIWARI
Submitted by:
SHUBHAM DHARNA

Bachelor of Business Administration [LOGISTIC MANAGEMENT]


SAP ID- 500037222
2014-17
SNO. INDEX
1 INTRODUCTION
2 REVIEW OF LITERATURE
3 OBJECTIVE
4 RESEARCH METHODOLOGY
5 CONCLUSION
6 REFERENCE
TABLE OF CONTENT

INTRODUCTION

E-COMMERCE
In its simplest form ecommerce is the buying and selling of products and services by businesses
and consumers over the Internet. People use the term "ecommerce" to describe encrypted
payments on the Internet.
Sometimes these transactions include the real-time transfer of funds from buyer to seller and
sometimes this is handled manually through an eft-pos terminal once a secure order is received
by the merchant.
Internet sales are increasing rapidly as consumers take advantage of lower prices offer by
wholesalers retailing their products. This trend is set to strengthen as web sites address consumer
security and privacy concerns.
Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the
buying and selling of products or services over electronic systems such as the Internet and other
computer networks. However, the term may refer to more than just buying and selling products
online. It also includes the entire online process of developing, marketing, selling, delivering,
servicing and paying for products and services. The amount of trade conducted electronically has
grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this
way, spurring and drawing on innovations in electronic funds transfer, supply chain management,
Internet marketing, online transaction processing, electronic data interchange (EDI), inventory
management systems, and automated data collection systems. Modern electronic commerce
typically uses the World Wide Web at least at one point in the transaction's life-cycle, although it
may encompass a wider range of technologies such as e-mail, mobile devices and telephones as
well.
A large percentage of electronic commerce is conducted entirely in electronic form for virtual
items such as access to premium content on a website, but mostly electronic commerce involves
the transportation of physical items in some way. Online retailers are sometimes known as e-
retailers and online retail is sometimes known as e-tail. Almost all big retailers are now
electronically present on the World Wide Web.
Electronic commerce that takes place between businesses is referred to as business-to-business or
B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific,
pre-qualified participants (private electronic market). Electronic commerce that takes place
between businesses and consumers, on the other hand, is referred to as business-to-consumer or
B2C. This is the type of electronic commerce conducted by companies such as Amazon.com.
Online shopping is a form of electronic commerce where the buyer is directly online to the
seller's computer usually via the internet. There is no intermediary service involved. The sale or
purchase transaction is completed electronically and interactively in real-time such as in
Amazon.com for new books. However in some cases, an intermediary may be present in a sale or
purchase transaction such as the transactions on eBay.com.
Electronic commerce is generally considered to be the sales aspect of e-business. It also consists
of the exchange of data to facilitate the financing and payment aspects of business transactions.

The 3 Pl in E-commerce

Third Party Logistics providers ("3PL") are utilized by many ecommerce businesses to oversee
and manage their supply chain management. 3PLs specialize in optimizing the supply chain,
allowing online stores to focus on marketing and other business operations.

In todays competitive business market, keeping costs down while increasing the speed and
efficiency of a companys logistics operations is imperative. The military was the first to coin the
term 3PL, as it developed this method for efficiently transferring resources to areas where they
are most needed. 3PL has continued to grow as the deregulation of interstate trucking reduced
barriers to entry in the freight management industry.

What exactly do 3PLs do for online businesses?

Services offered by third party logistics providers encompass more than just shipping. Some
providers focus on specific locales and geographies. With increased technological advances,
many providers have expanded their services by integrating shipping services with public and
contract warehousing as well as commodities and freight consolidation. A number of firms also
offer different types of freight transportation to customers.

Technology is at the core of third party logistics. Warehousing has grown from the simple storing
of products to focusing on optimized inventory control and the efficient provisioning of goods.
Companies that use third party logistics may offer additional services including forecasts, in-
depth reporting, transportation management software and freight bill auditing.

The Globalization of 3PL

Many logistics providers have moved toward globalization through organic growth and strategic
acquisitions and mergers. By expanding their reach worldwide, 3PL providers have enabled
numerous businesses to expand their own businesses to markets where it would previously have
been cost prohibitive to do so.

Will 3PL work for any size business?

A benefit of using a third party logistics provider is that it can improve logistics operations for a
business of any size. Logistics providers can provide a business with as few or as many services
as are needed. For example, a smaller company may only require shipping or warehousing of
goods, while a larger company may want the provider to offer them a bundle of services to
manage their entire supply chain. Increased efficiency in these areas allows a business to
successfully grow while effectively managing their bottom line.

REVIEW OF LITERATURE
A 3PL company is a private firm that provides logistics services under a contract to a primary
manufacturer, vendor, or user of a product or service. It is called third-party because the logistics
provider does not own the products but participates in the supply chain at points between the
manufacturer and the user of a given product. The 3PL can perform logistics functions of their
customer either completely or only in part ([3]-[4]). Initially, the 3PL were carriers, storage
companies or forwarding agents. Currently, they diversified by offering various services and by
ensuring various activities. The principal 3PL have their own warehouses, transport fleets and
their credits are often deployed throughout the world. Table 1 provides a list of possible activities
of 3PL and their related logistics functions ([5]). Most 3PL have specialised their services
through differentiation, with the scope of services encompassing a variety of options ranging
from limited services to broad activities covering the supply chain

Berglund et al. (1999) have noted the gradual shift from asset-based to system (non-asset) based
providers and distinguished between service (offering low cost, specific competitive services
to many clients) and solution (customized and complex services to a few key customers)
providers.

