A Study of Business Performance Measurement of Third Party Logistics (3PL)

Organizations in the Indian Logistics Industry

*Smriti Asthana
**Hamlata Bhat
*** Rahul Singh

Abstract
The Indian logistics industry is growing rapidly. It is the interchange of infrastructure,
technology and new types of service providers that define whether the industry is able to help
its customers reduce their logistics costs and provide effective services. Logistics services are
the backbone of an economy, providing the efficient, cost effective flow of goods and services
on which other commercial sectors are dependent. The logistics companies work as the
outsourced or third party service providers (3PL) and support the organizations logistics
functions.
This study of business performance measurement of 3PL organizations or logistics
outsourcing in Indian logistics industry explores the relationship between 3PL service
providers and supply chain partners (both upstream and downstream). The researchers have
made an attempt to determine the relationship on the basis of the performance variables such
as Service Quality (SQ), Organisational Effectiveness (OE) and Relationship Management
(RM) and there effect on the performance of the third party service provider(s).

Keywords: Third Party Logistics, Service Quality, Organisational Effectiveness, Relationship

Management, Performance measurement.

1. Introduction
The Indian Logistics Industry is becoming more multifaceted with the business transcending
geographies and logistics chain becoming multimodal and infrastructure dependent (Crisil
Report, 2015 ). A key reason can be identified for the same in the years of high growth in the
Indian economy that have resulted in a remarkable rise in the volume of freight traffic
movement both within and outside the country. The large volume of freight traffic has
provided impetus and growth opportunities in all facets of logistics services.
___________________________________________________________________________
*Research Scholar, Birla Institute of Management Technology, Greater Noida
** Associate Professor, G.L.Bajaj Institute of Management and Research, Greater Noida
***Associate Professor, Birla Institute of Management Technology, Greater Noida

Logistics services broadly comprise of courier services, freight forwarding, third party
logistics (3PL) and reverse logistics. According to a report by Netscribes, 2015 Growing
business of private telecom sector, financial institutions dependence on courier and seasonal
business upsurge due to occasions and festivals are the key drivers of the Courier Market.
3PL providers have largely benefitted from the growth in auto & auto components sector and
retail sector. The trade supply chains have become geographically complex and there is an
increasing dependence on competent transport intermediaries making it essential for the
supply chain organizations and Third Party Logistics (3PL) service provide rs, to develop
strategies that make available differentiated value to the customer at optimum cost (Indian
Logistics Industry Snippets, 2009). Key findings of the 16th Annual 3PL study regarding the
current state of the market for the year 2012 highlighted that 3PLs made valuable
contribution and are an important success factor for the companies across industries and
around the globe. The companies give preference/credit to their 3PL partners which are
helping to provide new and innovative ways to improve logistics effectiveness (State of
Logistics Outsourcing, 2012). Crisil Research (2010) estimates that the 3PL industry
revenues to increase to INR 190 - 195 billion by the end of 2015 from INR 57 - 60 billion in
2009-10. This as result shall lead to a rise in the share of 3PL service providers from 1.5 - 2.0
percent to 3.5 - 4.0 percent in the overall Indian logistics industry.

Business performance measurement has always been a managerial priority, and attracts
increasing interests of both academicians and managers. Managers persistently measure
business

performance

and

request

performance-related

information.

Performance

measurement is integral to the successful execution of managerial duties. It helps in the

transference of the complex reality of performance into a sequence of communicable symbols
that can be reproduced under similar circumstances (Lebas, 1995). Examination of logistics
performance has mainly been focused on operational measures. There has been less attention
placed on the influence of organizational factors, despite the advocated need for greater interorganizational integration among supply chain partners (Panayides and Meko, 2005).

