Int. J.

Production Economics 140 (2012) 269–282

Contents lists available at SciVerse ScienceDirect

Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Generic balanced scorecard framework for third party logistics

service provider
R. Rajesh a, S. Pugazhendhi b, K. Ganesh c,n, Yves Ducq d, S.C. Lenny Koh e
a
Department of Mechanical Engineering, Noorul Islam University, Kumarakoil, 629 180, Tamilnadu, India
b
Department of Manufacturing Engineering, Annamalai University, Chidambaram, 608 002, Tamilnadu, India
c
Supply Chain Management – Center of Competence, McKinsey Knowledge Center India Private Limited, McKinsey & Company, DLF Plaza Tower, DLF City Phase I,
Gurgaon – 122002, Haryana, India
d
University of Bordeaux, IMS-LAPS-GRAI-UMR 5218 CNRS, 351 cours de la Libération, 33405 Talence cedex, France
e
Logistics and Supply Chain Management (LSCM) Research Centre, Management School, The University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK

a r t i c l e i n f o abstract

Article history: To provide valuable support for successful decision-making, managers needs a balanced set of financial
Received 28 August 2010 and non-financial measures that represent different requirements, strategic goals, strategies, resources,
Accepted 30 January 2012 and capabilities and the causal relationships between these domains. The balanced scorecard (BSC) is
Available online 15 February 2012
such a measurement system. Although much discussion has taken place in industries and academia
Keywords: circles for the development of BSC for third party logistics (3PL) service provider, little research exists
Balanced scorecard which studies and develops BSC strategies for 3PL service providers. This study proposed a set of
Strategies framework strategies for BSC of 3PL service providers. We devised a strategies framework for all the four BSC
Third party logistics service provider perspectives of the various functions of 3PL service providers and the weightages for the different
3PL
strategies are evaluated using Delphi analysis. The implementation of the proposed framework in a 3PL
Q-sort method
company is also discussed.
Delphi method
& 2012 Elsevier B.V. All rights reserved.

1. Introduction and more accurate services has increased considerably. As a

In this intensive and competitive environment that we live in,
many firms are considering the logistics outsourcing option, in
order to streamline their value chains. Third party logistics (3PL)
service providers are typically addressed in the context of long
term outsourcing of logistics activities by a manufacturer (Sink
et al., 1996; Razzaque and Sheng, 1998). We define 3PL service
providers as companies, which perform the various logistics
activities of a customer either completely or only in part
(Delfmann et al., 2002; Lai et al., 2004). These functions can
include traditional activities such as transporting, warehousing,
packaging, etc. but could also include some conventional activ-
ities such as customs clearance, billing as well as tracking and
tracing. In the last decade, the development of 3PL service
providers has gained importance. The increasing importance of
efficiency and a focus on core competencies opened up many
business opportunities for 3PL service providers (Christopher,
1998a, b). The expectation of customers on shorter delivery times
n
Corresponding author.
E-mail addresses: rajesh1576@yahoo.co.in (R. Rajesh),
pugazhs12@yahoo.co.in (S. Pugazhendhi), koganesh@gmail.com,
koganesh@yahoo.com (K. Ganesh), yves.ducq@laps.ims-bordeaux.fr,
yves.ducq@ims-bordeaux.fr (Y. Ducq), s.c.l.koh@sheffield.ac.uk (S.C. Lenny Koh).
result, the control complexity of logistics service providers has
also increased significantly.
Performance indicators can support the management of com-
plex systems. It is to be observed that no single performance
indicator can give a full picture regarding performance. Each
indicator presents a partial view from a specific viewpoint and is
therefore not enough to serve as a basis for management
decisions. Historically, companies concentrated on financial indi-
cators. Nowadays, it is widely recognized that non-financial and
even intangible indicators can give valuable information as well
(Brewer and Speh, 2000). But, such indicators are more difficult to
measure and compare (Kleijnen and Smits, 2003). In recent years,
both practitioners and researchers have emphasized the need to
move beyond the financial measures of an operation and to
incorporate a much wider variety of non-financial metrics in an
organization’s performance reporting and reward systems
(Kaplan, 1998). A popular performance measurement scheme
suggested by Kaplan and Norton (1992) is the balanced scorecard
(BSC) that employs performance metrics from financial, customer,
internal processes and growth perspectives. By combining these
different perspectives, BSC helps managers to understand the
inter-relationships and tradeoffs between alternative perfor-
mance dimensions, thus leading to improved decision making
and problem solving.

