Introduction

1.1 OBJECTIVES OF THE STUDEY

The study of this topic has been undertaken with a number of objectives.
Following are the objectives of this study:

a) To understand the concept of 3rd party logistics, various operations in 3rd party
logistics.
b) Cost and time savings for the client.
c) Ability of client to focus on core business
d) To study the warehousing, inventory management and damage control.

INTRODUCTION- ABOUT 3rd Party Logistics

Definition

“Third-party Logistics is simply the use of an outside company to perform all or part of the
firm’s materials management and product distribution function.”

THIRD PARTY LOGISTICS is an industry to which a shipper (owner of transported

goods) outsources various elements of the supply chain to perform some / all logistics
management functions including inbound freight, customs, warehousing, order fulfillment,
distribution and outbound freight.

• Initiated in 1980s when companies began looking for opportunities to improve

logistics performance.

• FedEx drew attention to 3PL service by offering JIT delivery

• FedEx success in 3PL marketplace opened it up to competition

• 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 client’s 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

3. Integrated Providers – 3PL companies that can either be asset

based or management based that supplement their services with
whatever services are needed by their clients

Types of 3PL Provider

• 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’),
Figure 1. Main components of 3PL.

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.
*Advantages and disadvantages of third party logistics

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 customer’s suppliers. And that is more than essential to a
company’s 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
company’s 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 doesn’t 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 3PL’s counter and try to charm away such
doubts. Some 3PL’s even paint the clients logos on their assets and vest their employees like the
clients ones.

1.3 Implementation issues and requirements of 3PL collaboration

Due to the fact that a 3PL to client collaboration is a typical strategic alliance, as the author
mentioned earlier in this thesis, there will be an introduction of problem areas in the practical
implementation of strategic alliances. This points are important for a successful strategic
alliance. If they aren’t fulfilled or only badly, this will lead to immense problems. And these
problems will be even more serious in the development of a strategic alliance than in a
company’s daily routine, because damaged faith in respect to the benefits and success of such an
alliance is deadly and destructive for change motivation of all people involved.

Important issues to think about, before contracting with a 3PL provider

First you have to know about your own logistics costs. Because only if you know exactly your
own costs you can compare it to the costs of a logistics provider. Often it is useful to know the
direct costs of each product and service, because sometime it makes sense to outsource only
some parts of the logistics and leave some products or operating steps untouched because the in-
house logistics is able to do better or cheaper than an external provider.[8] Another important
point is the customer orientation of the 3PL provider. The provider has to fit to the structures and
the requirements of the company. This fit is more important than the pure cost savings, like a
survey of 3Pl providers shows clearly: The customer orientation in form of adaptability to
changing customer needs, reliability and the flexibility of third party logistics provider were
mentioned as much more important than pure cost savings.[9]
Closely entangled together with the point of customer orientation is the point of a 3PL’s
specialization. The special requirements of the own company should be flow into the decision
which 3PL is the right one to choose. Experts often suggest firms to choose 3Pl providers with
roots in the same area of logistics as the department that shall be outsourced.
Furthermore it is worth to discuss if the company wants an asset-owning or a non-asset-owning
3PL Provider. 3PL provider without own assets are called lead logistics providers. Lead logistics
provider have the advantage that they have specialized industry expertise combined with low
overhead costs, but lower negotiation power and less resources than a third party provider has,
based on a normally big company size, a good customer base and established network systems.
But 3Pl providers tend to shed clients efficiency consciously by preferring their own assets in
order to maximize their own efficiency. In addition to that third party logistics provider often are
bureaucratic and have long decision making cycles caused by the size of the company.

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:

 Aims and methods for target achievement have to be set

 Milestones for important actions of the alliance project have to be set

Actions for encouragement of strengths on the one hand and methods for compensation of
weaknesses have to be planned

 Concept for the integration of alliance partners have to be developed

Critical parts of the contract have to be discussed and a for both sides responsible agreement
have to be found

 A time frame of the contract has to be given.