2. Lite rature Review

2.1 Third Party Logistics (3PL)

There are several perspectives on the 3PL definitions. This paper attempts to understand the
various definitions which are frequently used in several researches. References of the
definition are also found in the research papers and reports scanned for this research paper.
The Council of Supply Chain Management Professionals Glossary has defined 3PL as
"A firm [that] provides multiple logistics services for use by customers. Preferably,
these services are integrated, or "bundled" together, by the provider. Among the
services 3PLs provide are transportation, warehousing, cross-docking, inventory
management, packaging, and freight forwarding." (CSCMP, 2010)
Lau (1999) defined 3PL as the outsourcing of logistics activities to other companies, such as
transportation, warehousing, inventory management, distribution, and other value-added
services such as pick-and-pack, assembly, repairs, and re-conditioning. Field (1998) defined
3PL service providers as companies that provide a range of logistics services to outsourcing
companies to co-ordinate the transfer of goods from one place to another.
Since 1980s, along with the trend to outsource non-core activities (Sink and Langley, 1997)
companies have increasingly turned to 3PL both in USA (Lieb and Randall, 1996;
Rabinovich et al., 1999; Knemayer and Murphy, 2004) and in Europe (Van Laarhoven et al.,
2000). 3PL services help to achieve the tactical objectives by focussing more on core
competency of the business than creating the whole value chain of the organisatio n which
engages very special and valuable time, effort and investment. 3PL users depend on 3PL
service providers to secure capacity and gain agility (Hannon, 2005) that not only provides
core services like supplying right quality product but also maintaining long term customer
relationship.
According to Qureshi (2007) Razzaque and Sheng (1998), outsourcing of 3PL(s) is generally
defined as a provision of a single or multiple logistics services by a vendor on a contractual
basis. At the organizational level, Aguezzoul (2007) defines 3PL as a private firm that
provides logistics services under a contract to a primary manufacturer, vendor, or user of a
product or service. It is called third-party because the logistics provider does not own the

products but participates in the supply chain at points between the manufacturer and the user
of a given product.

2.2 Performance Measurement

Performance is the outcome that results from actions performed for a particular objective or
goal and performance measurement is determining numbers or quantifying the result.
Historically, when organizations were small and operations in a linear model, the
performance measurement was done on the basis of the cash flow of the organization. From
the late nineteenth century until the 1930s, theoretical and practical methods of management
accounting were established, and standards were widely applied (Maskell, 1991). The
research in performance measurement has evolved since its emergence in 1980s. As
performance measurement research pro gressed, Pursell (1980) focused on the performance
measurement of the entire business unit and examined performance criteria, standards, and
measures.
According to Neely (1995), performance measurement is a popular issue that is widely
discussed but rarely defined. Hence, it is important to introduce certain relevant definitions of
performance measurement. It is defined by few authors as;

Authors/ Researches
Performance Measure ment Definition
Armstrong and Baron Performance Management is both a strategic and an integrated
(1998)
approach to delivering successful results in organizations by
improving the performance and developing the capabilities of
teams and
Bititci et al., (1997)
A process by which the company manages its performance in line
with its corporate and functional strategies and objectives.
Cook et al., 1995
The process of evaluating performance in terms of explicit short-,
medium-, and long-term objectives and reporting the results to
management
The process of transferring the complex reality of performance
Gunasekaran et al., 2001
into a sequence of limited symbols that can be communicated and
reproduced under similar circumstances
Performance measurement is an essential part of the performance
Lebas, 1995
management. By measuring, people transform complex reality
into simplified numerical concepts that can be easily
communicated and acted upon
Neely et al., 1995; 1996 The process of quantifying the efficiency and effectiveness of
action
Rose, 1995
The process of evaluating performance relative to a defined goal.
Sink, 1991

Performance refers to the nature and quality of an action that an

organization carries out to accomplish its principal missions and
functions for the generation of profit

Effectiveness and Efficiency are the two basic parameters determining the organizational
performance. Effectiveness is the extent to which production functions are accomplished and
customer requirements met; and efficiency is a measure of how economically the
organizations resources are utilized in accomplishing these functions. From a quantitative
perspective, performance is related to the dimension of scale, and means that, generally, it
can be quantified in a variety of dimensions. Performance targets are only meaningful when
they can be expressed quantitatively (Macleod et al., 1997).
Rose (1995) highlights in the paper that it is an analytical tool in the performance
measurement process that records measures, displays results, and determines subsequent
actions. Generally, performance measures have financial or non- financial and tangible or
intangible classifications (Polakoff, 1992). Kaplan (2009) believed that measurement was
essential for managers as it was for scientists. Kaplan and Nortan (1992) emphasised that if
companies were to improve the management of the ir intangible assets, they had to integrate
the performance measurement of intangible assets into their management systems. Sink
(1991) found that measurement is complex, frustrating, difficult, challenging, important,
abused and misused, however Das(1994) stressed on the need of performance measurement

processes for an organization with evidence based outcome as if we cannot measure it, we
cannot improve it(Kaplan, 2009).