0925-5273/$ - see front matter & 2012 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2012.01.040
270 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282
Logistics operations, the core of 3PL industry, can be very
volatile, which is why there is always a need to be constantly
updated with tools and development strategies that keep it
sustainable. The balanced scorecard is a useful performance tool
that ensures a method for determining initiatives for strategic
planning support, systematic updates, and developments on
initiatives and metrics, as well as a balanced measurement for
internal and external aspects. The use of a balanced scorecard
helps in examining all the areas in 3PL operations that may affect
results and it can also help in improving efficiency and effective-
ness in 3PL operations management, thus promoting better
structure, management and success. The performance measure-
ment and metrics pertaining to 3PL providers have not received
adequate attention from researchers or practitioners, though the
metrics of measuring the performance on logistics services of 3PL
providers have an important role to play in setting objectives,
evaluating performance and determining future plans of actions.
Olson and Slater (2002) showed that the competitive strategy and
the BSC have a significant relationship on firm’s performance. So,
the BSC has been well accepted as a reliable tool for business
operations, but the difficulty in the implementation of BSC is, the
identification of strategies which represent the most critical
performance aspects of corporate operations. This paper develops
a framework and a model for the identification of a set of
strategies for all the perspective levels of the BSC of 3PL service
providers. The intention is to provide a ready-reckon framework
and model which can be used as a base to develop and implement
a customized BSC for any 3PL service provider.
2. Research background
2.1. Performance measurement and balanced scorecard
The BSC is a high-profile model which has attracted much
attention from both practitioners and academics. The BSC is a
performance measurement system that allows managers to look
at the business from four divergent important perspectives, thus
balancing as well as linking the financial and non-financial,
tangible and intangible, internal and external; customers and
internal business, innovation and learning factors (Kaplan and
Norton 1992). The BSC approach is introduced by Kaplan and
Norton in 1992 and has been developed for strategic manage-
ment. The BSC is a measurement and management system which
helps organizations to translate their vision and strategy into
action, and provides a comprehensible overview for managers of
the organization’s performance. By providing feedback on both,
the internal business processes and the external outcomes of
those processes as well as strategic performances can be con-
tinuously improved. The BSC does not only focus on financial
outcomes, but also on the human issues which generate those
outcomes in order to ensure better performance in the long-term.
The BSC system is intended to make managers focus on the key
performance metrics within a business that generate success.
Kaplan and Norton (1996) describe the idea behind the BSC as
follows (Arveson, 1998) ‘‘The BSC retains traditional financial
measures. But financial measures tell the story of past events. But,
an adequate story for industrial age companies for which invest-
ments in long-term capabilities and customer relationships was
not critical for success. These financial measures are inadequate,
however, for guiding and evaluating the journey that information
age companies must make in order to create future value by
investing in their customers, suppliers, employees, processes,
technology, and innovation’’. There are four perspective levels in
BSC such as Financial, Internal, Customers and Learning and
Growth (Reader can refer Kaplan and Norton, 1996) and the focus
on only four areas forces managers to concentrate on the most
critical measures.
Many companies have started adopting BSC as the foundation
for their strategic management system. Some managers have
used it as they align their business to new strategies, moving
away from cost reduction and towards growth opportunities
based on more customized, value-adding products and services
(Martinsons et al., 1999). The balanced scorecard has evolved
from its early use as a simple performance measurement
framework to a full strategic planning and management system,
and it enables executives to truly execute their strategies
(Miyake, 2002).
The concept of balanced scorecard is very relevant in the
present era of emerging intense global competition where the
organizations are facing increasingly knowledgeable and
demanding customers and activist shareholders which have
changed the competitive environment from competition based
on ability to invest in and manage physical (or tangible) assets to
competition based on knowledge and the ability to exploit
intangible and soft assets (like human capital, information sys-
tems, intellectual capital, brand development, research and devel-
opment etc.). In this changed business paradigms, the BSC throws
an insight into an organization’s performance by integrating
financial measures with other key performance indicators around
customer perspectives, internal business processes and organiza-
tional growth, learning and innovation thus enabling organiza-
tions to track short-term financial and operating results while
monitoring progress for future growth, development and success
(Ghosh and Mukherjee, 2006).
2.2. Balanced scorecard and 3PL service providers
One area that the world’s most successful companies attribute
their success to is, outsourcing their logistics and supply chain
activities/operations to a third party logistics (3PL) service provi-
ders. Faced with increasing competition in the global marketplace
of the 21st century, many companies worldwide are turning to
logistics outsourcing as a way to increase their profitability and
gain a sustainable competitive edge. 3PL companies offer services
that can allow businesses to outsource part of their routine
logistics and supply chain management functions. In responding
to global outsourcing needs, 3PL companies have been transition-
ing from basic commodity-service (transportation and warehous-
ing) to a more comprehensive service offering. The increasing
focus on core competencies opened up many business opportu-
nities for logistics service providers (LSP) (Christopher, 1998a, b).
3PLs carry out the logistic activities for one or more companies
within the supply chain; functioning as an intermediary (Lai et al.,
2004). The functions of 3PLs or LSPs can be divided into: ware-
housing, transportation, customer service, and inventory and
logistics management (Sink et al., 1996; Vaidyanathan, 2005a,
b). Lieb and Kendrick (2003) have identified the following as
significant outsourcing functions for 3PL service providers and it
needs to be accounted for performance management: transporta-
tion, warehousing, freight consolidation and distribution, product
marking, labeling and packaging, inventory management,
traffic management and fleet operations and management, freight
payments and auditing, cross docking, product returns, order
management, carrier selection, rate negotiation and logistics
information systems.
In the literature, we identified two major perspectives. First of
all, there is a clear split between performance indicator related
research that focuses on internal operations of a 3PL provider,
versus literature that takes the supply chain perspective and
seeks to optimize inter-organizational performance. The second
perspective relates to the use of performance indicators; in
 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282
general the indicators are used either at the strategic level, for
performance evaluation, or at the higher operational level, for
planning and control. A rapid switch from local and domestic
competition to a global market place has resulted in international
3PL service providers attaching heightened significance to the
development and implementation of strategies consistent with
securing business success (Ellinger et al., 1996). This underscores
the evolving nature of strategic management systems and the
pertinence of research into the extent to which performance
measures achieve a degree of balance for 3PL service providers
(Krauth et al., 2005). It is evident that there is a need for a
framework for implementing the strategic performance measure-
ment system for 3PL service providers. The literature search
conducted has highlighted the profound importance of the BSC
to the business and academic communities alike. It has also
highlighted the fundamental role of the four dimensional per-
spective of the BSC for small, medium and large scale 3PL service
providers. It appears, however, that there has been minimal
empirical strategic management research concerned with the
extent and manner of performance measurement of 3PL service
providers. This is despite the labor, resource and infrastructure
intensive nature of most 3PL service providers operations. The
purpose of this study is, to develop a generic framework and
model for all the four perspective levels of BSC for 3PL service
providers which can be used as a base for strategic performance
measurement and management systems. This study explores the
extent to which the measures of the balanced scorecard (BSC) is
understood and prioritized by 3PL service providers within the
3PL industry and, more specifically, the extent to which he
scorecard’s four perspective levels of performance measurement
dimension is prioritized within the various departments of 3PL
industry.
3. Research framework
An attempt is made to devise the conceptual BSC framework for
3PL service providers. The conceptual BSC framework includes the
relevant key strategies for all the critical functions/departments of
3PL service providers which are matched to the four perspective
levels of the BSC such as, the financial perspective, the customer
perspective, the internal business process perspective and the
learning and growth perspective. Once the strategy is devised,
the weightage for each strategy is determined in order to link the
same to the key performance indicators of those strategies which
in turn may be linked to the performance-linked pay of employees
of each function/department. Any 3PL service provider can con-
sider this conceptual BSC framework as a base and they can devise
the BSC according to the needs of the organization. 3PL service
providers can take this conceptual framework directly and imple-
ment them with the required revisions. The three phase process for
the development of the conceptual BSC framework is named as the
‘‘Three Phase Method’’ and is indicated in Fig. 1.
The conceptual framework for the overall process is shown in
Fig. 3.
3.1. Step 1. Expert opinion method to decide function/department
and strategies
The BSC concept is built upon the premise that measurement
motivates and that measurement must start with a clearly described
strategy. The four perspectives of the BSC framework (financial,
customer, internal and people and knowledge) are used to describe
the strategy. Indeed the logic of the BSC management system starts
with translation of mission, vision, and core values of the organiza-
tion into desired strategic results. The organization’s ‘‘pillars of
271
Fig. 1. Process for development of conceptual BSC framework.
excellence’’, or strategic themes, are selected to focus effort on the
strategies that matter the most to success. Strategic objectives are
used to decompose strategy into actionable components that can be
monitored using performance measures. Measures allow the orga-
nization to track results against targets, and to celebrate success and
identify potential problems early enough to fix them. Therefore, the
balanced scorecard can be thought of as the ‘‘strategic chart of
accounts’’ for an organization. It captures both the financial and
the non-financial elements of a company’s strategy and discusses
the cause-and-effect relationships that drive business results. The
balanced scorecard puts strategy – the key driver of results today –
at the center of the management process (Miyake, 2002) and to
embark on the BSC path, an organization first must know (and
understand) the company’s mission statement and the strategic
plan/vision.
As explained, the starting point in developing the BSC would
be the identification of the business unit’s strategic plan. This
would involve the development of a vision, mission, strategy,
outputs, measures, targets and feedback systems for the business
unit. These are then cascaded down the business unit in such a
way that it is localized, meaningful, understood and owned by
every department in the business unit. 3PL organizations consist
of many functions/departments that set the organization in
motion and contribute to organizational performance and hence
it becomes necessary to identify such critical functions/depart-
ments. Therefore, from the perspective of each department, one
needs to know enough about the business (the central business
issues and non-financial factors that drive the business).
Based on the above, the first phase of the development of the
generic BSC framework for 3PL providers involves the identification
of the critical functions/departments of 3PL organizations and the
set of strategic objectives that have potential adoption by them to
meet their company’s goals/vision. From the background of semi-
structured interviews and discussions with the top experts and
officials of selected 3PL companies in India and with top academic
experts, we have considered 5 such critical functions/departments
such as transportation, facility structure, information and commu-
nication and supply chain along with a corporate function/depart-
ment for this study based on the indication of Vaidyanathan, 2005a,
b. It is also evident that the main operations such as inbound
logistics, conversion and outbound logistics are sustained by the
execution of the following five logistics activities:
i) Transportation function: It includes, inbound traffic, out-
bound traffic, international traffic, carrier selections and mode
selection.
272 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282