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 one’s livelihood is
paralyzing the working morale. The employees should be motivated and mobilized to an active
cooperation by understanding the change as a chance.

Motivation and aims of 3PL collaborations

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, aren’t 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. 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 Alfred son (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:

 FTL, or Full Truck Load

 Hotshot (direct, exclusive courier)
 Next Flight Out, sometimes also referred to as Best Flight Out (commercial airline
shipping)
 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
cold-calling 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.
Market Potential of 3rd Party Logistics
Third-party logistics (3PL) or logistics outsourcing is gaining importance as more and more
corporations across the world, unable to manage their complex supply chains, are outsourcing
logistics activities to the 3PL or logistics service providers. The 3PL market in India is least
developed and highly fragmented. However, due to the increasing awareness of the Indian firms
towards the benefits of logistics outsourcing there is an immense potential for growth of 3PL in
India.

Indian logistics industry is likely to continue its growth momentum due to the reviving fortunes
of the sector with booming end-user industries. Thus, to facilitate a better analysis of the
penetration level of 3PL logistic services across different industries in India, we have studied the
market potential of the 3PL services in four major industries including: Automobile, IT
Hardware, FMCG and Consumer Electronics till 2015. Subsequently, it has been found that the
automobile industry dominates the 3PL market with majority share, and is forecasted to remain
the fastest growing segment in Indian 3PL market.

Further, it has been revealed that storage infrastructure is the most important aspect of the
logistics industry supply chain and forms the fundamental platform for the development of
logistics industry in any market across the globe. The report also covers analysis of
Warehousing, Cold Storage and CFS/ICD (Container Freight Stations/Inland Container Depot)
industry in India. It was found that, the CFS/ICD industry is expected to register a strong growth
in future, followed by cold storage industry.

As infrastructure is the most important part of logistics industry, thus our report discusses freight
movement by roads, railways, air and ocean. Continuous improvement in logistic infrastructure
has led 3PL services to be perceived as a far better mode of controlling both internal and external
logistic processes. The report also covers brief overview of logistics parks in India along with
emerging industry trends such as Green Logistics and 4PL industry.
The report also provides profiling of the major public and private players, which will help the
clients to gain insights on their overall business and industry activities. Overall, the report is
likely to prove as a proper source of knowledge for investors and clients interested for
investment in the Indian 3PL Market.

Indian Third party logistics market has been consistent over the past few years, but it is expected
to show a tremendous change in the next few years. Growth of the sector is backed by
investment in infrastructure, globalization of manufacturing systems.
 Supply Chain Integration

Why Use 3PL?

BECAUSE SOMEONE ELSE CAN DO IT BETTER
Even if you have resources available, another organization within the supply chain may be able
to do it better, simply because its relative position in the supply chain, supply chain expertise and
economies of scale.
TO SHARE RESPONSIBILITY
3PL companies can share responsibility for managing global supply chains, keeping customers
and stores properly stocked, and delivering the perfect order every time.
TO RE-ENGINEER DISTRIBUTION NETWORKS
Logistics outsourcing can be a quick way to re-engineer distribution networks to meet global
market demands and gain a competitive edge. Did you know that you can drill into the history of
each SKU number tracked by P3PL and view when and to where every piece was shipped, when
new stock arrive and how many?

BENEFITS OF USING A 3PL

 Reduced total delivered cost for your customer

 Local expertise in new markets
 Improved customer service through shorter shipment times
 Reduced inventory costs through better management
 Cost benefits through volume shipping discounts
 Improved focus on core competency
 Increased shipment visibility
 More scalable logistics operation and cost model
 Improved variety of technology and service
 Risk reduction

WAREHOUSE MANAGEMENT
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.

Storage and shipping systems in Warehouses:

Some of the most common warehouse storage systems are:
 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.

