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IJPDLM
41,9
822
International Journal of Physical
Distribution & Logistics Management
Vol. 41 No. 9, 2011
pp. 822-838
q Emerald Group Publishing Limited
0960-0035
DOI 10.1108/09600031111175807
Customer-specific adaptation by
providers and their perception
of 3PL-relationship success
Rudolf O. Large, Nikolai Kramer and Rahel Katharina Hartmann
Department of Business Logistics, University of Stuttgart, Stuttgart, Germany
Abstract
Purpose – The purpose of this paper is to investigate whether there is an impact, from a provider’s
perspective, of customer-specific adaptations by third-party logistics (3PL) providers on the success of
3PL-relationships.
Design/methodology/approach – A document analysis is presented and hypotheses are developed
based on research in 3PL, relationship marketing and transaction cost theory. Structural equation
modelling and causal analysis with partial least square were used to test the hypotheses.
Findings – This study provides evidence that customer-specific adaptation by providers is an
important prerequisite to 3PL-performance. Furthermore, according to the transaction cost theory, the
results express the importance of providers’ adaptation to maintain 3PL-relationships.
Research limitations/implications – Further research should compare customers’ perceptions of
partner-specific adaptations and 3PL-relationship success with the results of this study.
Originality/value – The paper shows that 3PL-providers should adapt their systems and procedures
to customers’ specific requirements, to ensure high-relationship performance. Satisfied customers
should promote the providers’ adaptations, because these adaptations enhance the probability of
contract renewal and reduce the risk of providers’ unexpected termination of the contract.
Keywords Logistics management, Supply chain management, Adaptability, Third-party logistics (3PL),
Customer-specific adaptations, Relationship performance, Satisfaction, Loyalty
Paper type Research paper
Introduction
Logistics service providers have encountered growing competitive pressures
throughout the last decade (Persson and Virum, 2001; Yeung et al., 2006). Especially,
in recent years the traditional transportation market has faced a dramatic slowdown
(Klaus et al., 2009), marked by stagnating or shrinking volumes. This has led to
overcapacity, and low margins in turn increasing problems with returns and financing
(Klaus et al., 2009). Within this challenging environment logistics service providers tend
to additionally suffer from a high degree of replaceability as their traditional services
are simple and not customized. Therefore, logistics service providers need to focus on a
strategic reorientation towards differentiation and encourage service innovation in
order to reach a higher degree of customer orientation and offer more complex and
customer-specific services (Panayides, 2004; Ellinger et al., 2008). Transforming into a
third-party logistics (3PL) service provider that offers a bundle of customized logistics
services (Rabinovich et al., 1999; Maltz and Ellram, 2000) provides opportunities to enter
a growing market with higher margins, than obtainable in the traditional transportation
market (Lai, 2004; Klaus et al., 2009).
In comparison to traditional transport and warehousing services, 3PL “are more
complex, encompass a broader number of functions, and are characterized by longer-term,
more mutually beneficial relationships” (Africk and Calkins, 1994). Hertz and Customer-
Alfredsson (2003) emphasize the importance of the ability to solve problems and the specific
ability to undergo customer adaptations. Both characteristics are used to differentiate
between 3PL-providers and traditional logistics firms. Furthermore, Hertz and Alfredsson adaptation
develop a typology of 3PL-providers based on these characteristics. These business
models of 3PL are essentially based on the creation of customer-specific services and
hence on adaptations by providers. Such a creation of specificity in logistical services 823
leads to a deeper integration and decreases the providers’ replaceability.
While there are various characteristics of 3PL-service providers, Hertz and
Alfredsson (2003) point to specific adaptation as a key capability. Specific adaptations
to customers’ systems and procedures as well as extensive monitoring and reporting
responsibilities are natural in 3PL-relationships. 3PL contracts can include detailed
stipulations concerning a provider’s responsibilities (van Hoek, 2000) and many
3PL-providers complain about one-sided adaptation to customers’ systems and
procedures (Lieb and Bentz, 2005). For example, the customer insists on a specific
location, demands specific procedures, expects the usage of their equipment or requires
the provider to report a specific set of key performance indicators. Following these
circumstances the research question of this paper emerges as follows:
RQ1. Is there any influence of 3PL-providers’ customer-specific adaptations on their
perception of the success of a specific business relationship and if indicated,
how strong is this relationship?
Analysis draws upon literature on 3PL, transaction cost theory and relationship
marketing to deduce constructs covering the wide-ranging concept of relationship success
and to analyze the role of customer-specific adaptations in the 3PL-service industry.
In addition, studies of tender documents have been conducted to identify the required
degree of customer-specific adaptations. Both sources – literature and documents – were
used to create a set of hypotheses, because hypotheses tend to be more stable and reliable
due to their consideration of different categories of sources (Ellram, 1996). A sample of
3PL-providers was drawn to collect data on relationship success and customer-specific
adaptations. Structural equation modelling (SEM) was applied to test the hypotheses.