2.3 Performance Measurement of Third Party Logistics (3PL) Service Providers

Performance in logistics is defined as the evaluation of constituents using efficiency,
effectiveness, or social referent criteria to measure how well an organization meets the
aspiration levels of constituents (Thompson, 1967; Friedlander and Pickle, 1968). A great
deal of attention has historically been placed on individual measures, rather than on systems
of measurement (Beamon, 1999), and many of the existing studies are prescriptive in nature
and emphasize the attributes that good metrics and measurement systems should have
(Bourne et al., 2000). Keebler et al. (1999) indicated that relatively few firms measure the
performance of the logistics supply chain, especially logistics outsourcing. This is because
the systems perspective is seldom adopted and very little empirical research exists on supply
chain performance measurement from a broader system perspective, such as organizational
performance measurement.The increasing importance on core competencies opened up many
business opportunities for logistics service providers (Christopher, 1998). They act as
intermediaries in a supply chain that enable the organized movement of goods from a point of
origin to a point of destination (i.e. from shippers to consignees) (Lai et al., 2004). Instead of
merely focusing on transportation activities, third party logistics providers (3PL) are
additionally coordinating logistical activities, integrated on an intra- or even interorganizational level (Sink et al., 1996; Vaidyanathan, 2005). Companies in a supply chain
have to decide to be either cost-efficient or lead time driven and the provision of logistics
services is affected by this choice as well (Fisher 1997).
Man (2006) has highlighted in his study that efficient logistics and supp ly chain management
reinforces an organizations customer- oriented performance. Sink and Langley (1997) have
found that high- level communication and interaction were needed between organizations
outsourcing logistics services and third party logistics service providers and also that
continuous evaluation of 3PL services was important for maintenance of efficient and
effective performance. Panayides and Meko (2005) have examined in their study that 3PL has
been an efficient organizational adjustment to the needs of clients for logistics solutions and
improvement in supply chain performance. This study examines empirically the influence of
relationship orientation in third-party logistics and its impact on logistics service quality and
performance. To study the performance measurement of the 3PL service providers the

variables discussed in this study are service quality, organizational effectiveness and
relationship management.

2.3.1 Service Quality (SQ)

Service quality has emerged as an important area in the sustainability and growth of the
business and its various dimensions have been explored by researchers. Wikipedia defines
Service Quality as a comparison of expectations with the performance. Juran and Godfrey
(1999) defined quality as fitness for use and those product features which meet customer
needs and thereby provide customer satisfaction. Practitioners across various fields have used
service quality synonymously with customer satisfaction, both being related concepts. But
empirical and theoretical researches support the view that the two concepts are different and
that quality performance leads to customer satisfaction (Rosen and Surprenant, 1998; Olsen,
2002). Factoring the service quality, Kim, Cheong and Cho (2006) formulated five
dimensions of 3PL service quality (tangibles, reliability, responsiveness, assurance and
empathy) and applied the Analytic Hierarchy Process (AHP) method to determine the relative
weights of the five service quality dimensions to select the best 3PL service provider. In an
empirical case study on four companies providing 3PL services in Korea, responsiveness
came out as most important of the five service quality dimensions in the perception of 3PL
customers.
Man (2006) has described customer service as marketing and logistics activity that is aimed
at enrichment of the offered products or the facilitation of the exchange process between
suppliers and customers. According to Man (2006), customer service, from a marketing
perspective, includes elements of product design and maintenance, training in sales attitudes
and responsiveness, the ease of customer interaction with suppliers, guarantees, price, and
elements of logistics service. From the customers point of view, Power, Sharafali and Bhakoo
(2007), attempted to present how customers perceived their logistics service providers in
terms of achieving the claimed benefits of outsourcing in Australia. The results indicate that
customers of 3PL service providers place significant value on the services provided,
technologies used and objectives that go beyond low cost to the customers, and that,
customers focus on service based solutions that provide a set of benefits going beyond sheer
cost control. From an emerging market perspective, Seth, Deshmukh and Vrat (2006)
explored some of the critical issues in the area of service quality and offered practical help to
researchers and practitioners in providing a direction for supply chain service quality

improvement. They proposed a model for assessing the quality of service at various interfaces
of supply chain using third party logistics.