Automation and optimization in Warehouses

Some warehouses are completely automated, and require only operators to work and
handle all the task. Pallets and product move on a system of
automated conveyors, cranes and automated storage and retrieval systems coordinated
by programmable logic controllers and computers running logistics
automation software. These systems are often installed in refrigerated warehouses where
temperatures are kept very cold to keep product from spoiling, especially in electronics
warehouse where they require specific temperature to avoid damaging the parts, and
also where land is expensive, as automated storage systems can use vertical space
efficiently. These high-bay storage areas are often more than 10 meters (33 feet) high,
with some over 20 meters (65 feet) high. Automated storage systems can be built up to
40m high.

For a warehouse to function efficiently, the facility must be properly slotted. Slotting

addresses which storage medium a product is picked from (pallet rack or carton flow),
and how they are picked (pick-to-light, pick-to-voice, or pick-to-paper). With a proper
slotting plan, a warehouse can improve its inventory rotation requirements—such as first
in, first out (FIFO) and last in, first out (LIFO)—control labor costs and increase
productivity.
Benefits of Warehousing
 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.

Warehouse Management System

A warehouse management system (WMS) is a software application that supports

the day-to-day operations in a warehouse. WMS programs enable centralized
management of tasks such as tracking inventory levels and stock locations.
WMS systems may be standalone applications or part of an Enterprise Resource
Planning (ERP) system
.
A warehouse management system (WMS) is a key part of the supply chain and
primarily aims to control the movement and storage of materials within
a warehouse and process the associated transactions, including shipping,
receiving, put away and picking. The systems also direct and optimize stock put
away based on real-time information about the status of bin utilization. A WMS
monitors the progress of products through the warehouse. It involves the physical
warehouse infrastructure, tracking systems, and communication between product
stations.

Early warehouse management systems could only provide simple storage

location functionality. Current WMS applications can be so complex and data
intensive that they require a dedicated staff to run them. High-end systems may
include tracking and routing technologies such as Radio Frequency Identification
(RFID) and voice recognition. No matter how simple or complex the application
is, the goal of a warehouse management system remains the same -- to provide
management with the information it needs to efficiently control the movement of
materials within a warehouse.
 More precisely, warehouse management involves the receipt, storage and
movement of goods, (normally finished goods), to intermediate storage locations
or to a final customer. In the multi-echelon model for distribution, there may be
multiple levels of warehouses. This includes a central warehouse, a regional
warehouses (serviced by the central warehouse) and potentially retail
warehouses (serviced by the regional warehouses).

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.

Company Profile

About Us:

Thenpandiyan Logistics Pvt. Ltd. caters to the 3PL requirements, local distribution and express
between Chennai-kanyakumari of the Customers across industries. Thenpandiyan today has a
strong customer base of Domestic Giants and New entrants.

Origin has grown from a team of few to now over 40 employees, over 30 vendors spread at
multiple locations i.e. Chennai-kanyakumari

Director Profile – Kumarasamy

Over 14 years of cross functional experience in Operations (Road Express, Bulk Transportation,
Rail transportation), Supply Chain Management (Warehousing, Local Distribution, Logistics,
Stores Management, Contract Administration). 
Currently an entrepreneur / Director of Origin Logistics Pvt. Ltd. providing Warehousing and
distribution services, with a customer base of over 160+ with major customer like Lifestyle,
Hypercity, Redington, Max and Brandhouse, expected to cross the turnover of over 2 cores in the
3rd financial year of operation. 
Worked for companies like Schenker Logistics, Pyramid Retail, Gati, Elbee . 

Some of the Customers who using 3rd Party Logistics Services at Origin Logistics Pvt. Ltd.

1. Keeda Sunglasses :

About The Organization:

Brand “Keeda” is the fashion accessory brand of Chrysal Fashions Pvt. Ltd. a Chrysal
Group company.