Literature
The following literature studies focus on 3PL, transaction cost theory and relationship
marketing. In general, there is a lack of theoretical foundations in research of 3PL
(Selviaridis and Spring, 2007). Most of the previous studies have focused on outsourcing
and have, therefore, taken customers’ perspective on 3PL-relationships (Lieb and
Kendrick, 2002). Relationship marketing was chosen, because general insights into
the nature of supplier-customer relationships can be transferred to the topic of 3PL-
relationships. Transaction cost theory deals with the effects of specific investments on
the efficiency of business transactions. Therefore, a better understanding of the impact
of adaptations on provider-specific assets can be expected. As a prerequisite, the
definition of what constitutes success in 3PL-relationships should be discussed in detail.

Providers’ perception of 3PL-success

In general, success could be understood as the degree of goal accomplishment in
3PL-relationships. As accepted in marketing science, success is conceptualized
IJPDLM in a broader sense covering the performance of the relationship as well as the
41,9 satisfaction and the loyalty of the business partners (Oliver, 1997). In this research, each
of these constructs is configured from a provider’s point of view. Consequently, this
research focuses equally on the relationship performance as perceived by the provider
as well as on the provider’s loyalty to and satisfaction with the 3PL-relationship.
Most of the previous research focused on customers’ perceptions of 3PL-performance
824 (Knemeyer and Murphy, 2005). From a customer perspective Knemeyer and Murphy
(2004) define 3PL-performance as the “perceived performance improvements that the
logistics outsourcing relationship has provided the user”. Performance improvements
include, e.g. reduced logistics costs, reduced cycle times, more efficient handling of
exceptions and improved system responsiveness (Knemeyer and Murphy, 2004;
Sinkovics and Roath, 2004). These factors are inadequate to define performance from the
providers’ perspective. At first glance, the logistics service providers’ performance
could be measured in terms of growth in market share, growth in return on investment
and growth in annual sales (Sum and Teo, 1999; Ellinger et al., 2008). On closer
examination, these indicators are also not suitable, for this research paper as it focuses
on specific 3PL-relationships and their performance rather than business performance
of a logistics service provider in general. Therefore, a broader measurement of
“perceived relationship performance”, covering the overall perception of the provider
instead of general figures of business performance is necessary. Consequently, in this
research a reflective four-item scale of Stank et al. (1996) was modified and used to
measure the outcomes of a specific business relationship as perceived by the provider:
(1) My firms association with this customer has been a highly successful one
(PERF1).
(2) This customer leaves a lot to be desired from an overall standpoint (PERF2).
(3) If I have to give this customer an appraisal for the past year, it would be
outstanding (PERF3).
(4) Overall, I would characterize the results of my firm’s relationship with this
customer as having exceeded our expectations (PERF4).

Previous literature focuses on customer evaluation of satisfaction with logistics

partnerships (Gibson et al., 2002). Accordingly, Stank et al. (2003) for instance describe
customer satisfaction in 3PL-relationships as a customer’s contentedness with the
overall relationship with their provider. In the context of logistical partnerships
Gibson et al. (2002) emphasize the importance of satisfaction of both partners in order to
generate a sustainable relationship. In general, it can be assumed that providers’
satisfaction depends on their expectations vs the degree of actual goal achievement.
Considering providers’ motivations for entering the 3PL-market, higher margins and
customer retention rates are assumed to be important factors influencing provider
satisfaction. Hofmann (2009) points to the importance of efficient operational processes
and punctual payments for providers to be satisfied. Additional factors indicating
provider satisfaction with 3PL-relationship can be considered. Gibson et al. (2002) for
example prove that the level of trust, the total cost, and the flexibility of shipper-carrier
partnerships are important indicators that characterize the degree of provider
satisfaction. Therefore, to operationalize provider satisfaction, a formative scale that
covers the totality of these indicators could be applied. In contrast, provider satisfaction
much like customer satisfaction is a latent variable or in other words an intrinsic Customer-
construct. It was concluded that direct measurement with formative scales is not specific
appropriate and hence a modified combination of proven reflective satisfaction scales,
common in relationship marketing and logistics was employed in this research (Cannon adaptation
and Perreault, 1999; Daugherty et al., 1998):
.
Our firm regrets the decision to do business with this customer (SAT1, reverse).
.
Overall, we are very satisfied with this customer (SAT2).
825
.
We are very pleased with this customer’s compensation (SAT3).
.
Our firm is not completely happy with this customer (SAT4, reverse).
.
If we had to do it all over again, we would still work for this customer (SAT5).
.
We are delighted with our overall business relationship with them (SAT6).
.
We wish more of our customers were like this one (SAT7).
.
It is a pleasure to deal with this customer (SAT8).
.
There is always one problem or another with this customer (SAT9, reverse).