ii) Facility structure function: It includes warehouses, material
handling and packaging.
iii) Communication/information function: It includes order pro-
cessing, demand forecasts and production scheduling.
iv) Supply chain function: It includes inventory and logistics
management.
v) Corporate function: It includes fleet management, strategic
negotiation and strategic sourcing.
Each is vital and each is found at every stage of the system. We
have considered all the four perspective levels such as ‘‘Financial’’,
‘‘Customer’’, ‘‘Internal Business Processes’’, and ‘‘Learning and
Growth’’ for all the five functions/departments. The functions
with the perspective of BSC for 3PL service providers are depicted
in Fig. 2 and from the background of research and business
literature and focused group discussions with the same set of
experts; we have devised a set of strategic objectives of each
perspective of BSC for all the five functions/departments.
3.2. Step 2. Modified Q-sort method to fit strategic objectives into
appropriate function
Now that we have a set of strategies in place, we have to
translate the specifics of our strategy into a set of grids or maps.
As already explained, balanced scorecards are structured over four
perspectives or layers: Financial, Customer, Internal Processes, and
Learning and Growth. Strategic grids include these four layers.
Within each layer, we will place our strategic objectives, making
sure everything links back. Trying to develop strategic objectives
and placing them into the correct layers for all strategic grids is
probably the most difficult step in building the BSC. In the present
work, the modified Q-sort method is employed for this purpose that
helps in fitting in each strategic objective into appropriate perspec-
tive for each department under consideration. Q Methodology is a
research method used in psychology and other social sciences to
study people’s ‘‘subjectivity’’ – that is, their viewpoint. The name ‘‘Q’’
comes from the form of factor analysis that is used to analyze the
data. Normal factor analysis, called ‘‘R method,’’ involves finding
correlations between variables (say, height and age) across a sample
of subjects. Q, on the other hand, looks for correlations between
subjects across a sample of variables. Q factor analysis reduces the
many individual viewpoints of the subjects down to a few ‘‘factors,’’
which represent shared ways of thinking. It is sometimes said that Q
factor analysis is R factor analysis with the data table turned
sideways. While helpful as a heuristic for understanding Q, this
explanation may be misleading, as most Q methodologists argue
that for mathematical reasons no one data matrix would be suitable
for analysis with both Q and R.

Corporate
Financial Perspective
Strategy 1 Strategy 2

Customer Perspective
Strategy 1 Strategy 2
Internal Perspective
Strategy 1 Strategy 2

Learning & Growth Perspective

Strategy 1 Strategy 2

Transportation Facility Structure

Financial Perspective Financial Perspective
Strategy 1 Strategy 2 Strategy 1 Strategy 2

Customer Perspective Customer Perspective

Strategy 1 Strategy 2 Strategy 1 Strategy 2
Internal Perspective Internal Perspective
Strategy 1 Strategy 2 Strategy 1 Strategy 2

Learning & Growth Perspective Learning & Growth Perspective

Strategy 1 Strategy 2 Strategy 1 Strategy 2

Information and Communication Supply Chain

Financial Perspective Financial Perspective
Strategy 1 Strategy 2 Strategy 1 Strategy 2

Customer Perspective Customer Perspective

Strategy 1 Strategy 2 Strategy 1 Strategy 2
Internal Perspective Internal Perspective
Strategy 1 Strategy 2 Strategy 1 Strategy 2

Learning & Growth Perspective Learning & Growth Perspective

Strategy 1 Strategy 2 Strategy 1 Strategy 2

Fig. 2. Balanced scorecard (BSC) strategy map.

 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282
Business Literature Discussion with subject experts
Identification of strategic objectives for the BSC
Fit the strategy to any one
perspective of any one function
with opinion of experts and
business executives using
modified Q-sort method
Yes, it fits
Consider the strategies having more than 70% hit ratio
Devise the BSC framework with selected strategies for all functions
of 3PL provider
Fig. 3. Conceptual framework for modified Q-Sort method.
The Q-sort technique is a useful tool for measuring attitudes
and is intriguing in several aspects. The Q-sort technique was
originally developed by Stephenson (1953) and was published as
a note in Nature, titles ‘‘Technique of Factor Analysis’’. The Q-sort
provided attitude descriptors selected by the researcher based on
content validity, variability and differentiation among individuals.
The goal of this research is to develop and validate a Q-sort
instrument to select the strategies for balance score cared for the
3PL providers.
The Q-sort method is an iterative process in which the degree
of agreement between judges forms the basis of assessing con-
struct validity and improving the reliability of the constructs. The
Q-sort method was devised by Nahm et al. (2002) as a method of
assessing reliability and construct validity of questionnaire items
that are generated for survey research. This method is modified
and applied as a pilot study, which comes after the pre-test and
before administering the questionnaire items as a survey (Nahm
et al., 2002). The method is simple, cost efficient and accurate and
provides sufficient insight into potential problem areas in the
questionnaire items that are being tested.
3.3. Step 3. Delphi analysis to decide weightage for the strategic
objectives
In order to make the scorecard more useful and practical it is
necessary to assign weights to different strategic objectives/
measures (both financial and non-financial) on the basis of their
importance to the organization for specifying trade-off between
financial and non-financial measures. But it is a complicated task
(Ghosh and Mukherjee, 2006). Thus, the development of the BSC
requires a lot of skill and expertise of the management, time and
expenditure of money and for this reason it is still out of reach for
most of the small and medium-sized organizations. One of the
queries raised by researchers in the development of the BSC for
any organization is whether it would be possible to quantify the
issues related to the importance of objectives and related mea-
sures, weightages of various perspectives (financial, customer,
273
No, it does
not fit
Neglect those
strategies from the
BSC framework
internal and innovation), etc (Thakkar et al., 2005). Here, an
attempt is made to derive total weightage for each category –
financial, customer, internal, and innovation and learning per-
spectives – as well as weightage for various strategic objectives
within categories. Delphi is a decision-making approach, based on
knowledge, experience, and perceptions of experts in the field.
It is valuable for decision-making, involving intangible attributes
that are associated with strategic factors present in the study. The
use of the approach in the present case provides the means for
determining the weightages for various BSC perspectives as well
as weightage for various strategic objectives within categories,
and this makes the results more valuable.
4. Three phase method of generating the BSC framework
The research undertaken can be characterized as exploratory,
with qualitative and quantitative data collected. In order to
provide an in-depth description of 3PL executives and managers’
perspectives on the development of framework for BSC and its
level of adoption in their organizations, in-depth interviews were
considered the most appropriate data collection vehicle, enabling
the collection of a large amount of data (Marshall and Rossman,
1999).
4.1. Phase 1. Expert opinion method to decide function/department
and strategies
A convenience sampling procedure was utilized. Prospective
interviewees were selected if they held a manager position at 3PL
service provider and if they are an academic expert in the area of
3PL logistics. Although restricted geographically, the 3PL service
providers are chosen nationwide. Each prospective participant
was initially approached by phone and invited to participate in
the study. A total of 30 participants agreed to be interviewed,
representing 14 managers from different 3PL service providers
and 16 academic experts from different academic institutions.
274 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282
Interviews were semi-structured, but involved some specific
questions that were posed in order to enable comparisons to be
drawn and create an overall picture of the nature of different
functions/departments in 3PL industry. This follows Marshall and
Rossman’s (1999) requirement for consistency in interviews to
ensure internal reliability of the data.
As an introduction, interviewees were asked to describe if they
were familiar with the BSC and the function/department required
for development of BSC framework for 3PL providers. Once
interviewees had a clear understanding of all the functions/
departments of 3PL service providers, they were asked to rate
the relative importance of those function to consider or club for
the involvement in the development of BSC framework. The
interviewees were then asked to rate the set of functions/depart-
ments to be considered for development of BSC framework with
respect to the extent that the function/department is very critical
for the performance management system of 3PL service providers.
To promote internal reliability with respect to interpretation of
the data collected, the three research members were present at all
interviews conducted. As advocated previously (Goffman, 1967),
this approach enabled a sharing of experiences for the research-
ers, which promoted deeper probing during the interviews and
greatly facilitated the data analysis process. All the interviews
were recorded and later transcribed. This has allowed the
researchers to distill the raw data to themes which have facili-
tated the generation of findings. Three researchers are involved in
the finalization of function/departments for the consideration in
the development of a BSC framework for the 3PL service provider.
The set of strategies to be considered for the development of the
BSC framework is also extracted based on the semi-structured
discussions with the same set of experts.
4.1.1. Strategic Objectives for development of the BSC framework
The balanced scorecard is a framework that measures a
company’s performance in an integrated manner. It provides a
formalized mechanism in order to achieve a balance between
non-financial and financial results across short-term and long-
term horizons. It is based on the notion that companies have to
aim for a true integration of different functions of the 3PL
industry. In this study, we inherit the dimensions of the balanced
scorecard, which allow the managers to look at the business
from four important perspectives, namely, the customer, internal
business, innovation and learning, and financial perspectives.
Customer perspective depicts what a customer expects from 3PL
operations. The measures should capture customer opinions. They
can be general, such as those focusing on customer value, and
customer retention, or they can more specifically address a
dimension of customer value such as service quality, response
time, flexibility, or cost. The Internal business process perspective
illustrates the areas that the operations must excel in so as to be
able to achieve the target. The Innovation and learning perspec-
tive of the balanced scorecard focuses on whether the operations
can continue to improve and create more value for customers by
improving the efficiency. The focus is on the future as opposed to
current capabilities. The Finance perspective of a balanced scor-
ecard indicates how the operations cater to the shareholders’
financial objectives. The Financial perspective, most concerned by
3PL management and investors, is an important perspective since
it represents the economic consequences of organizations after
implementing a series of activities.
4.1.1.1. Financial perspective. Financial performance strategies
indicate whether the implementation and execution of a
company’s strategy are effectively contributing to the bottom
line improvement of a firm. Financial goals are to survive, succeed
and prosper. Survival is measured by cash flow, success by growth
in sales and operating income and prosperity by increased market
share and return on equity and capital employed. Based on
the eanalysis by industry experts, discussions with senior execu-
tives at major 3PL providers and a detailed literature review,
three strategies were identified as important in designing a
balanced scorecard for the 3PL provider’s corporate financial
perspective, two under financial perspective of transportation
function, two for facility structure function, one for information
and communication function, and three for supply chain
management function.
4.1.1.2. Customer perspective. BSC demands that the management
must translate their general mission statement on customer
service into specific strategies that reflect the factors that really
matter to customers. Organizations must respond to changes in
the environment, just as they must adapt to changing stakeholder
demands. The demand management interfaces capabilities of
logistics (example: customer service and logistics quality)
provides product or service differentiation and service enhance-
ment for lasting distinctiveness with customers. These capabi-
lities are also called customer focused, value added (or customer
integration capabilities). These capabilities help a firm target
a given customer base, and meet or exceed their expectations
by providing unique value added activities. The details of the
strategic objectives are identified through an analysis by industry
experts and discussions with senior executives at a major 3PL
provider.
4.1.1.3. Internal business perspective. What must businesses excel
in at the internal strategies for the BSC stems from the business
processes that have the greatest impact on customer satisfaction
factors? Firms should decide what processes and competencies
they must excel at and specify strategies for each of them. A total
of 12 strategic objectives were identified.
4.1.1.4. Learning and growth perspective. A company’s ability
to innovate, improve and learn corresponds directly to a
company’s value. Continuous learning processes with innovation
ecan bring about efficiency in the operating domain of the
business. Under this perspective, twelve strategic objectives in
total were considered in the development of the BSC for 3PL
service providers.
4.2. Phase 2. Modified Q-sort method to fit strategies for function
Phase I of the proposed approach helps in identifying a set of
strategic objectives pertaining to the 3PL industry and the output
of phase I is a consolidated statement of a set of strategic
objectives developed through an interaction with subject experts
in the field of third party logistics. Once the strategic objectives
are identified, the task of placing them into the correct perspec-
tive to form the strategic grids is the next step and for a reliable
way of accomplishing this task, a modified Q-sort approach is
adopted. Towards achieving this objective, a Q-sort instrument is
developed that helps to choose the appropriate strategies for the
different perspectives of the balance scorecard for the 3PL
providers.
The Q-sort technique is a useful tool for measuring attitudes
and is intriguing in several aspects. This technique was originally
developed by Stephenson (1953) and was published as a note in
Nature, titled, ‘‘Technique of Factor Analysis’’ and it provided
attitude descriptors selected by the researcher based on content
validity, variability and differentiation among individuals. The
Q-sort method is an iterative process in which the degree of
 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282 275