Chrysal Group operates with the attitude and motto “Open Minds, Open Doors”.
The corporate motto embodies the Group’s passion for ‘investing in new ideas’.

Whether it be Realty, Hospitality, Media or Fashion what sets Chrysal Group’s ventures
apart is the fresh outlook with which each business is approached.
Our first launch under the brand Keeda is in the eyewear category.

WHAT IS BRAND KEEDA?

 That fire in the belly that motivates you to be someone, pushes you to do something be
seen and heard.
 Literally the worm.
 Metaphorically, the persona of an individual.
 In a manner the brand seeks to be more than just a fashion accessory, and be that all-
important statement one would want to be seen in.
 Eyewear by KEEDA
 By design, by color, by shape, by material KEEDA sunglasses will be an eye-opener for
those who want to see the world differently.
 Sturdy, snazzy & trendy. Keeda launches its eyewear in the market by combining the
latest from optical technology and style. Made from high performance lenses and
lightweight frames, every Keeda eyewear ensures a snug and a comfort fit.

R Chrystal Fashions India Pvt. Ltd.

Vision:
To be an enterprise that pursues ides that have the potential to be rewarding business and
social ventures that offers value to the society.

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.

Industry Profile
Outsourcing Development of Logistics Services and Network

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.
 Third Party Logistics in India

Ever since the liberalization of its economy India has been on a path to become one
of the top economic powers in the world. New avenues for progress and
development have opened up; manufacturing and retail sectors gained popularity
because of the changes in China’s export policy of not exporting manufactured
items, from which Indian manufacturing firms have benefitted. Hence this sector
will contribute to GDP significantly in the long run. The growth and
competitiveness in these two sectors largely depend on the efficiency of the
logistics operations that facilitate the companies’ ability to reach out to their
customers quickly and at the desired location. Realizing this many manufacturers
and retailers are now restructuring their supply chain processes in a manner to
incorporate partnerships with expert supply chain service providers and
outsourcing such activities as domestic transportation, international transportation,
customs brokerage, warehousing, forwarding, cross-docking, product labeling,
packing, assembly, kitting, reverse logistics, freight bill auditing and payment, IT
services, fleet management, supply chain consultancy services provided by 3PLs,
order entry, processing and fulfillment and limited liability partnership (LLP)/4PL
Service.

Currently 3PL services are in their nascent stage in India. Third party logistics will
gain considerable share of the logistics sector because of the following compelling
facts.

 Globally, the logistics industry is valued at US$3.5 trillion and the Indian
logistics industry is currently estimated at US$90 billion (CII)1.
 The industry has generated employment for 45 million people in the
country in comparison with the IT and ITES sector, which employs
approximately 4.3 million people1.
 As per the World Bank Survey, India ranks 39th in terms of the logistics
performance index and indicators, with Singapore on top, the UK, USA
and China in 9th, 14th and 30th positions, respectively. India spends
US$1,148 in handling costs to import one cargo container and US$820 to
export it. In comparison, Singapore spends US$367 per imported
container and China US$390, according to a World Bank study1.
1
  India spends 13% of its GDP on logistics compared to an average of 10%
in developed countries, while the U.S. spends just 8%. Better supply
chain management has reduced logistics costs by nearly 1% in 10 years1.
 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.

2
Comparative Analysis of 3PL in India and the U.S.

Parameter USA India

Usage of 3PL 71% 55%
Common activities Warehousing (73.7%) Outbound Transportation (55%)
outsourced Outbound Transportation (68.4%) Inbound Transportation (52%)
Freight bill payment (61.4%) Custom clearing and forwarding (51%)
Inbound warehousing (56.1%)
Reasons for not Control would diminish (63%) Poor infrastructure of provider (81%)
outsourcing Costs would not be reduced (63%) Inability to respond to changing needs
(81%)
Service commitment would not be Unreliable promised from providers
met (48%) (80%)
Logistics is a core competency Concerns about capability of providers
(44%) (77%)
Necessity of e- 72% 67%
commerce
Collaborative 82% 14%
relationship
Gain sharing is 80% 6.6%
important for
relationship