Loyalty is a valuable concept reflecting the long-term success of a relationship

(Daugherty et al., 1998). Since customer loyalty is one of the central constructs in
consumer marketing, there are countless approaches to loyalty operationalization
(Bandyopadhyay and Martell, 2007). Oliver (1997, p. 392) defines customer loyalty as:
[. . .] a deeply held commitment to rebuy or repatronize a preferred product or service
consistently in the future, despite situational influences and marketing efforts having the
potential to cause switching behavior.
In the 3PL-industry, customer loyalty stands for the commitment of the customer to
maintain the relationship and if necessary to renew the contract. In a broader sense
loyalty points out the mutual relatedness between the provider and the customer.
Therefore, loyalty reflects the commitment of both partners. Consequently, provider’s
loyalty covers the commitment of the provider to continue and support the business
relationship to the customer. Along the lines of common loyalty scales in the logistics
business (Daugherty et al., 1998; partly based on Morgan and Hunt, 1994) an adapted
reflective scale of providers’ loyalty was built for this research:
.
The relationship that my firm has with this customer is something we are very
committed to (LOY1).
.
The relationship that my firm has with this one is something we intend to
maintain indefinitely (LOY2).
.
The relationship that my firm has with this customer deserves our maximum
effort to maintain (LOY3).
.
Maintaining a long-term relationship with this customer is very important to my
firm (LOY4).

Customer-specific adaptations by the provider

As shown above, 3PL consist of recurrent, complex services based on a long-term
contract between a provider and a customer. For such settings, the transaction cost theory
predicts the existence of specific investments by the provider (Williamson, 1979, 2008).
IJPDLM The transaction cost theory highlights specific investments as a decisive factor on the
41,9 level of transaction costs and the business relationship contract. Therefore, transaction
cost theory is of vital importance to gain a better understanding of 3PL-relationships
(Maloni and Carter, 2006). Asset specificity indicates “a specialized investment that
cannot be redeployed to alternative uses or by alternative users except at a loss of
productive value” (Williamson, 1996, p. 377). Transaction-specific assets invested by the
826 provider enable the usage of efficient processes and procedures to generate third-party
services (Williamson, 1996). Furthermore, asset specificity is a precondition to meet the
specific requirements of the customer and to efficiently support recurrent transactions
(Williamson, 1984, 1985). Williamson distinguishes at least four important types of asset
specificity: site specificity, physical asset specificity, human asset specificity and
dedicated asset specificity (Williamson, 1984, 1991).
Following Williamson (1985) 3PL contracts can be characterized by a recurrent
frequency and a high level of asset specificity. Table I displays the relationship among
frequency of exchange, asset specificity and logistics contract characteristics. Detailed
and long-term agreements (hybrid contracting) like third-party contracts are necessary
to safeguard these specific investments and to reduce the risk of opportunism
(Williamson, 2008). Additionally, if the frequency of service transactions is low it is
difficult to recoup investments made in the 3PL-relationship. Therefore, 3PL contracts
are not appropriate for transactions with an occasional frequency. van Hoek (2000)
proved that customer-specific 3PL arrangements including services such as final
assembly, display building or special warehousing activities are positively related to the
existence of detailed contracts. In conclusion, transaction cost theory predicts intensive
investments by 3PL-providers as a prerequisite to meet the customer’s requirements and
to realize high-relationship performance.
Generally, relationship marketing has emphasized the importance of behavioral
adaptations by sellers to customers’ systems and procedures. Cannon and Perreault
(1999) developed a typology of customer-supplier relationships from a variety of
characteristics which can be regarded as “relationship connectors”. These relationship
connectors are: information exchange, operational linkages, legal bonds, cooperative
norms, adaptations by sellers, and adaptations by buyers. Based on relationship
marketing, partner-specific adaptations can be regarded as important characteristics of
close relationships. Two types of relationships with extensive adaptations were detected
by Canon and Perreault (1999). The first one is the “customer is king” type which
involves intensive adaptations only by the seller. The second type of relationship is
“mutually adaptive” which requires adaptations by both the seller and the supplier.
Ellinger et al. (2008) generally emphasize the importance of customer orientation of
logistics service provider. The business model of 3PL is essentially based on the
creation of customer-specific services and hence on adaptations by the provider.