agreement between judges forms the basis of assessing construct
validity and improving the reliability of the constructs. Nahm
et al. (2002) devised the Q-sort method as a method of assessing
reliability and construct validity of questionnaire items that are
generated for survey research. This method is modified and
applied as a pilot study, which comes after the pre-test and
before administering the questionnaire items as a survey (Nahm
et al., 2002). The method is simple, cost efficient and accurate and
provides sufficient insight into potential problem areas in the
questionnaire items that are being tested.
4.2.1. Item generation and structured interview (pre-pilot/pre-test)
Proper generation of measurement items of a construct deter-
mines the validity and reliability of an empirical research. The
very basic requirement for a good measure is content validity,
which means the measurement items contained in an instrument
should cover the major content of a construct (Churchill, 1979).
Content validity is usually achieved through a series of interviews
with practitioners and academicians. A list of initial items for each
construct was generated based on a comprehensive review of
relevant literature and interviews with practitioners and acade-
micians. Once the item pools were created, items for the various
constructs were reviewed by two academicians and a doctoral
student, and further re-evaluated through a structured interview
with one practitioner. The focus was to check the relevance of
each construct’s definition and clarity of wordings of sample
questionnaire items. Based on the feedback from the academi-
cians and practitioners, redundant and ambiguous items were
either modified or eliminated. New items were added whenever
deemed necessary. The result was the following number of items
in each pool entering Q-sort analysis. There were a total of 21
pools and 74 items. Number of items are shown in Table 1 and the
list of items are shown in Table 2 (Autry and Daugherty, 2003;
Bromley, 2001; Colson and Dorigo, 2004; Durvasula et al., 2002;
Easterby-Smith and Lyles, 2003; Faber et al., 2002; Fernandes
et al., 2006; Fusillo, 2003; Geary, 2001; Gibson et al., 2002;
Graham et al., 1994; Green et al., 1999; Hammer, 2001; Kaplan
and Cooper, 1998; Kaplan, 1984; Knemeyer et al., 2003; Kulkarni et
al., 2004; Levitt and March, 1988; Manloni and Benton, 1997;
McNair et al., 1990; Mentzer and Konrad, 1991; Moberg and Speh,
2004; Murphy and Daley, 2001; Rogers et al., 1996; Ross, 2002;
Sackman, 1975; Sanders and Premus, 2002; SCOR – Supply Chain
Council, 2003; Simchi-Levi et al., 2003; Stank et al., 2003; Stewart,
1995; Thomas and Griffin, 1996; Weber, 2002; Wong-On-Wing et
al., 2007; Young and Wilkinson, 1989).
4.2.2. Scale development: Modified Q-sort method
Items placed in a common pool were subjected to two Q-sort
rounds. The objective was to pre-assess the convergent and
discriminant validity of the scales by examining how the items
were sorted into various factors or dimensions. The basic proce-
dure was to have relevant respondents representing the target
population (in our case, purchasing/materials/supply chain/
operations vice presidents and managers, academicians, 3PL
managers and supply chain practitioners) act as judges and sort
the items into several groups, each group corresponding to a
factor or dimension, based on similarities and differences among
items. An indicator of construct validity was the convergence and
divergence of items within the categories.
If an item was consistently placed within a particular category,
then it was considered to demonstrate convergent validity with the
related construct, and discriminant validity with the others. Analy-
sis of inter-judge disagreements about item placement identified
both bad items, as well as weakness in the original definitions of
constructs. Based on the misplacements made by the judges, the
items could be examined and any inappropriately worded or
ambiguous items could be either modified or eliminated.
4.2.3. Sorting procedure
The eleven page questionnaire with a covering letter was
prepared and sent to 225 judges which included the directors/
Chief Executive Officers (CEOs)/Vice Presidents/Engineers of out-
sourcing organizations, directors/CEOs/Vice Presidents/Engineers
of 3PL providers and academicians who were working in the area
of balance scorecards. Within a space of three months, 105 judges
filled the questionnaire and send them to the authors. The propor-
tion of judges belonging to the various categories is shown in Fig. 4.
The definitions of the constructs were also given to the judges.
The judges were then asked to fit-in/relate each strategy to any
one of the perspective level of any one of the function/department
to the best of their knowledge. A ‘‘Not Applicable’’ category was
also included to ensure that the judges did not force any item into
a particular category. A pair of judges included a vice president
and a purchasing manager or a materials manager and a purchas-
ing manager to ensure that the perception of the target popula-
tion is included in the analysis. The judges were allowed to ask as
many questions as was deemed necessary in order to ensure they
understood the procedure.
4.2.4. Inter-rater reliabilities
To assess the reliability of the sorting conducted by the judges,
three different measures were used. First, for each pair of judges
in each sorting step, the inter-judge raw agreement scores were
calculated. This was done by counting the number of items that
both of the judges had agreed to place in a certain category. An
item was considered as an item with agreement, though the
category in which the item was sorted together by both judges
may not be the original intended category. Second, the level of