Considerable amount of research on the topic of the implementation of 3PL in different countries
has been published in academic and trade journals. Viewpoints of both users and service
providers have been considered to identify the major issues, industry dynamics, current status
and future prospects of the 3PL industry. However most of the research is descriptive in nature
and does not go into in-depth statistical analysis of survey data. In the present study Indian 3PL
providers’ service dimensions are analyzed in terms of the key success factors and growth
strategies using various statistical tools.

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 provides a list of recent contributions that address the reasons for
outsourcing logistics activities.

Reasons for outsourcing logistics activities.

Author, (Year) Objective Conclusion

Sheffi, (1990) Understand the The main motives are to focus on
motives for the  Core businesses
growth of logistics  Better transportation solutions
outsourcing in USA  Cost savings and improved
services
 Development of necessary
Maltz, (1994) Establish relative The technological expertise
study determined that and
impact of cost and organizations are reluctant to use
services on the third party warehousing due to
Author, (Year) Objective
decision to outsource Conclusion
customer service considerations.
Rao & Young, Identify the factors The study identified factors such as
(1994) influencing  Centrality of the logistics
outsourcing of function
logistics functions  Risk and control
 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
network-related (e.g. countries
served) drivers are believed to
have an indirect influence in
the outsourcing decision
Daugherty et al., Study the perception The service users believe that they
(1996) of the third party are getting benefits like reduction
logistics service users in inventory levels, order cycle
van Damme et al., Examine outsourcing The “do
times, or times
lead buy” decision is also
and improvement
(1996) logistics management affected by evaluation of
activities cost/service trade-offs. One
important determinant of the
decision is cost comparison
between alternative options. Costs
associated with performing
Sink & Langley, Develop a managerial logistics activities
Concentration in-house
towards and
the core
(1997) framework for the competencies was the most
acquisition of third important factor for the acquisition
Bhatnagar et al., party logistics
Find out factors for of
Thethird party
major logistics
reasons services.
to outsourcing
(1999) decision-making of logistics activities were cost
process for choosing saving (86.8%), customer
Bhatnagar and Ascertain benefits of The manufacturing firms got the
Viswanathan, (2000) alliance between advantage of reduction in inventory
manufacturing and levels, order cycle times, lead
Bask, (2001) Study
global benefits
logisticsof The
timescustomer satisfaction
and improvement in increases
outsourcing the significantly and provides access to
Persson and Virum, logistics activities.
Study growth international distribution
Forming relationships networks.
with 3PL
(2001) strategies for logistics providers is an efficient and
service providers effective means of achieving the
Sohail & Sohal, Examine the reasons The major
required reasonswithout
services reported are
investing
(2003) for outsourcing  Cost savings
logistics activities in  Improved services
Malaysia  Better transportation solutions
 Better professionalism

Author, (Year) Objective Conclusion

Wilding & Juriado, Determine customer The main reasons for outsourcing
(2004) perceptions on the logistics activities are
logistics outsourcing  Competencies of 3PLs
in the European  Operating flexibility
consumer goods  Cost reduction
industry  Focus on core businesses

Aktas & Ulengin, Review the reasons
(2005) for outsourcing
logistics activities in
Turkey
Simchi-Levi et al., Determine the effect
(2008) of outsourcing of
logistics on the
management of the
supply chain.
Turkish firms basically outsource
the transportation activities to
reduce the operating costs.
The most important reason for
outsourcing is that it allows a
company to focus on its core
competencies and hence on
customer requirements.

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.

Table 3 Impact of outsourcing logistics activities.