Frequency No
Table I. Occasional Contract of carriage
Asset specificity and
logistics contract Recurrent Contract of carriage/
characteristics warehousing contract
Asset specificity
Medium High
Forwarding contract Forwarding contract/contract of
employment
Forwarding contract/ Third-party logistics contract/
cooperation agreement contract of employment
Specific adaptations to the systems and procedures of the customer as well as Customer-
extensive monitoring and reporting responsibilities are natural. 3PL contracts can specific
include detailed stipulations concerning a provider’s responsibilities (van Hoek, 2000)
and many 3PL-providers complain about one-sided adaptations to customer’s systems adaptation
and procedures (Lieb and Bentz, 2005). In many cases, the customer insists on a specific
location, demands specific procedures, expects the usage of his equipment or requires
periodical reports of specific key performance indicators. Consequently, Hertz and 827
Alfredsson (2003) emphasize the ability of customer adaptations as a crucial
characteristic of 3PL-providers.
In summary, the construct of providers’ adaptations covers both the investments in
specific assets and the behavioral adaptations by the provider. Therefore, a reflective
scale covering both issues was used to measure the degree of providers’ adaptations.
This scale is adapted based on items used by Knemeyer and Murphy (2004) and
Sharland (1997):
.
We have gone out of our way to link us with the customer’s business (PSPEZ1).
.
We have tailored our services and procedures to meet the specific needs of this
customer (PSPEZ2).
.
We would find it difficult to recoup our investments in this customer if the
relationship were to end (PSPEZ3).
.
We made considerable investments in tools and equipment in our relationship
with this customer (PSPEZ4).
.
Gearing up to deal with the customer required highly specialized tools and
equipment (PSPEZ5).

Documents study
Organizational documents are a source of insights into organizational relationships
and are an expression of the interactions in terms of problems and behaviors between
different parties (Forster, 1995). Especially since documents as written texts are capable,
in a very truthful manner to reveal the reality of business activity (Hodder, 2000). The
application of a qualitative research method allowed for a beneficial combination with
the subsequent use of a quantitative approach, from which a broader perspective on
the research phenomena emerged (Frankel et al., 2005). However, analyzing documents
leads to issues with interpretation and subjectiveness (Forster, 1995; Hodder, 2000).
Document studies of tender documents have been conducted to evaluate
the required degree of customer-specific adaptations in the 3PL-business. Altogether
15 tender documents (requests for quotation) have been analyzed. Two major European
3PL-companies made these documents available to the author. The subject of eight
documents is customer-specific distribution and warehousing. Seven documents are
requests for physical supply and logistics in manufacturing, e.g. sequencing activities
and materials handling. Most of the customers belong to the automotive industry.
Typically, a request for quotation consists of a main text of more than 50 pages that
describes the basic conditions and the specific customer requirements. Additionally,
most of the requests include an extensive appendix. Examples are warehouse layouts,
annual demand figures and performance indicators of the existing equipment. Each
document describes an individual case and has individual structure and style.
IJPDLM In accordance, the qualitative method of explorative document analysis was applied
41,9 (Frankel et al., 2005; Spens and Kovàcs, 2006).
The analysis focused on the content of the described documents.
Adopting qualitative content analysis as a research method (Ryan and Bernard,
2000), the available documents were analyzed systematically and theory-guided and
processed with the required openness of the researcher (Marasco, 2008; Kohlbacher,
828 2006). The systematic frame of this document study was based on the findings obtained
by discussing transaction cost theory, 3PL-literature and relationship marketing. In
detail, this systematic frame consists of four content categories, as follows: required
specificity (site specificity, physical asset specificity, and human asset specificity), the
intended procedure of performance evaluation, the expected behavioral adaptation by
the provider and the willingness of the customer to adapt to the provider.
Analyzing the documents, the considerable amount of (required) site specificity
is striking. Most customers insist on a specific location or at least stipulate that
the warehouse must be located in proximity of their own manufacturing facilities.
Most customers expect specific investments by the provider such as warehouses,
warehousing equipment or computer systems. This highlights that physical asset
specificity is a frequent characteristic of 3PL-relationships. For outsourced tasks, the
provider is typically requested to use the customer’s existing assets. Likewise, human
asset specificity is a recurring requirement throughout. Typically, there is a need for
additional personnel at the desired location, or at least a need for training in order to meet
the specific requirements of the customer. As expected, most customers place specific
demands on the service provider concerning performance measurement and reporting.
The vast majority of the documents illustrate the amount one-sided adaptations by
the 3PL-provider.