2.3.2 Customer Relationship

Man (2006) emphasised that in addition to the context-structure-output framework
relationship management, an external factor also affects the organizational performance of
the 3PL service providers. Most of the previous studies have focused on outsourcing and
have therefore taken customers perspective on 3PL relationships (Lieb and Kendrick, 2002).
Man quoted Elmuti (2002), who elaborated that a good relationship management such as one
that involves guanxi, trust and commitment among supply chain partners enhances 3PL
organizational performance. Ferrer, Santa, Hyland (2010) in their study have identified three
factors that have significant influence on relationships: sharing, power and interdependency.
These three factors have been defined as: Sharing is the willingness of the organisation to
share resources with other members of the supply chain; Power relates to exercising control
based on experience, knowledge and position in the supply chain; and, Interdependency is the
relative levels of dependency along the supply chain.
Additionally, Large, Nikolai, Rahel, and Hartmann (2011) in their study provide evidence
that customer-specific adaptation by logistics service providers is an important prerequisite to
3PL performance. The paper shows that 3PL providers should adapt and integrate their
systems and procedures to specific requirements of the customers to ensure high-relationship
performance. Satisfied customers in turn should promote the service providers adaptations,
because these adaptations enhance the probability of contract renewal and reduce the risk of
providers unexpected termination of the contract.
Knemeyer, A.M., Murphy, P.R. (2005) provide a comparison of users and providers of thirdparty logistics (3PL) services with respect to relationship marketing elements, such as trust
and communication, as well as relationship marketing outcomes such as retention and
recovery. Tian, Ellinger, and Chen (2010) proposed and tested a conceptual model of the
relationship between customer orientation of third-party logistics (3PL) service providers and
logistics improvement of customer firm, and found that custome r orientation of 3PL service
provider significantly influences customer firms logistics improvement. Wu and Chou
(2007) quoted Edvinsson and Malone (1997) and emphasised that intellectual capital (IC)
such as customer relationships, business processes, re search and development, knowledge of

employees, and customer loyalty cannot be presented in the financial reports or analyzed for
future prediction. The findings of the study show that human capital, structure capital, and
customer relationship have a positive association with IC performance.

2.3.3 Organizational Effectiveness (OE)

Effectiveness and Efficiency are the two basic parameters determining the organizational
performance. Effectiveness is the extent to which production functions are accomplished and
customer requirements are met. Efficiency is a measure of how economically the
organizations resources are utilized in accomplishing these functions. Performance targets
are only meaningful when they can be expressed quantitatively (Macleod et al., 1997).
Knemeyer and Murphy (2004) in their study explore the possible connection between
relationship management extent and 3PL service providers performance. On performance, t he
study by Sahay and Mohan (2006) has cited substantial growth in various financial indicators
using services of 3PL. For instance, the improvements in sales revenue by 13.5%, working
capital by 12.3%, returns on assets by 10%, capital assets reduction by 10%, production cost
reduction by 10.5%, labour cost reduction by 10.0%, and logistics cost reduction by 15% are
identified in the study.
There are different competencies that companies from developed markets and emerging
markets possess. Study of different countries indicates changes in the structure and output
relationship. According to Elmuti (2002) a good organizational structure achieves
organizational effectiveness in 3PL service providers. The structure-output relationship (Man,
2006) develops a research model to identify the relationship between 3PL service providers
and their supply chain partners. The relationship has elements like productivity, financial
performance, market share, cycle time, customer service, reputation and goodwill (Beamon,
1999; Thomas, 1999; Mentzer et al., 2000; Carr and Person, 1999; Elmuti, 2002; Lai et al.,
2004; Reiner, 2005). Halldorsson, Larsen, Tage (2004) consider 3PL from the resource and
competency perspective. According to them there is a need for new competencies and the
same are to be developed between the shipper and the 3PL service provider from time to
time.