Table 1
Number of Items under Level Perspectives before Modified Q-Sort Method

Department and perspective Number of items Department and perspective Number of items

Corporate: finance [Cf] 3 Corporate: customer [Cc] 2

Corporate: internal [Ci] 8 Corporate: learning and growth [Cl] 5
Transportation finance [Tf] 2 Transportation: customer [Tc] 5
Transportation: internal [Ti] 5 Transportation: learning and growth [Tl] 3
Facility structure: finance [Ff] 1 Facility structure: Customer [Fc] 6
Facility structure: internal [Fi] 3 Facility structure: learning and growth [Fl] 2
Information and communication: finance [If] 1 Information and communication: customer [Ic] 4
Information and communication: internal [Ii] 5 Information and communication: learning and growth [Il] 1
Supply chain: finance [Sf] 3 Supply chain: customer [Sc], 4
Supply chain: internal [Si] 7 Supply chain: learning and growth [Sl] 4
Not applicable (NA) –
276 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282

Table 2 (continued )
Table 2
List of Items under Level Perspectives before Modified Q-Sort Method
Sl. List of strategy items for balanced score card of 3PL service provider
No
Sl. List of strategy items for balanced score card of 3PL service provider
No
16 Learning and growth strategies for information and communication
16.1 Create and contribute knowledge on IT related content
1 Financial perspective strategies for corporate
17 Financial perspective strategies for supply chain
1.1 Enhance profitable growth of organization
17.1 Lower cost by global sourcing of items
1.2 Contribute corporate revenue growth
17.2 Reduce cost by layout optimization for vehicle space
1.3 Develop overall competitive cost strategy
17.3 Increase revenue by improve imports substitution
2 Customer perspective strategies for corporate
18 Customer perspective strategies for supply chain
2.1 Develop service and performance level agreements for business
18.1 Improve on time delivery of vendors
2.2 Improve flexible pricing in business by negotiation
18.2 Maintain perfect shipment accuracy of vendors
3 Internal perspective strategies for corporate
18.3 Develop materials management skills and quality
3.1 Enhance strategic vehicle planning, scheduling and capacity utilization
18.4 Enhance trace and track technology for shipment expediting
3.2 Improve strategic forecasting and demand estimation
19 Internal perspective strategies for supply chain
3.3 Enhance profitability through effective low cost freight operations and
19.1 Enhance availability of warehouse special equipments
technology
19.2 Enhance facilities practices
3.4 Establish automated logistics for IT support for customers
19.3 Establish long-term vendor relationship
3.5 Enhance business by flexible product delivery
19.4 Develop and establish business to business information system
3.6 Align strategic personal goals
19.5 Maximize the inventory turns of outsourced items
3.7 Drive global business through most effective technology
19.6 Enhance value engineering to improve quality and delivery
3.8 Follow uniform bill of lading for transshipment
19.7 Leverage technology for a better supply chain
4 Learning and growth strategies for corporate
20 Learning and growth strategies for supply chain
4.1 Create a business culture and climate for action
20.1 Enhance high flexibility in setup time commonality in vehicles
4.2 Develop strategic knowledge assets and skills
20.2 Leadership development through value chain excellence
4.3 Link business performance and rewards
20.3 Establish and develop best practices of supply chain
4.4 Attain reliable quality range for business
20.4 Create and contribute knowledge on supply chain related content
4.5 Develop best transparent business practices and policies for customer
relationship
5 Financial perspective strategies for transportation
5.1 Achieve ROI on CAPEX of freight
5.2 Develop negotiation capabilities to improve transportation service pricing
6 Customer perspective strategies for transportation
6.1 Improve vehicle fill rate
6.2 Improve transit time reliability and customer service flexibility
6.3 Provide high security and safety of goods
6.4 Establish system for handling claims and customer complaints
65. Improve on time shipment
7 Internal perspective strategies for transportation
7.1 Enhance availability of special transportation equipments
7.2 Reduce freight loss and damage
Where
7.3 Improve quality of operating personal
a- Directors / CEOs / Vice President / Engineers from 3PL providers
7.4 Improve flexible logistics planning and scheduling
b- Directors / CEOs / Vice President / Engineers from outsourcing organization
7.5 Improve business order fulfillment rate
c- Academicians
8 Learning and growth strategies for transportation
d- Supply Chain Management Consultants
8.1 Improve employee training through center of excellence
8.2 Develop promotional and rotational plans for logistics personnel Fig. 4. Description of Q-sort participants.
8.3 Create and contribute knowledge on negotiation and freight related
content
9 Financial perspective strategies for facility structure agreement between the two judges in categorizing the items was
9.1 Reduce average warehouse/storage cost per order measured using Cohen’s Kappa (Cohen, 1960). This index is a
10 Customer perspective strategies for facility structure
method of eliminating chance agreements, thus evaluating the
10.1 Develop strategy for warehouse operations
10.2 Improve warehouse utilization true agreement score between two judges. Third, the item place-
10.3 Provide accurate billing statement for storage ment ratio (or Moore and Benbasat’s (1991) ‘‘Hit Ratio’’) was
10.4 Reduce the effort and range of product handling calculated by counting all the items that were correctly sorted
10.5 Improve the product packaging
into the target category by the judges for each round and dividing
10.6 Reduce material handling cost
11 Internal perspective strategies for facility structure
them by the total number of items.
11.1 Enhance warehouse order processing
11.2 Eradicate errors in storage and picking
11.3 Promote innovation and problem solving for inbound logistics through 4.2.5. Results of first sorting round
team work In the first round, the inter-judge raw agreement scores
12 Learning and growth strategies for facility structure averaged 90.5% (Table 3), the initial overall placement ratio of
12.1 Develop employee relationship for better work environment in stores
items within the target constructs was 85% (Table 4), and the
12.2 Create and contribute on warehouse related content
13 Financial perspective strategies for information and communication
Cohen’s Kappa score averaged 0.843. The calculation for Cohen’s
13.1 Improve cash to cash information cycle Kappa coefficient is shown below:
13.2 Reduce information technology & system cost P
N X  ½ðX X Þ
14 Customer perspective strategies for information and communication k ¼ i 2 ii P i i þ þ i
14.1 Maintain consistent order cycle time and information flow N i  i ½ðX i þ X þ i Þ
14.2 Develop high flexible automated distribution system
14.3 Develop automation technology for material handling
ð74  67Þ339
k¼ ¼ 0:843
14.4 Integrate customers IT system with WMS/ERP system ð74  74Þ339
15 Internal perspective strategies for information and communication
15.1 Improve perfect order information processing where Ni is the number of total items; Xii is the total number of
15.2 Enhance report and feedback information system items on the diagonal, that is, the number of items agreed on by
15.3 Develop IT system reliability and maintainability the two judges; Xi þ is the total number of the items on the ith
15.4 Improve information system incorporating agile feedback
row of the table; X þ i is the total number of items on the ith
 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282 277

Table 3
Inter-judge raw agreement scores – first sorting round.