Hypotheses
Provider capability of customer adaptation is a crucial characteristic of 3PL-business
(Hertz and Alfredsson, 2003) and thus a requirement of 3PL-business relationships.
Customers of 3PL firms expect tailored logistical solutions (Sink et al., 1996).
The document study shows that specific adaptations by the provider to the customer’s
systems and procedures seem to be a matter of course. A provider’s capability and
willingness to adapt are also prerequisites to transaction-specific investments made by
that provider. Following transaction cost theory, specific assets improve the
performance of 3PL-relationships, because specific assets enhance the productivity of
logistical activities in comparison to general purpose technology (Williamson, 1996,
2008). Consequently, 3PL-providers should understand and recognize the necessity of
specific adaptations to the customer. These ideas suggest the following hypothesis:
H1. The provider’s perception of 3PL-relationship performance is positively
influenced by the degree of their own specific adaptations.
Transaction cost theory indicates that intensive investments can be construed
as means to stabilize business relationships, because “transaction-specific assets can be
redeployed to alternative uses and users only at a loss of productive value” (Williamson,
2008, p. 8). Providers expect ongoing relationships and a continuous use of their specific
investments. The higher the degree of specific investments and adaptations the higher
are the switching costs and the degree of the provider’s loyalty towards the relationship.
Asset specificity contributes to the commitment of both parties, resulting in a trustful Customer-
relationship between the partners. Kwon and Suh (2004) proved that supply chain specific
partners’ investments increase the level of trust between the partners, because these
investments are perceived as a signal of commitment. Therefore, the effect of providers’ adaptation
adaptations on the degree of loyalty is assumed as being positive:
H2. The provider’s loyalty is positively influenced by their own specific 829
adaptations.
The positive relationship between performance and customer satisfaction is a widely
recognized phenomenon in consumer marketing as well as in business-to-business
relationships (Patterson et al., 1997; Homburg et al., 2002). Similarly, the satisfaction of
the provider with the business relationship is essential too. A significant level of
provider satisfaction is a prerequisite to facilitating an enduring effort to provide
outstanding logistical service by the provider. On the other hand, satisfaction is the
result of an ongoing evaluation of the perceived outcome of the 3PL-relationship.
Consequently, it can be suggested that a high level of perceived performance exerts
a positive influence on the degree of customer satisfaction as well as on the degree of
provider satisfaction. For that reason a positive relationship between the perceived
performance and the satisfaction of the provider is assumed:
H3. The provider’s satisfaction is positively influenced by the perceived
relationship performance.
In a broad sense loyalty indicates the reciprocal relatedness between the customer and
the provider in a 3PL-relationship. Relationship commitment is fundamental to the
concept of loyalty (Daugherty et al., 1998). Provider loyalty therefore stands for the
commitment of the provider to support the ongoing 3PL-relationship. In marketing
research customer satisfaction is recognized as a main influence on customer loyalty
(Luo and Homburg, 2007; Seiders et al., 2005). In a figurative sense a high level of
provider satisfaction is an important precondition of the willingness to maintain and
continue the relationship by the provider. This analogy suggests the following
hypothesis:
H4. The provider’s loyalty is positively influenced by the provider’s perceived
satisfaction.
The influence of specific investments and adaptations on the satisfaction of partners in
business relationships is assumed to be contradictory. On one side, 3PL-relationships
based on specific investments and adaptations by the provider meet customers’ special
requirements efficiently. Specific adaptations are thus at the core of the business and
a crucial element of 3PL-relationships from the provider’s point of view. Therefore,
an indirect positive influence of the degree of adaptations on providers’ satisfaction
mediated by the level of performance is reasonable (H1 and H3). In contrast, many
3PL-providers complain about one-sided adaptations to customers’ systems and
procedures (Lieb and Bentz, 2005). The providers associate a higher degree of
customer-specific adaptations with additional costs and a growing dependence on their
customers. Consequently, they feel uncomfortable with a high degree of own adaptations
in addition to a substantial amount of asset specificity. To cover this phenomenon
IJPDLM the suggested model includes a direct negative influence of adaptations on providers’
41,9 satisfaction. This leads to the last hypothesis:
H5. A provider’s satisfaction with the 3PL-relationship is negatively influenced
by his own specific adaptations.