3. Objective of the study

The purpose of this study is to empirically investigate the organizational business
performance of 3PL service providers and their supply chain partners (upstream and
downstream) and also to study about the relationship management of 3PL service providers
with upstream and downstream supply chain partners in the transport logistics industry in
India. It is aimed to determine the interrelationship between the three constructs of
organizational

performance

being

service

quality,

relationship

management

and

organizational effectiveness.
The specific research objectives of this study are presented as follows.
1. To empirically investigate the service quality performance of 3PL service providers with
respect to their supply chain partner organizations (upstream and downstream).
2. To study the relationship framework of 3PL service providers and their supply chain
partners (upstream and downstream) investigating trust, commitment and guanxi.
3. To study the organizational effectiveness in terms of productivity, goodwill and reputation
of the 3PL service providers.

4. Research Methodology

To realize the research objectives, this study is designed to identify the expectation and actual
practice of 3PL organizational performance in Indian Logistics Industry. The researchers
collected data from the supply chain partners (upstream and downstream) and the internal
staff of the leading ten 3PL providers in India. The 3PL service providers located in Mumbai
and Delhi (NCR) and Chennai have been surveyed for the study. The 3PL service providers
with certain commonalities have been selected for this study to facilitate the analysis of
performance measurement between 3PL service providers and their partners.

4.1 Research Instrument

A total of 600 questionnaires in four groups (3PL expected performance, 3PL actual
performance, customers expectations of 3PL performance, and customers actual experience
with 3PL service providers performance ) were distributed to the target 3PL service providers
and their customers / supply chain partners (upstream and downstream).

Part I of the questionnaire is designed to gather the demographic details of the respondents
and their companies, such as position, type of industry, type o f company, total number of
employees, number of year in operation, annual sales, and the personal information of the
respondents, such as name, designation and contact information.

Part II consists of 12 measurement items that examine the service quality of 3PL service
providers. The respondents were asked to evaluate the extent to which they agreed or
disagreed with statements that addressed the service quality in targeted 3PL providers on a
seven-point Likert scale that ranges from 1 (strongly disagree) to 7 (strongly agree).

Part III outlines the 14 measurement items of 3PL organizational effectiveness in four
dimensions: productivity, cycle time, goodwill and reputation and customer service.
Productivity is measured by 5 items, cycle time is measured by 4 items, customer service is
measured by 3 items and goodwill and reputation is measured by 2 items. All of the
measurement items are evaluated in a seven-point Likert scale where 1 represents strong
disagreement and 7 represents strong agreement. Table 4.2 shows the measurement items
of 3PL organizational effectiveness.

Part IV outlines the 9 measurement items of 3PL relationship management in three

dimensions: Guanxi, Trust and commitment. Guanxi is measured by 3 items, trust by 3 items,
and commitment is measured by 3 items. The respondents were asked to evaluate the extent
to which they agreed or disagreed with statements that describe the relationship and bus iness
links between 3PL service providers and their customers on a seven-point Likert scale that
ranges from 1(strongly disagree) to 7 (strongly agree).

4.2 Target Respondents

The questionnaires were administered physically to ten employees of each of the ten 3PL
service providers in the three locations of Mumbai, Chennai and Delhi-NCR to answer the
questions related to their customers expectations and actual performance delivered in terms
of service quality, organizational effectiveness and relationship management. Similar
questionnaires were also administered to five business partners of each selected 3PL service
provider to identify their expectation in terms of service quality, organizational effectiveness
and relationship management from the service providers and the actual performance received
by them. Two executives from each such organization were randomly selected for the
purpose of the survey. In the selection of the samples, despite potential information bias, only
the key respondents from each company are considered. This is inspired by Teo and King
(1997), in order to avoid potential perceptual discrepancies between respondents. However, it
is still necessary to examine the suitability of the respondents. As this study aims to examine
3PL performance measurement, the target respondents of this study are the senior
management, middle management and front line managers of the selected 3PL service
providers and their business partners (upstream and downstream).

4.3 Pilot Study

Before distributing the questionnaires to the targeted respondents, a pilot study was
conducted with several industry experts and academic professionals. Based on their feedback,
modifications were made to enhance the clarity of the items. After incorporating feedback
from a pre-test, the revised questionnaire was further pilot tested on a 3PL company, and
included both company employees and customers. Four sets of questionnaires were
administered. Ten expected and actual questionnaires were administered to employees of a
3PL company and twenty expected and actual questionnaires were administered to the
business partners of a 3PL company.