Factor Indentified by
Impact on customer satisfaction Gooley (1992); and Lieb et al. (1993)

Impact on logistics system performance Lieb et al. (1993) and Dapiran et al. (1996) and Bhatnagar
et al. (1999)
Reduction in capital investment in facilities Foster and Muller (1990) and Richardson (1992, 1995)

Reduction in capital investment in
equipment
Reduction in investment in information
technology
Impact on employee morale
Reduction in manpower cost
Improvement on specific logistics function
parameters
Improvement in inventory turnover rates
Fantasia (1993), Foster and Muller (1990) and Richardson
(1992)
Goldberg (1990), Sheffi (1990), Trunick (1990) and
Fantasia (1993)
Bowersox (1990) and Dapiran et al. (1996)
Foster and Muller (1990) and Richardson (1992, 1995)
Minaham (1997) and McMullan (1996)
Richardson (1990, 1995)
 In UK there is several research studies are made on 3 rd 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 develop a research agenda for this field of study.

Design/methodology/approach – The proposed 3PL research classification framework is

based on a comprehensive literature review, which concentrates on peer-reviewed journal
papers published within the period 1990-2005. A total of 114 academic sources have
been retrieved and analyzed in terms of research purpose and nature, method employed,
theoretical approach and level of analysis.

Findings – The review reveals that 3PL research is empirical-descriptive in nature and
that it generally lacks a theoretical foundation. Survey research is the dominant method
employed, reflecting the positivist research tradition within logistics. It identifies certain
knowledge gaps and develops five propositions for future research. It suggests that focus
should be directed towards more normative, theory-driven and qualitative method-based
studies. It also argues that further empirical research in relation to 3PL
design/implementation and fourth party logistics services is needed.

Originality/value – This paper fulfils an identified need for a comprehensive

classification framework of 3PL studies.

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. 

3.1Type 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 100 third party logistics providers’
employees. 89 of the replies could be used for the analysis.
Tools of Analysis

In study I used factor analysis, SERVQUAL and AHP. The stages of the research
process are shown in Figure

Industry Review Literature Review

Research Issue

Research Questions

First Version

Development of Questionnaire

Final Version

Data Collection

Data Analysis

Conclusion
Data Analysis

To identify the success factors of Indian 3PL firms and its relative importance. 

Table KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. 0.769

Bartlett's Test of Approx. Chi-Square
3167.333
Sphericity
Df 325
Sig. .000

Table Rotated Component Matrix (a)

Component

1 2 3 4 5 6 7 8

Q1 .504
Q2 .431
Q3 .760
Q4 .417 .502
Q5 .639
Q6 .488 -.407
Q7 .646
Q8 .505
Q9 .813
Q10 .739
Q11 .555 .419
Q12 .699
Q13 .647
Q14 .639
Q15 .823
Q16 .815
Q17 .772

.457
Q18
Q19 .514 .491
Q20 .658
 Q21 .731
Q22 .643
Q23 .742
Q24 .676
Q25 .688
Q26 .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.