Methodology
830 SEM with partial least square
The five hypotheses derived in the previous section indicate a closely connected set of
relationships between the theoretical constructs that form this research. The employed
constructs are not directly observable or measurable. To account for each theoretical
construct it is necessary to define the reflective multi-item scales involved (Hair et al.,
2009). To meet these two requirements, the model is constructed using SEM. The
SEM approach combines a path model (relationship among the construct) and a
measurement model (set of items for each construct) (Giménez et al., 2005; Hair et al.,
2009). Figure 1 shows the structure of the path model.
SmartPLS (Ringle et al., 2005) was executed for the analysis of the path model shown
in Figure 1. This SEM software package is an application of the partial least square
(PLS) method (Chin, 1998; Tenenhaus et al., 2005). In comparison to covariance-based
procedures the PLS algorithm is advantageous if the model is complex and the sample
size is small (Chin, 1998). Covariance-based SEM procedures such as LISREL or AMOS
perform a simultaneous estimation of the totality of the model parameters. Therefore,
these procedures require very large samples, especially if the models are complex.
According to the recommendations of Bentler and Chou (1987) LISREL or AMOS would
need more than 175 cases to analyze the path model shown in Figure 1. In contrast, the
PLS estimation is based on a set of distinct multiple regressions. Following the
recommendations of Chin and Newsted (1999) the sample size in PLS estimation should
be at least ten times either the largest number of formative indicators or the largest
number of independent variables influencing a dependent variable of the structural
model. In this research, the measurement model consists of reflective indicators
exclusively. It follows that only the second criterion is relevant. The dependent variables

Performance of
the
Relationship
1 +H
+H 3

Adaptations –H5 Provider’s

by the
Satisfaction
Provider

+H 4
2 +H

Figure 1. Provider’s
Hypothesized path model Loyalty
with the largest number of predictor variables are “loyalty” and “provider satisfaction”. Customer-
This adds up to two, thus requiring the number of usable cases to be at least 20 as per the specific
recommendation by Chin and Newsted (1999). Accordingly, the sample meets the
sample size requirements of PLS. The applied PLS approach is also more suitable for adaptation
explorative studies where the level of theoretical knowledge and scale development is
rather low (Chin, 1998) making PLS the best-fitting and most appropriate approach to
analyzing the data of this study. 831
Sampling and data collection
To examine the five hypotheses a two-part questionnaire was designed. The first part
of the questionnaire consists of general questions about 3PL. The second part refers to
a specific 3PL-relationship of the company. Reflective multi-item scales (Stank et al.,
1996; Daugherty et al., 1998; Knemeyer and Murphy, 2004; Sharland, 1997) were
adopted to measure the four constructs involved in this research.
The questionnaire was sent by e-mail to 129 chief executives or sales managers
of 3PL-companies. The sample was drawn from a mailing list of the university.
Additionally, the logistics newsletter of the German Association of Purchasing and
Logistics (BME) was used to enlist additional participants. Altogether 45 responses were
available for statistical analysis. In total, 42 of the providers have already established at
least one third-party relationship. Based on the number of questionnaires distributed the
response rate is 27.9 percent.

Measurement assessment
An important prerequisite of SEM is an accurate scale purification for each construct
individually. This is particularly important in the case of new or adapted scales. In this
study, the path model consists of four latent variables. Thus, a reflective measurement
model was chosen. The questionnaire includes 22 indicators. SPSS was used in the first
instance to perform reliability analysis and explorative factor analysis. The evaluation
was undertaken using the criteria provided by Hair et al. (2009). Some items were
dropped because of low loadings or insufficient reliability of the scale (PERF4, LOY3,
SAT1, SAT5, SAT9, PSPEZ2 and PSPEZ3). After scale purification, measurement
assessment showed satisfactory results. Only one loading (PSPEZ1) was still slightly
below the benchmark value of 0.7. Since this item represents an important facet of
behavioral adaptation it was not excluded. In total, the calculations showed sufficient
degrees of reliability and validity (Table II).
Finally, SmartPLS was used to evaluate the scales of the model. Common criteria to
evaluate reflective measures of PLS path models are the average variance extracted,
the composite reliability and the communality (Stone-Geissers Q2) (Chin, 1998). The
results of these calculations are shown in Table III. Each of the constructs meets the
requirements.
The path relationships (standardized regression coefficients) of the hypothesized
model were estimated performing SmartPLS 2.0 (Ringle et al., 2005). The bootstrap
procedure (Efron, 1979) was used to obtain t-statistics in order to evaluate the
significance of the parameters. Each of the estimators is significant at the 5 percent
level. The results are shown in Table IV and Figure 2.
Each of the hypotheses is supported by the analysis. In support of H1, there is
evidence that behavioral adaptations and specific investments by the 3PL-providers
IJPDLM
Variance
41,9 Construct Indicator Cronbach’s a . 0.7 Loading . 0.7 explained . 50%