The purpose of the pilot test was to obtain feedback and to test the content validity and clarity
of the measurement scale. A copy of the questionnaire, a covering lettering explaining the
purpose of the pilot study was personally administered to thirty respondents.

4.4 Hypotheses

On the basis of literature review and objectives of the study the major hypothesis developed
are as mentioned below:
H1: The service quality of 3PL service provider has a positive impact on its business
performance with supply chain partners (upstream and downstream).
H2: The quality of relationship management of a 3PL service provider has a posit ive impact
on its organizational performance.
H3: The organizational effectiveness of 3PL service providers has a positive impact on its
service quality and relationship management with supply chain partner organizations
(upstream and downstream).

4.5 Statistical Tools

The research methods used for the purpose of the study are Chi- square Goodness of fit,
Correlation Coefficient Analysis and Cronbachs Alpha.
-

Cronbachs Alpha - To check the reliability of the research instrument the researchers
have used

Chi-square Goodness of fit for hypothesis testing for one variable

Correlation coefficient analysis to test the extent of correlation between the three
constructs of SQ, OE and RM

5. Data Analysis and Interpretations

This study examines the performance framework of third party logistics and finds that the
performance measurements are primarily based on common variables with special weight to
Service Quality (SQ), Relationship Management (RM) and Organisational Effectiveness
(OE). The most commonly used statistical software packages of SPSS, MINITAB and MS
Excel have been used for the purpose of this study.

5.1 Reliability Test

A reliability test has been conducted to cross check the reliability of the research instrument.
Reliability is determined by the Cronbachs Alpha coefficient, which is based on the internal

consistency of the scale. It implies that an instrument is stable. The higher the value of the
Cronbachs Alpha coefficient, the higher the internal consistency of the item measurement of
each construct, which indicates the instruments high reliability. Cronbach's alpha is an index
of reliability associated with the variation accounted for by the true score of the "underlying
construct." Construct is the hypothetical variable that is being measured (Hatcher, 1994).

Table 5.1 Reliability of the Instrument

Constructs
Service Quality
Organisational Effectiveness
Relationship Management
Note: n = Nu mber of Items measured

Cronbach's Alpha Coefficient

Items(n) 3PL
3PL
Customers
Actual
expected Actual
0.894
0.87
0.94
12
14
0.943
0.903
0.898
0.962
0.919
0.897
09

Customers
Expected
0.869
0.876
0.923

Source: Authors own compilation of primary data

Table 5.1 shows the Cronbachs Alpha coefficients for each instrument and the constructs of
3PL service quality, 3PL organizational effectiveness, and relationship management. The
table shows that there is a positive Alpha Coefficient of greater than 0.85 for all the three
constructs hence determines a good reliability of the research instrument.
Nunnally (1978) claimed that a Cronbachs Alpha coefficient of greater than the
recommended value of 0.60 is acceptable for exploratory research. A value of greater than
0.72 reveals that a good reliability has been achieved. Cronbach's alpha increases as the intercorrelations among the measured items increase, and is thus known as an internal consistency
estimate of reliability of the items. Cronbach's alpha is widely believed to indirectly indicate
the degree to which a set of items measures a single unidimensional latent construct.

5.2 Correlation Coefficient

Correlation analysis is performed to investigate the inter-correlations between the three

constructs of service quality, organisational effectiveness and relationship management.
A correlation coefficient is a statistical measure of the degree in which changes to the value
of one variable will predict change to the value of another. In positively correlated variables,
the value increases or decreases in tandem. In negatively correlated variables, the value of
one variable increases as the value of the other decreases.

Correlation coefficients are expressed as values between +1 and -1. A coefficient of +1

indicates a perfect positive correlation: A change in the value of one variable will predict a
change in the same direction in the second variable. A coefficient of -1 indicates a perfect
negative correlation: A change in the value of one variable predicts a change in the opposite
direction in the second variable. Lesser degrees of correlation are expressed as non- zero
decimals. A coefficient of zero indicates there is no discernible relationship between the
degrees of change of the variables.