Judge 1

Judge 2 Cf Cc Ci Cl Tf Tc Ti Tl Ff Fc Fi Fl If Ic Ii Il Sf Sc Si Sl NA
Cf 3
Cc 2
Ci 1 6 1
Cl 5
Tf 2
Tc 5
Ti 1 1 3
Tl 3
Ff 1
Fc 5 1
Fi 3
Fl 2
If 1
Ic 4
Ii 5
Il 1
Sf 3
Sc 1 3
Si 7
Sl 1 3
NA
Total item placement; 74 Number of agreements; 67 Agreement ratio; 90.5%

Table 4
Items placement ratios – first sorting round.

Actual categories

Theoretical categories Cf Cc Ci Cl Tf Tc Ti Tl Ff Fc Fi Fl If Ic Ii Il Sf Sc Si Sl NA %
Cf 315 100
Cc 160 38 12 76.2
Ci 100 630 110 75.0
Cl 525 100
Tf 210 100
Tc 70 420 30 5 80.0
Ti 55 35 385 50 73.3
Tl 315 100
Ff 105 100
Fc 60 500 70 79.3
Fi 315 100
Fl 210 100
If 105 100
Ic 210 100
Ii 5 25 90 400 76.1
Il 105 100
Sf 315 100
Sc 35 325 60 77.3
Si 735 100
Sl 70 20 330
Total item placement: 7778 Number of agreements: 6615 Overall ‘‘Hit Ratio’’: 85%

column of the table. For Kappa, no general agreement exists with Following the guidelines of Landis and Koch (1977) for inter-
respect to required scores. However, several studies have con- preting the Kappa coefficient, the value of 0.843 indicates an
sidered scores greater than 0.65 to be acceptable e.g., (Vesey, excellent level of agreement (beyond chance) for the judges in the
1991). Landis and Koch (1977) have provided a more detailed first round. This value is lower than the value for raw agreement
guideline to interpret Kappa by associating different values of this which is 0.905. The level of item placement ratios averaged 0.85.
index to the degree of agreement beyond chance. They suggest For instance, the lowest item placement ratio value was 0.733 for
the following guideline: the transportation internal perspective, 0.75 for the customer
internal perspective, 0.761 for the corporate customer perspec-
tive, 0.766 for the information and communication perspective,
Value of Kappa Degree of agreement beyond chance
0.773 for the supply chain customer perspective and 0.793 for the
0.76–1.00 Excellent facility structure customer perspective, indicating a low degree of
0.40–0.75 Fair to good (Moderate) construct validity.
0.39 or Less Poor Feedback from both judges was obtained on each item and
incorporated into the modification of the items. Overall, ten items
278 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282

Table 5
Number of items under level perspectives after modified Q-sort method.

Department and perspective Number of items Department and perspective Number of items

Corporate: finance [Cf] 3 Corporate: customer [Cc] 1

Corporate: internal [Ci] 6 Corporate: learning and growth [Cl] 5
Transportation finance [Tf] 2 Transportation: customer [Tc] 4
Transportation: internal [Ti] 3 Transportation: learning and growth [Tl] 3
Facility structure: finance [Ff] 1 Facility structure: customer [Fc] 5
Facility structure: internal [Fi] 3 Facility structure: learning and growth [Fl] 2
Information and communication: finance [If] 1 Information and communication: customer [Ic] 4
Information and communication: internal [Ii] 4 Information and Communication: learning and growth [Il] 1
Supply chain: finance [Sf] 3 Supply chain: customer [Sc], 3
Supply chain: internal [Si] 7 Supply chain: learning and growth [Sl] 3
Not applicable (NA) -

were deleted. The items deleted were, to drive global business
through most effective technology from corporate customer
perspective, to improve flexible pricing in business by negotia-
tion, to enhance business by flexible product delivery from
corporate internal perspective, to improve on time shipment from
transportation customer perspective, to improve flexible logistics
planning and scheduling, to enhance trace & track technology for
shipment expediting from transportation internal perspective, to
reduce material handling cost from facility structure customer
perspective, to reduce information technology and system cost
from information and communication internal perspective, to
improve business order fulfillment rate from supply chain custo-
mer perspective, leverage technology for a better supply chain
from supply chain learning and growth perspective. The number
of items for each construct remained unchanged after the first
round of Q-sort is shown in Table 5. The list of items are indicated
in Table 6. There were a total of 21 pools and 64 items.
The Delphi panel members were considered eligible for the Delphi
panel if they were employed in top positions in 3PL industries
or working supply chain management consultants in leading
outsourcing organizations. A total of 70 members were identified
as eligible for panel membership and were mailed a recruitment
letter soliciting their participation in the study. A total of 30
members volunteered to become panel members and participate
in the data collection forms. The percentage distribution for the
panel members was 53% supply chain management consultants
from the leading outsourcing organizations and 47% from the top
officials of the 3PL providers. The panel members were mailed a
six page questionnaire and a covering letter. The cover letter
described the purpose of the research and instructed the panel
members to return the questionnaires only if they were willing to
participate in the study. Panelists were given a two-week return
date deadline in the cover letter. The author received the entire 30
filled questionnaire within 20 day.

4.2.6. Results of second sorting round 4.4. Delphi results

Again, the same judges were involved in the second sorting
round. In the second round, the inter-judge raw agreement scores
averaged 100%, the initial overall placement ratio of items within
the target constructs was 100% and the Cohen’s Kappa score
averaged 1.00. At this point, we stopped the Q-sort method at
round two, for the raw agreement score of 1.0, Cohen’s Kappa of
1.0, and the average placement ratio of 1.0 which were considered
an excellent level of inter-judge agreement, indicating a high level
of reliability and construct validity.
4.3. Phase 3. Delphi analysis to decide weightages for function and
strategies
The Delphi method is traditionally based on three fundamental
concepts. The first concept is anonymity. The participants never
met each other during the process. Each participant submits his or
her opinions independently, by completing a specially designed
questionnaire. The replies are then disclosed to all participants,
without identifying the particular respondent. The second con-
cept is controlled feedback. The process consists of several
rounds, during which the respondents, in each round are asked
to judge all the opinions expressed in the previous rounds, which
are often presented in the form of statistics. The last concept is
statistical group response. The Delphi method reaches a ‘collec-
tive opinion’ or a ‘collective decision’ and expresses it in terms of
a statistical score.
From the Q-sort we have 64 strategies for developing the 3PL
providers’ balance scorecard. The main goal of the Delphi research
is to assign the weightage for the each strategic objective of
the balance scorecard of each departments of the 3PL provider.
The Delphi results for the weightages of the strategic objec-
tives in each department for 3PL generic balanced scorecard are
tabulated in Table 7.
5. Putting the proposed framework into practice
It is a normal for a company to have experts who will be in
charge of the balanced scorecard development for the benefit of
the organization. Development of the balance scorecard may
seem a very taxing undertaking or task because there is a lot to
do in developing a set of standards and targets. It is essential that
managers know the basic framework of developing scorecards if
they want to successfully manage operations and the financial
benefits of the organization. In building a firm-specific balanced
scorecard using the proposed framework, the following steps are
recommended:
Define organizational vision, mission and strategy: To
develop a balanced scorecard, one should first understand what
the company needs to attain its goals. This step also includes
identification of the department’s existing/functions performed
by the concerned 3PL organization and this may include all or a
few departments/functions considered in the generic framework.
For these corresponding departments, the set of strategic objec-
tives deemed suitable for the concerned 3PL organization under
each perspective according to the prescribed vision/mission are
identified.
Translate the strategy into operational terms and develop
performance measures and goals: The next step is to translate
the strategic objectives into operational terms that the
 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282 279