Performance of the relationship PERF1 0.70 0.860 65.19

PERF2 0.760
PERF3 0.798
832 Loyalty LOY1 0.90 0.911 84.60
LOY2 0.929
LOY4 0.919
Provider’s satisfaction SAT2 0.90 0.778 68.46
SAT3 0.776
SAT4 0.801
SAT6 0.852
SAT7 0.910
SAT8 0.840
Adaptation by the provider PSPEZ1 0.76 0.635 69.56
PSPEZ4 0.891
Table II. PSPEZ5 0.943
Reliability and validity of
the measurement model Note: Calculations with SPSS

Average variance Composite Stone-Geissers Q2 Cronbach’s

extracted .0.6 reliability . 0.7 (communality) . 0 a . 0.7

Specific adaptations by the

provider (PSPEZ) 0.69 0.86 0.69 0.77
Performance of the
relationship (PERF) 0.65 0.85 0.65 0.73
Provider’s satisfaction
(SAT) 0.68 0.93 0.68 0.90
Provider’s loyalty (LOY) 0.85 0.94 0.85 0.91
Table III.
Evaluation Note: Calculations with SmartPLS

PLS path coefficient Bootstrap sample mean SE t-value Significance

PSPEZ ! PERF (H1) 0.40 0.42 0.16 2.471 0.013

PSPEZ ! LOY (H2) 0.24 0.23 0.10 2.392 0.017
PERF ! SAT (H3) 0.91 0.92 0.05 16.746 0.000
SAT ! LOY (H4) 0.62 0.63 0.09 6.869 0.000
PSPEZ ! SAT (H5) 20.16 20.17 0.08 2.096 0.036
Table IV.
Parameter estimation Note: Calculation with SmartPLS

exert positive influence on the performance of the relationship perceived by the provider.
As H2 predicted, the estimation indicates that 3PL-provider’s adaptations also exert
positive influence on the degree of loyalty. H3 and H4 offer positive connections among
relationship performance, provider satisfaction and loyalty. The data also strongly
support these hypotheses.
 Performance of R2 = 0.16 Customer-
the specific
Relationship
* H3 adaptation
00* :+
0.9
+0.4 13*
:
H1 **

Adaptations
833
H5: –0.162** Provider’s
by the
Satisfaction
Provider
H2 *
: + ** R2 = 0.74
0.2 .616
36* : +0
* H4

Provider’s
Loyalty
R2 = 0.49 Figure 2.
Notes: Significance at: *p < 0.1, **p < 0.05, ***p < 0.01; standardized Results of the
PLS-estimation
regression coefficients

Since one’s own adaptations are recognized as an additional effort, there is a direct
negative influence (2 0.162) of specific adaptations by the providers on the level of
satisfaction as predicted (H5). However, there is a positive indirect effect of the specific
adaptations by providers on their satisfaction (0.365) mediated by a very strong impact
of performance on satisfaction. Altogether, adaptations exert a positive total influence
on the provider’s satisfaction (0.203).
The coefficients of determinations (R 2) for each dependent construct deliver insights
as to whether the independent variables of the model exert substantial influence on this
construct (Chin, 1998). The coefficient of determination of the performance of the
relationship is rather small (R 2 ¼ 0.160), because there is only one exogenous variable.
The R 2 of the two other endogenous constructs show sufficient (LOY: R 2 ¼ 0.494) and
high values, respectively, (SAT: R 2 ¼ 0.742).