Table 5.2 Correlation Coefficie nt between Constructs

Correlation Coefficient between Constructs
Constructs
SQ

OE

RM

Respondents Customer Actual

0.664 0.619

SQ

RM

SQ

Customer Expected

SQ

OE

0.664

0.42 0.213

RM

0.619

0.42

Note: r ranges fro m -1.00 to +1.00

OE

0.213 0.239
1

0.239 0.887

OE

SQ

3PL Actual
1

0.887 0.076
1

RM

0.101

0.918

RM

3PL Expected

0.076 0.101
1

OE

0.918 -0.06
1

-0.058 -0.048
1

-0.05 0.087

0.087
1

Source : Authors own compilation fro m primary data

Table 5.2 shows that all the three constructs display moderate to high correlation with each
other. According to the table the correlation coefficients in the Customer Actual group show
a moderate relationship between SQ and OE with correlation coefficient being 0.664 and
between SQ and RM with coefficient at 0.619.However the relation between RM and OE
does not seem to be very strong as the correlation coefficient is only 0.42.This means that
according to the customers the actual performance of the 3PL service provider is not much
effected by the relationship management however, service quality of the service provider
does have a positive impact on the organisational performance.

In the customer expected category the above table shows that the relationship between SQ
and OE and SQ and RM are not having much influence on each other as the correlation
coefficients are 0.213 and 0.239 respectively, which is quite low as compared to the other
category. According to the customers expectations organisational effectiveness (OE) is

directly influenced by the relationship that the service provider has with the customers as
correlation coefficient between RM and OE is 0.887.

According to the data collected from the 3PL service providers (actual) it has been observed
that the correlation coefficient between SQ and OE is 0.76 and between RM and OE is at
0.918 and only 0.101 between SQ and OE. Thus, it shows that there is a high relationship
between the Organisational effectiveness and relationship management and a

moderate

relationship between the service quality and the organisational effectiveness of the 3PL
service provider in terms of their supply chain partners (upstream and downstream).

The data collected from the 3PL service providers (expected) determines that the correlation
coefficient between SQ and OE is - 0.58 and between RM and OE is at 0.087 and - 0.048
between SQ and RM. Thus, according to the representatives of the 3PL service providers it is
expected that the service quality does not have much influence on the Organisational
effectiveness and relationship management of the service provider with their counter parts.
However, the relationship management of the 3PL service provider has a positive impact on
its organisational effectiveness.

5.3 Hypothesis Testing

For the purpose of the study and hypothesis testing the most commonly used statistical
software package MINITAB has been used. Table 5.1 gives a detail of the results derived by
the application of the tool for the said purpose.

5.3.1 Hypotheses

H1: The service quality of 3PL service provider has a positive impact on its business
performance with supply chain partners (upstream and downstream).
H2: The quality of relationship management of a 3PL service provider has a positive impact
on its organizational performance.
H3: The organizational effectiveness of 3PL service providers has a positive impact on its
service quality and relationship management with supply chain partner organizations
(upstream and downstream).

Assumptions
1) Null Hypothesis: H10 : The service quality of 3PL service provider has a positive impact on
its business performance with supply chain partners (upstream and downstream).
Alternative Hypothesis: H1a: The service quality of 3PL service provider does not have any
impact on its business performance with supply chain partners (upstream and downstream)

Table 5.3

Chi square Test- Goodness of Fit (one variable)

Chi Square- Goodness of Fit (one variable)

Constructs
Service Quality

Customer Actual
N DF Chi-Sq P-Value
23 12 10.3478 0.585

*P > 0.05 , N = observed value , n= 150

Respondents
Customer Expected
3PL Actual
3PL Expected
N DF Chi-Sq P-Value N DF Chi-Sq P-Value N DF Chi-Sq P-Value
14 9 3.14286 0.958 18 10 6.44444 0.777 13 6 4.76923 0.574
**Source: Authors own compilat ion fro m primary data.

From Table 5.3 it has been observed that at = 0.05 level of significance the p- value for Chi
Square Goodness of fit test is greater than 0.05 in all the four groups of respondents for the
construct service quality, so we shall accept null hypothesis. Thus, it can rightly be said that
the service quality of the 3PL service provider has a positive impact on its business
performance with the supply chain partners.

2) Null Hypothesis: H20 : The quality of relationship management of a 3PL service provider
has a positive impact on its organizational performance.
Alternative hypothesis: H2a: The quality of relationship management does not have any
impact on its organizational performance.