Table 6 Table 6 (continued )

List of Items under Level Perspectives after Modified Q-Sort Method
Sl. List of strategy items for balanced score card of 3PL service provider
Sl. List of strategy items for balanced score card of 3PL service provider No
No
17.3 Increase revenue by improve imports substitution
1 Financial perspective strategies for corporate 18 Customer perspective strategies for supply chain
1.1 Enhance profitable growth of organization 18.1 Improve on time delivery of vendors
1.2 Contribute corporate revenue growth 18.2 Maintain perfect shipment accuracy of vendors
1.3 Develop overall competitive cost strategy 18.3 Develop materials management skills and quality
2 Customer perspective strategies for corporate 19 Internal perspective strategies for supply chain
2.1 Develop service and performance level agreements for business 19.1 Enhance availability of warehouse special equipments
3 Internal perspective strategies for corporate 19.2 Enhance facilities practices
3.1 Enhance strategic vehicle planning, scheduling and capacity utilization 19.3 Establish long-term vendor relationship
3.2 Improve strategic forecasting and demand estimation 19.4 Develop and establish business to business information system
3.3 Enhance profitability through effective low cost freight operations and 19.5 Maximize the inventory turns of outsourced items
technology 19.6 Enhance value engineering to improve quality and delivery
3.4 Establish automated logistics for IT support for customers 19.7 Leverage technology for a better supply chain
3.5 Enhance business by flexible product delivery 20 Learning and growth strategies for supply chain
3.6 Align strategic personal goals 20.1 Enhance high flexibility in setup time commonality in vehicles
4 Learning and growth strategies for corporate 20.2 Leadership Development through value chain excellence
4.1 Create a business culture and climate for action 20.3 Establish and develop best practices of supply chain
4.2 Develop strategic knowledge assets and skills
4.3 Link business performance and rewards
4.4 Attain reliable quality range for business
4.5 Develop best transparent business practices and policies for customer Table 7
relationship Delphi Results for Weightage of Strategies
5 Financial perspective strategies for transportation
5.1 Achieve ROI on CAPEX of freight Sl.No Strategy for balanced score card of 3PL service provider Weightage
5.2 Develop negotiation capabilities to improve transportation service
pricing 1 Financial perspective strategies for corporate 0.893
6 Customer perspective strategies for transportation 1.1 Enhance profitable growth of organization 0.934
6.1 Improve vehicle fill rate 1.2 Contribute corporate revenue growth 0.760
6.2 Improve transit time reliability and customer service flexibility 1.3 Develop overall competitive cost strategy 0.906
6.3 Provide high security and safety of goods 2 Customer perspective strategies for corporate 0.880
6.4 Establish system for handling claims and customer complaints 2.1 Develop service and performance level agreements for 0.880
7 Internal perspective strategies for transportation business
7.1 Enhance availability of special transportation equipments 3 Internal perspective strategies for corporate 0.773
7.2 Reduce freight loss and damage 3.1 Enhance strategic vehicle planning, scheduling and 0.786
7.3 Improve quality of operating personal capacity utilization
8 Learning and growth strategies for transportation 3.2 Improve strategic forecasting and demand estimation 0.786
8.1 Improve employee training through center of excellence 3.3 Enhance profitability through effective low cost freight 0.626
8.2 Develop promotional and rotational plans for logistics personnel operations and technology
8.3 Create and contribute knowledge on negotiation and freight related 3.4 Establish automated logistics for IT support for customers 0.580
content 3.5 Enhance business by flexible product delivery 0.734
9 Financial perspective strategies for facility structure 3.6 Align strategic personal goals 0.550
9.1 Reduce average warehouse/storage cost per order 4 Learning and growth strategies for corporate 0.800
10 Customer perspective strategies for facility structure 4.1 Create a business culture and climate for action 0.760
10.1 Develop strategy for warehouse operations 4.2 Develop strategic knowledge assets and skills 0.586
10.2 Improve warehouse utilization 4.3 Link business performance and rewards 0.614
10.3 Provide accurate billing statement for storage 4.4 Attain reliable quality range for business 0.734
10.4 Reduce the effort and range of product handling 4.5 Develop best transparent business practices and policies 0.760
10.5 Improve the product packaging for customer relationship
11 Internal perspective strategies for facility structure 5 Financial perspective strategies for transportation 0.934
11.1 Enhance warehouse order processing 5.1 Achieve ROI on CAPEX of freight 0.866
11.2 Eradicate errors in storage and picking 5.2 Develop negotiation capabilities to improve transportation 0.786
service pricing
11.3 Promote innovation and problem solving for inbound logistics through
6 Customer perspective strategies for transportation 0.772
team work
6.1 Improve vehicle fill rate 0.760
12 Learning and growth strategies for facility structure
6.2 Improve transit time reliability and customer service 0.760
12.1 Develop employee relationship for better work environment in stores
flexibility
12.2 Create and contribute on warehouse related content
6.3 Provide high security and safety of goods 0.906
13 Financial perspective strategies for information and
6.4 Establish system for handling claims and customer 0.560
communication
complaints
13.1 Improve cash to cash information cycle
7 Internal perspective strategies for transportation 0.906
14 Customer perspective strategies for information and communication
7.1 Enhance availability of special transportation equipments 0.614
14.1 Maintain consistent order cycle time and information flow
7.2 Reduce freight loss and damage 0.906
14.2 Develop high flexible automated distribution system
7.3 Improve quality of operating personal 0.414
14.3 Develop automation technology for material handling 8 Learning and growth strategies for transportation 0.626
14.4 Integrate customers IT system with WMS/ERP system 8.1 Improve employee training through center of excellence 0.454
15 Internal perspective strategies for information and communication 8.2 Develop promotional and rotational plans for logistics 0.614
15.1 Improve perfect order information processing personnel
15.2 Enhance report and feedback information system 8.3 Create and contribute knowledge on negotiation & freight 0.560
15.3 Develop IT system reliability and maintainability related content
15.4 Improve information system incorporating agile feedback 9 Financial perspective strategies for facility structure 0.892
16 Learning and growth strategies for information and communication 9.1 Reduce average warehouse/storage cost per order 0.892
16.1 Create and contribute knowledge on IT related content 10 Customer perspective strategies for facility structure 0.892
17 Financial perspective strategies for supply chain 10.1 Develop strategy for warehouse operations 0.560
17.1 Lower cost by global sourcing of items 10.2 Improve warehouse utilization 0.773
17.2 Reduce cost by layout optimization for vehicle space 10.3 Provide accurate billing statement for storage 0.346
280 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282