Hertz and Alfredsson (2003) classify LSPs in terms of their abilities for general problem solving
(co-ordination) and the extent of adaptation to client needs. Persson and Virum (2001) present a
typology of 3PL vendors in terms of service complexity and degree of asset specificity. Based on
RBV theory, Lai (2004) has proposed a typology of LSPs in terms of their service capabilities
and performance results. Bolumole (2003) presents a framework for evaluating the supply chain
roles of LSPs, arguing that certain elements of the clients strategy shape the outsourcing
decision and requirements, which in turn influence the role of 3PL providers within the supply
chain (Bolumole, 2003). However, it seems to be static in nature (e.g. shippers with external
supply chain orientation may also outsource due to cost efficiency advantages).

CRITERIA AND METHODS OF 3PL SELECTION

The most recent studies conducted on the 3PL use are generally results of many exploratory
surveys. They are mainly interested in the following topics: -

Reasons, benefits and risks of outsourcing decision ([5]-[7])


- Modelling, planning and evaluation of the integrated logistics network for 3PL ([8]- [11])

- Analysis of relationships between 3PL and supply chain members ([12]-[14])

- 3PL selection and evaluation. The last topic, that is 3PL selection and evaluation, is the
objective of this paper.

3PL Selection Criteria

In 2014, the International Warehouse Logistics Association (IWLA), that comprises more than
550 logistics companies of North America, conducted an exploratory study with several 3PL
customers. Their study showed a major change in the selection criterias rankings. The results of
this study are summarized in table 2 (reprinted from: www.iwla.com). In 1994 and 1999, this
table shows that the top three determinants in selecting a 3PL were service quality, reliability and
on-time performance. By 2003, the price became the most important selection criterion. This
change is mainly due to the increase of quality and the number of services offered by the 3PL.
While the cost of these services continued to decrease, the price remained the crucial part of the
negotiation with the 3PL. Colson and Dorigo [15] present a software tool which allows the
selection of public warehouses. Their extensive list of decision criteria includes: storage surface
and volume, dangerous items, geographical distance to highway connection, certification (ISO
9001/9002, SQAS, HACCP), assistance with customs, use of technology such as RFID/Bar-
coding, modem connection, etc. Similarly, Moberg and Speh [16] study the process of selecting
3PL in order to outsource warehousing. Their empirical survey in the US shows that the most
important indicators for choosing a particular 3PL are related to responding to service requests,
quality of management, and track record of ethical performance. The three least important
criteria are investment in state-of-the art technologies, size of firm, and national market
coverage. The empirical study conducted by McGinnis et al. [17] in the US depicts that both the
firms competitive responsiveness strategy and the level of environmental hostility affect the
selection criteria. They also show that there are eight important criteria which are: on time
shipment and deliveries, superior error rates, financial stability, creative management, ability to
deliver as promised, availability of top management, responsiveness to unforeseen occurrences,
and importance of meeting performance requirements before price discussions occur.
3PL Evaluation Methods

Our literature analysis enables us to classify the various methods of 3PL selection and evaluation
according to four categories listed below:

1- Linear weighting models


2- Artificial intelligence
3- Statistical/probabilistic approaches, and
4- Mathematical programming models The most utilized approaches are linear weighting
models. These models place a weight on each criterion and provide a total score for each
3PL by summing up the 3PL performance on the criteria multiplied by their associated
weights. So et al. [20] apply the analytic hierarchy process (AHP), which is a category of
linear weighting models, to evaluate the service quality of 3PL. This service takes
account of five generic dimensions which include: tangibles, reliability, responsiveness,
assurance and empathy. Analytic Network Process (ANP) which is a more general form
of AHP is also investigated in the literature. Jharkharia and Shankar [21] use ANP as a
tool to classify the 3PL criteria selection into three levels. The first one contains strategic
criteria named determinants which include: compatibility, cost, quality, and reputation. At
the second level, the criteria which support the achievement of the upper-level
determinants also known as dimensions are also identified. These dimensions are long-
term relationship, operational performance, financial performance and risk management.
The third level criteria are named enablers. These enablers support their respective
dimensions and have some interdependencies among themselves. Meade and Sarkis [22]
use ANP for selecting and evaluating 3PL in the context of reverse logistics. The
operations activities included in the decision are: collection, packing, storage, sorting,
transitional processing, and delivery. To model uncertainty and inaccuracy of the criteria
weights, Bottani and Rizzi [23] propose the fuzzy sets theory.