Table Factor Matrix

Eigen Value

Factor Factor Name % of Items Items

No. Total Variance Loading

Realized Cost Reduction 0.823

Geographical Coverage 0.814

1 Reduced Cost 5.997 23.065
Experience as a 3PL Provider 0.739

Continuous Improvement 0.635

Knowledge Based Skills 0.742

Project Management Skills 0.676

Operational Global Capabilities 0.646

2 3.356 12.909
Performance Skilled Logistics Professionals 0.643

Real Time Access to Information 0.555

Route & Load Optimization 0.514

3 Information 1.625 6.250 Enterprise Resource Planning 0.699

Technology System
Online Tracking System and
0.688
Transaction System

Transportation Management System 0.639

Warehouse Management System 0.488

 Use of RFID Technology 0.431

Breadth of Service Offered 0.647

Integration among Internal 3PL

0.639
4 Versatility 1.379 5.305 System

Flexibility & Adaptability 0.505

Focus on specific Industry 0.504

Speed of the Delivery 0.731

5 Quality Management 1.249 4.802 Availability of Data on Time 0.658

Product Returns & Repair 0.457

Compatibility with the

6 1.161 4.467 Good Relationship with Service user 0.813
Users

Investment in IT Systems 0.760

7 Fixed Assets 1.098 4.225
Investment in Quality Assets 0.502

Performance Management of Key Performance

8 1.023 3.935 0.772
Measurement Indicators

5.2 Analysis of the gap between achievement and expectation

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

Sr. Factor Company Service

Success Variable Gap
No. Importance Importance Quality
1 Realized Cost Reduction 4.40 4.20 -0.20 Weak

2 Geographical Coverage 4.50 3.90 -0.60 Weak

3 Experience as a 3PL Provider 4.30 4.20 -0.10 Weak

4 Continuous Improvement 4.50 4.60 0.10 Strong
5 Knowledge Based Skills 4.10 4.50 0.40 Strong
 6 Project Management Skills 3.80 4.00 0.20 Strong
7 Global Capabilities 4.20 4.20 0.00 Neutral
8 Skilled Logistics Professionals 4.30 4.00 -0.30 Weak

9 Real Time Access to Information 4.10 4.00 -0.10 Weak

10 Route & Load Optimization 4.10 3.90 -0.20 Weak

11 Enterprise Resource Planning 3.80 3.40 -0.40 Weak
Online Tracking System and
12 4.20 3.90 -0.30 Weak
Transaction System
13 Transportation Management System 3.60 3.20 -0.40 Weak
14 Warehouse Management System 3.90 3.60 -0.30 Weak
15 Use of RFID Technology 2.90 2.40 -0.50 Weak
16 Breadth of Service Offered 4.30 4.10 -0.20 Weak
17 Integration among Internal 3PL System 4.10 3.90 -0.20 Weak
18 Flexibility & Adaptability 4.40 3.90 -0.60 Weak
19 Focus on specific Industry 4.30 4.30 0.00 Neutral
20 Speed of the Delivery 4.00 3.90 -0.10 Weak
21 Availability of Data on Time 4.10 4.20 0.10 Strong
22 Product Returns & Repair 3.80 3.00 -0.80 Weak
23 Good Relationship with Service user 4.60 4.40 -0.20 Weak
24 Investment in IT Systems 3.70 3.50 -0.20 Weak
Sr. Factor Company Service
Success Factor Gap
No. Importance Importance Quality
1 Reduced Cost 4.425 4.225 -0.200 Weak
2 Operational Performance 4.100 4.100 0.000 Neutral
3 Information Technology System 3.680 3.300 -0.380 Weak
4 Versatility 4.275 4.050 -0.225 Weak
5 Quality Management 3.967 3.700 -0.267 Weak
6 Compatibility with the Users 4.600 4.400 -0.200 Weak
7 Fixed Assets 3.700 3.450 -0.250 Weak
8 Performance Measurement 4.20 4.40 0.20 Strong

5.3 Prioritizing the growth strategies and their relative importance

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 maker’s
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.

Description of the Model:

Growth strategies have been determined through literature review and the relevant attributes have been
selected for the AHP model for the selection of growth strategies. The attributes are:

1. Direct Investment [DI]

 Merger & Acquisitions [MA]

 Alliance [AL]

 RFID & IT [RI]

 Regional Expansions [RE]

2. Service Portfolio [SP]

 Broadening Service Lines [BS]

 Industry Specialization [IS]

 Global Service [GS]

 Integration [IN]

 Supply Chain Security [SS]

 Quality of Services [QS]

3. Green Supply Chain [GS]

4. 3PL User/Provider Relationship [UP]

 GOAL Growth Strategy

CRITERIA

DI UP GS SP

SUB CRITERIA

MA AL RI RE BS IS GS IN SS QS

RNATIVES

Unique Air Express

RAS, India AFL Pvt. Ltd FEDX