Table 7 (continued ) organization can understand and act upon. A critical part of this
step in the process is determining the key objectives, measures,
Sl.No Strategy for balanced score card of 3PL service provider Weightage
targets and initiatives to drive the strategy (Miyake, 2002) i.e., for
10.4 Reduce the effort and range of product handling 0.572 each strategy that must perform well, it is necessary to identify
10.5 Improve the product packaging 0.372 measures and set goals and performance against each strategy are
11 Internal perspective strategies for facility structure 0.812 evaluated by using these scorecard measures and targets. The key
11.1 Enhance warehouse order processing 0.746 performance indicators (KPI) may also be identified for each
11.2 Eradicate errors in storage and picking 0.760
11.3 Promote innovation and problem solving for inbound 0.600
measure.
logistics through team work Evolve the experience: It takes time to establish measures, but
12 Learning and growth strategies for facility structure 0.720 it is also important to recognize that they might not be perfect the
12.1 Develop employee relationship for better work 0.760 first time. Performance management is an evolutionary process
environment in stores
that requires adjustment as experience is gained in the use of
12.2 Create and contribute on warehouse related content 0.440
13 Financial perspective strategies for information and 0.746 performance measures.
communication
13.1 Improve cash to cash information cycle 0.773
14 Customer perspective strategies for information and 0.840 5.1. Case study demonstration
communication
14.1 Maintain consistent order cycle time and information flow 0.692
14.2 Develop high flexible automated distribution system 0.400 The adoption and implementation of the proposed framework
14.3 Develop automation technology for material handling 0.426 in developing a balanced scorecard by a 3PL organization is
14.4 Integrate customers IT system with WMS/ERP system 0.400 reported. The 3PL case company is a leading warehouse provider.
15 Internal perspective strategies for information and 0.666
It was established in 2001 and situated in a major industrial
communication
15.1 Improve perfect order information processing 0.612 town of southern India, which is very well connected by rails. The
15.2 Enhance report and feedback information system 0.600 case company does not have the balanced scorecard implemented
15.3 Develop IT system reliability and maintainability 0.720 in their organizations but is interested in putting in place some
15.4 Improve information system incorporating agile feedback 0.730 kind of performance management system. When explained
16 Learning and growth strategies for information and 0.586
about the use of the BSC as a performance management and
communication
16.1 Create and contribute knowledge on IT related content 0.626 strategic management tool, this firm evinced keen interest
17 Financial perspective strategies for supply chain 0.827 in the process of developing a balanced scorecard for their
17.1 Lower cost by global sourcing of items 0.746 organization and helped in identifying suitable person(s) in
17.2 Reduce cost by layout optimization for vehicle space 0.640
developing such a process. A team comprising top management,
17.3 Increase revenue by improve imports substitution 0.800
18 Customer perspective strategies for supply chain 0.760 middle management and functional level executives was formed
18.1 Improve on time delivery of vendors 0.786 and the concept of the balanced scorecard and also the generic
18.2 Maintain perfect shipment accuracy of vendors 0.772 framework developed as well as the adoption of this framework
18.3 Develop materials management skills and quality 0.600 to customize this framework according the needs of their orga-
19 Internal perspective strategies for supply chain 0.600
nization was explained to members of this team. Through
19.1 Enhance availability of warehouse special equipments 0.720
19.2 Enhance facilities practices 0.400 discussion with the team, the strategic objectives of the organiza-
19.3 Establish long-term vendor relationship 0.400 tion were identified and by following the steps for the adoption
19.4 Develop and establish business to business information 0.452 procedure of the generic framework, the performance measures
system
and targets were identified and the detailed BSC for the case
19.5 Maximize the inventory turns of outsourced items 0.626
19.6 Enhance value engineering to improve quality and 0.452
company that deals only with warehousing operations are shown
delivery in Table 8.
19.7 Leverage technology for a better supply chain 0.440 The BSC depicted here shows all the strategic objectives
20 Learning and growth strategies for supply chain 0.532 considered important by the team and those are chosen from
20.1 Enhance high flexibility in setup time commonality in 0.600
among the set of strategic objectives provided in the generic
vehicles
20.2 Leadership development through value chain excellence 0.572 framework along with the appropriate measures developed for
20.3 Establish and develop best practices of supply chain 0.400 each objective. The decision support system for balanced score-
card for case company is detailed in Fig. 5.

Table 8
Development of the balance scorecard based on the proposed framework for the 3PL provider (with warehousing as the sole operation performed).

Perspective Strategic objective Measure Calculation Target

Financial F1: Reduce average warehouse/storage cost per order Cost per order(min) Total warehouse cost/total orders 5%
shipped
Customer C1: Develop strategy for warehouse operations On-time delivery Orders on-time/total orders shipped 99%
C2: Improve warehouse utilization Storage utilization Avg. occupied Sq. m./total storage 90%
capacity
C3: Provide accurate billing statement for storage Dock to stock time (min) Total dock to stock hrs./total receipts 30 min
Internal P1: Enhance warehouse order processing Order fill rate Orders filled complete/total orders 98%
process shipped
Order cycle time Actual ship date – customer order date 1–30 h
Perfect order completion Perfect deliveries/total orders shipped 100%
P2: Eradicate errors in storage and picking Order accuracy Error-free orders/total orders shipped 99%
Damaged inventory Total damage/inventory value 0.3%
Learning and L1: Develop employee relationship for better work Items per hour Items picked or packed/total 100 items per
growth environment in stores warehouse labor hrs. hour
L2: Create and contribute on warehouse Money invested in employee
related content training yearly
 R. Rajesh et al. / Int. J. Production Economics 140 (2012) 269–282
Fig. 5. Decision support system for balanced scorecard for case company.
6. Discussion and conclusion
To manage performance, organizations need to understand
where they are, where they are going and what needs to be
done to get to where they want to be in the future. Without a
strategic performance management approach, it is impossible
to address these fundamental issues. Well designed performance
management approaches and performance indicators enable
managers to track whether their organization is moving in the
right direction or not. The BSC has proven to be a powerful
means of translating strategy into action and ensuring that organ-
izations focus on what really matters to their success. It helps
managers to clarify the value proposition as well as the drivers
and enablers of success. In today’s world, it is the performance
drivers, especially the intangibles and the way these are managed
and deployed, that distinguishes successful organizations from
the rest.
While the specifics of a balanced scorecard differ from organ-
ization to organization; it is beneficial to build upon a standard
281
framework, such as the one attempted here, rather than starting
from scratch and BSC framework proposed here will be a
solution accelerator that will help 3PL companies who want to
implement a balanced scorecard for their organization. Many
companies are attracted by the power and simplicity of the
balanced scorecard concept, but then discover that the develop-
ment and implementation is extremely time-consuming and
expensive. The present work focused on the 3PL industry and
consisted of identifying the strategic objectives for 3PL service
providers from all the four perspectives of the BSC. A modified
Q-sort method was employed and based on the placement ratio,
a framework was devised for all the four perspectives of various
functions of 3PL service providers. The weightage of each strategic
objective was determined through Delphi study. The way of
putting the framework into practice is also validated through
the explanation of the adoption of the proposed framework in a
3PL company.
The contribution of this paper is the proposal of a generic
framework that helps in developing a balanced scorecard for the
3PL industry that can measure and evaluate day-to-day business
operations from the following four perspectives: finance, custo-
mer, internal business process, and learning and growth. The
proposed work is comparatively a new initiative in the direction
of developing a BSC system for adoption in the 3PL industry. The
salient features of the generic framework are: consideration of all
the four – financial, internal, customer and innovation and
learning – perspectives, and definition of weightage for each
perspective as well as for each strategy within each perspective.
The generic balanced scorecard framework developed in this
paper will help 3PL organizations develop and build a scorecard
economically and facilitate analysis of measures so that corrective
action can take place promptly. The framework provides a
comprehensive and cost-effective way to deploy the balanced
scorecard and deliver better returns on people, processes, custo-
mers, and technologies.
Acknowledgment
The authors sincerely acknowledge the judges, CEOs and
higher officials from the various 3PL firms in India for their
valuable participation and suggestions in this study.
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