OBJECTIVE OF THE STUDY


- Save Time and Money
- Ongoing Industry Expertise
- Scalability and Flexibility
- Continuous Optimization
RESEARCH METHODOLOGY

Research in general refers to the search of knowledge. One can also define research as a
scientific & systematic collection of information. In simple words research is the careful
investigation or enquiry of markets especially through search for new facts in any branch of
knowledge.

RESEARCH DESIGN

Research in common parlance refers to a search for knowledge. The formidable problem that
follows the task of defining the research problem is the preparation of the research project,
known as the research design. Decisions regarding what, where, when, how much, by what
means concerning an inquiry or a research study constitute a research design.
A research Design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure. In
fact the research design is the conceptual structure within which research is conducted; it
constitutes the blueprint for the collection, measurement and analysis of data. As such the design
includes an outline of what the research will do from writing the hypothesis and its operational
to the final analysis of data. Here, in this study, descriptive research design would be levied
because it involves observing and describing the behaviour of a subject without influencing it in
any way.

EXPLORATORY RESEARCH DESIGN

The study was Exploratory in nature, with survey method being used to complete the study.
Exploratory research aims to develop initial hunches and provide directions for any future
research needed. The primary purpose is to through light on nature of a situation and identifies
any specific objectives through additional research. It is most useful when a decision maker
wishes to better understand the situation or to identify decision alternatives.

SAMPLE DESIGN

Sampling is that part of statistical practice concerned with the selection of individual
observations intended to yield some knowledge about a population of concern, especially for the
purposes of statistical inference. Each observation measures one or more properties (weight,
location, etc.) of an observable entity enumerated to distinguish objects or individuals. In
business, sampling is widely used for gathering information about a population.

Population: population included online shopping in Dehradun region.

Sampling Element: Individual respondents were the sampling element.

Sampling Technique: Purposive sampling technique was used to select the sample.
Sample Size: Sample Size was 50 respondents.

CONCLUSION
, a literature review on 3PL selection and evaluation decision was presented. This review
shows that this decision is complex because it requires the use of several often conflicting
criteria such as price, reliability, service quality, on-time performance, etc. Also, it allows
the classification of the various approaches of 3PL selection and evaluation in four
categories namely: linear weighting models, artificial intelligence, statistical/probabilistic
approaches, and mathematical programming models. Each one of these models presents
its own advantages and disadvantages. This literature review also shows a lack of
theoretical work in 3PL selection and evaluation when compared with empirically based
studies. In particular, little attention is given to the application of mathematical models in
this field. These models are mainly used in modelling, optimization, planning and
evaluation of the integrated logistics network for 3PL. Similarly, the models based on
total cost like ABC (Activity-Based Cost) or TCO (Total Cost of Ownership) which are
used in selecting the suppliers of products, are not proposed in the case of 3PL selection
and evaluation. Further research should be undertaken to establish more mathematical
models and techniques based on cost.
REFERENCES

[1] Razzaque, M.A. and Sheng, C.C., 1998, Outsourcing of logistics functions: a literature
survey, International Journal of Physical Distribution & Logistics Management, 26, 2, 89-107.

[2] Marasco, A., 2007, Third-party logistics: A literature review, International Journal of
Production Economics, In Press, Accepted Manuscript.

[3] Delfmann, W., Albers, S. and Gehring, M., 2002, The impact of electronic commerce on
logistics service providers, International Journal of Physical Distribution and Logistics
Management, 32, 3, 203-222.

[4] Lai, K.H., Ngai, E.W.T. and Cheng, T.C.E., 2004, An empirical study of supply chain
performance in transport logistics, International Journal of Production Economics, 87, 2, 321-
331.

[5] Sink, H.L., Langley Jr, C.J. and Gibson, B.J., 1996, Buyer observations of the US third-
party logistics market, International Journal of Physical Distribution and Logistics
Management, 26, 3, 38-46.

[6] Laarhoven, P.V., Berglund, M. and Peters, M., 2000, Third-party logistics in Europe - five
years later, International Journal of Physical Distribution and Logistics Management, 30, 5,
425-442.
[7] Sohail, M.S. and Sohal, A.S., 2003, The use of third party logistics services: a Malaysian
perspective, Technovation, 23, 5, 401-408.

[8] Ko, H.J., Ko, C.S. and Kim, T., 2006, A hybrid optimization/simulation approach for a
distribution network design of 3PLs, Computers & Industrial Engineering, 50, 4, 440-449.

[9] Zpfel, G. and Wasner, M., 2002, Planning and optimization of hub-and-spoke
transportation networks of cooperative third-party logistics providers, International Journal of
Production Economics, 78, 2, 207-220.

[10] Tyan, J.C., Wang, F-K. and Du, T.C., 2003, An evaluation of freight consolidation policies
in global third party logistics, Omega: The International Journal of Management Science, 31, 1,
55-62.

[11] Ko, H.J. and Evans, G.W., 2007, A genetic algorithm-based heuristics for the dynamic
integrated forward/reverse logistics network for 3PLs, Computers & Operations Research, 34,
2, 346-366