Discussion and implications

This study delivers a better understanding of the nature of providers’ specific adaptations
and the influence of these adaptations on the success of 3PL-relationships from a providers’
perspective. The findings have some consequences and helpful managerial implications.
The first implication of this study relates to the importance of providers’ specific
adaptations to the relationship performance. The impact of specific adaptations
by the provider on the provider’s perception of performance is positive. Sufficient
behavioral adaptations and transaction-specific investments by providers are crucial
for 3PL-performance. As proposed by Hertz and Alfredsson (2003) adaptations by
the service provider are an essential characteristic of the 3PL-business. Therefore,
own adaptations are accepted by the provider as a critical element of 3PL-relationships.
Regarding the transaction cost theory the results confirm that asset specificity is a
precondition to realize efficient 3PL-relationships. Furthermore, the results show that the
amount of this influence is considerable. Consequently, we suggest that 3PL-providers
IJPDLM should adapt their systems and procedures to customers’ specific requirements to ensure
41,9 high-relationship performance.
As suggested in relationship marketing, the results of this research provide
additional evidence that 3PL-providers’ satisfaction is strongly influenced by the
degree of perceived relationship performance. Since one’s own behavioral adaptations
and specific investments are sensed as an effort, there is a direct negative impact
834 of providers’ adaptations on providers’ satisfaction. In other words, an increase in
behavioral adaptation and higher specific investments by providers lower their level
of satisfaction. This effect expresses the provider’s displeasure over adaptations to
customer’s systems and procedures. However, there is an indirect effect of specific
adaptations by providers on their level of satisfaction mediated by the very strong
impact of performance on satisfaction. This positive indirect effect exceeds the direct
negative impact leading to the total influence of providers’ adaptations on providers’
satisfaction to be positive. This research illuminates and confirms the contradictory
statements concerning the influencing factors on providers’ satisfaction. On one side,
providers are dissatisfied with specific adaptations while on the other they are aware of
the necessity of such adaptations to enhance relationship performance.
As expected by transaction cost theory, there is evidence that the direct effect of
adaptations by 3PL-providers exerts positive influence on the degree of loyalty, because
this theory construes specific investments as means to stabilize business relationships.
This suggests that customers should promote providers’ adaptations. Furthermore, the
degree of loyalty is positively driven by the satisfaction of the provider, because a
satisfied logistics service provider, who perceives a relationship as positive, wants to
continue this business. Besides the positive effects, providers’ adaptations also cause
a low indirect negative effect on the degree of customer loyalty mediated by its negative
impact on satisfaction. Nevertheless, the direct influence plus the positive effect
mediated by performance and satisfaction outweigh this indirect negative influence.
This result expresses the importance of providers’ adaptation to maintain 3PL-
relationships. Satisfied customers should promote the providers’ adaptations, because
these adaptations enhance the probability of contract renewal and reduce the risk of
providers’ unexpected termination of the contract.
Summing up, this study provides evidence that from a providers’ perspective the
customer-specific adaptation of 3PL-providers is an important precondition of
3PL-relationship success.

Conclusion, limitations and further research

This study has delivered first ideas concerning the providers’ adaptations and their
impact on providers’ perspective of relationship success. The research is based on a
sound theoretical foundation and suitable qualitative and quantitative methods for
evaluation were employed.
First, customer-specific adaptations by 3PL-providers have a considerable influence
on the success of 3PL-relationships. This is indicated by the influence of customer-
specific adaptations on relationship performance as well as on provider satisfaction and
provider loyalty as the three examined aspects of relationship success. Second, evidence
is provided, illustrating that 3PL-providers are aware of the importance of their own
partner-specific adaptations and accept these adaptations for the purpose of relationship
success.
 Third, light is shed on the contradictory statements regarding the relationship Customer-
between the degree of customer-specific adaptations and provider satisfaction. specific
Even though 3PL-service providers associate dissatisfaction with their customer-
specific adaptations, ultimately they recognize a positive influence on satisfaction. This adaptation
positive influence is mediated by relationship performance. Finally, 3PL-providers’
loyalty is exposed as being positively influenced by the degree of customer-specific
adaptations as well as by the level of satisfaction. 835
Nevertheless, there are some limitations that make further research necessary. First,
this research is based on adapted scales. Further evaluation and improvements of these
scales are necessary. A more general problem is the small sample size. The reason for
this small sample size is the comparatively small number of 3PL firms operating in
Germany. Although PLS is a suitable method, larger samples would allow for the use
of covariance-based methods like AMOS or LISREL. The most important advantage of
AMOS and LISREL is the availability of goodness-of-fit statistics to evaluate the overall
quality of a structural equation model. An appropriate approach to solve the problem of
small samples could be the broader collection of providers’ data to include providers from
other countries. Above all, the growing market of 3PL-providers, which already plays an
important role for European countries’ economies, should generally be examined more
closely using quantitative methods basing research on a strong theoretical foundation.
Finally, this research is focused on providers’ perceptions of partner-specific
adaptations and 3PL-relationship success. It is feasible to deduce that customers will
have divergent perceptions and points of view. Consequently, further research should
compare customers’ perceptions of partner-specific adaptations and 3PL-relationship
success with the results of this study.

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About the authors

Rudolf O. Large is a Professor of Business Logistics at the University of Stuttgart and Head of the
Business Logistics Department. He received his Doctoral degree from the Technical University of
Darmstadt. His research interests include logistics management, third-party logistics, strategic
supply management, human resource management in logistics and research methodology. His
research has been published in three books, in the International Journal of Physical Distribution
& Logistics Management, the Journal of Purchasing and Supply Management, the Journal of Supply
Chain Management and in various German journals.
Nikolai Kramer is a Research Assistant at the Department of Business Logistics, University
of Stuttgart. His research is focused on third-party logistics and logistics service buying.
Rahel Katharina Hartmann is a Research Assistant at the Department of Business Logistics,
University of Stuttgart. Her research interests are focused on human resource management in
logistics.

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