Table 5.4

Chi square Test- Goodness of Fit (one variable)

Chi Square- Goodness of Fit (one variable)

Constructs

Customer Actual
N DF Chi-Sq P-Value

Relationship
Management(RM) 22 10

0.629

*P > 0.05 , N = observed value , n= 150

Respondents
Customer Expected
3PL Actual
3PL Expected
N DF Chi-Sq P-Value N DF Chi-Sq P-Value N DF Chi-Sq P-Value

0.75

0.993

17 10 3.05882 0.980 11 8 1.27273 0.996

**Source: Authors own compilat ion fro m primary data.

From Table 5.4 it has been observed that at = 0.05 level of significance the p- value for Chi
Square Goodness of fit test is greater than 0.05 in all the four groups of respondents for the
construct relationship management, so we shall accept null hypothesis. Thus, it can rightly be
said that relationship management of the 3PL service provider has a positive impact on its
business performance with the supply chain partners. The respondents feel that relationship
management is an important factor in building strong long term relation and thus improving
the overall organisational performance of 3PL service provider.

3) Null Hypothesis: H30 : The organizational effectiveness of 3PL service providers has a
positive impact on its service quality and relationship management with supply chain
partner organizations (upstream and downstream).
Alternative hypothesis: H3a: The organizational effectiveness of 3PL service providers has
a positive impact on its service quality and relationship management with supply chain
partner organizations (upstream and downstream).

Table 5.5

Chi square Test- Goodness of Fit (one variable)

Chi Square- Goodness of Fit (one variable)
Customer Actual
N DF Chi-Sq P-Value

Constructs
Organisational
Effectiveness(OE) 24 10 16.3333 0.090
*P > 0.05 , N = observed value , n= 150

Respondents
Customer Expected
3PL Actual
3PL Expected
N DF Chi-Sq P-Value N DF Chi-Sq P-Value N DF Chi-Sq P-Value
16 11 6.5
0.838 22 10
12 0.285 21 9
9 0.437
**Source: Authors own compilat ion fro m primary data.

Table 5.5 shows that at = 0.05 level of significance the p-value for Chi Square Goodness
of fit test is greater than 0.05 in all the four groups of respondents for the construct
organisational effectiveness, so we shall accept null hypothesis. Thus, it can rightly be said
that organizational effectiveness of 3PL service providers has a positive impact on its service

quality and relationship management with supply chain partner organizations (upstream and
downstream). The better the performance of the organization the better is its service quality
in terms of reliability, responsiveness, tangibility, empathy and assurance. Also the better the
organizational performance the better is its relationship with the supply chain partners in
terms of trust, commitment and guanxi.

Limitations and Future Scope

Appropriate care has been taken to conduct a thorough research. Possibility however remains
that some articles on the topic might have been missed out accidentally while conducting
literature review. Since the coverage has been exhaustive, it is hoped that possible omissions
would not significantly alter the review and conclusion. This study mainly considers the
relation between Service Quality (SQ), Organizational Effectiveness (OE), and Relationship
Management (RM) and 3PL Organizational Performance. There may be other critical factors
that influence 3PL organizational performance that should be considered in future studies. The
survey for the purpose of the study was done based on 600 responses in four groups of
respondents. Ensuring a better and unbiased response is difficult in the present market
situation as the Indian 3PL industry is still in its infancy and the market is fragmented with a
handful of serious players. Future studies may look into the issue of larger sample size. More
comparative studies between Asian countries such as India and China can be possible topics
for future research. Last but not the least, further research work should focus on managing
4PL and 5PL processes, supply chain partnership and their long term customer relationships.

Conclusion

A well developed and networked logistics industry is vital to the success and overall growth
of the economy as efficient supply chain management gives industry a competitive
advantage. This Study provides insight into several factors that relate to the success of 3PL
service provider and supply chain partner relationships: service quality, organisational
effectiveness and relationship management to accommodate current and future business
needs and challenges. 3PL industry initially was a transaction based service but has gradually
evolved into a more strategic function that is integral to an organisations operational
activities and its adoption in the Indian industries is likely to gain momentum with the

increasing number of organisations embracing the concept for the enhanced operational
efficiency provided by the 3PL service providers.

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