Chapter 5 Data Collection and Analysis
5.3 Data Analysis
Both selecting the evaluation factors and implementing an effective selection method are crucial in the successfully choosing appropriate 3PLs. Weights of factors for 3PL evaluation in this analysis, are obtained from the experts (decision makers) of the company, through a pairwise statistical analysis. The priority (importance) weights of factors are calculated by AHP. The calculation process is really hard and difficult, if it is done manually.
So, a program is developed via Microsoft Excel. Hence, the whole process can be calculated automatically. When a pairwise comparison matrix is entered into program, weights of
dimensions and factors are calculated by the program and the results of this research are given in Table 11
Table 11 The weights and rank of dimensions and factors
Dimensions
Globalization(B5) 15.38 2.07 18
Relationship(A2) 27.58 1
Financial
5.3.1 The Analysis of Importance of Dimensions
The rank of importance of dimensions by their global weights is as follows: (1) Relationship(27.58%); (2) Capabilities(23.89%); (3) Customer Service(21.24%); (4) Operation Performance(13.81%); (5) General Company Consideration(13.48%).
Relationship – It is the most important dimension in this model. Under relationship
(A2), there are five factors: easy to work with(B8), good communication(B7), personal relationship(B6), network coverage(B10), and decrease labor problem(B9).The dimension of relationship is clearly accounts for 27.58 % of total importance of dimensions. The relationship between company and 3PL evolves through continuous
improvement, developing trust and sharing risk and reward. Long‐term relationship can helps both company and 3PL to achieve the common goal. Relationship is strongly recognized in the culture of Thailand. Many Thai companies have established relationship between both sides of outsourcing for years. There are several benefits for successfully established in relationship. The benefits are explored in terms of positioning the logistics outsourcing for competitive advantage. Outsourcing logistics allows the T.T. Company to concentrate on developing core competencies, and reduces the complexity in business processes and consequently create sustainable competitive advantage. In the culture of Thailand, company would like its 3PL to be easy to work with and communicate. Thai company would like to establish long-term relationship with its 3PL. Moreover, Lynch (2000) points out that labor problem consideration must not be neglected when making the outsourcing decision.
Problems with the workforce can be passed on to the 3PL.
Capabilities – It is the second most important dimension in this study. Under
capabilities(A3), there are six factors: cost reduction(B14), management quality(B12), special expertise(B13), IT systems(B11), financial stability(B16), and flexibility(B15). The local weights of factors can be found in Table 11The dimension of capabilities is accounts for 23.89 % of importance of total dimension. For the company, the dimension of capability focused on cost reduction, management quality, special expertise and IT systems. If the 3PL has sophisticated information systems in such areas as shipment tracking, EDI, import documentation monitors, complex duty calculations, etc., they would be better qualified. Special expertise is the 3𝑡ℎ important factors under this dimension. Kremic et al (2006) describes that firms face challenges with need of skills and knowledge will outsource their functions to gain world class capabilities from the logistics service providers.
General Company Consideration – It is the last important dimension in this model.
General company consideration(A1) there are five factors: price(B1), globalization(B5), expand market(B3) , location(B2), and own strategic asset (B4). The local weights of factors can be found in Table 11
The dimension of general company consideration only accounts for 13.48 % of importance total dimension. The T.T. Company is an international treading company so it needs 3PLs to use globalized and own strategic asset to perform logistics functions which have been conventionally operational within T.T. Company. Specifically, 3PLs can shorten the distance between customers and the company. Shorter distance enables to save time and money to delivery products. However, under this dimension the factors globalization, expand market, own strategic asset are not common in the 3PLs in Thailand. Since logistics outsourcing is in the developing stage in Thailand. Therefore, this may be the reason that the dimension of general company is not important.
5.3.2 The Analysis of Importance of Factors
It is interesting for us to discuss the top six and the last important factors on our study.
Thus, the meaning and the reason for the top six important factors to select the 3PL in T.T.
Company will be explained below.
Service Quality (accounted for 11.34 %) is the most important factor to select 3PL.
Quality of service comprises of accuracy in order fulfillment, less loss and damage, and quickly response to customers complaints, etc. Almost all of decision makers in T.T.
Company mention about the 3PL in service quality, and they consider that 3PLs must provide a good quality of service to company. Thus, 3PLs should be responsible to provide the professional quality of service and coordinate all logistics service under company agreement.
Easy to Work with (accounted for 9.33%) It is the second most important factor for
T.T. Company to select 3PLs. The 3PLs are willing to support what T.T. Company wants if 3PLs are not easy to work with, the companies may encounter difficulty when it needs the 3PLs to cooperate with it. For example if T.T. Company wants to change delivery date, 3PL may be reuse company requisition. Due to company and 3PL lack of easy to work with.Good Communication (accounted for 6.80%) It involves how to distribute
information effectively. Communication between company and 3PLs (Spencer et al. 1994;IWLA 2003) is essential for the coordination of internal corporate functions and outsourced logistics. Communication is a key part of building the relationship. It's usually an idea to arrange regular, face-to-face meetings for all the key people involved in logistics outsourcing.
T.T. Company needs to specify clearly to service providers about their roles and responsibilities as well as their expectations and requirements. 3PLs may need to assign a special department or person that is responsible for communication.
Particular in Thai business, Thais avoid confrontation and direct criticism (even constructive criticism), preferring a nonassertive, polite, and humble personality and admiring patience. All of these enhance interpersonal harmony. Thai social language styles and levels vary by gender, relative rank and position, age, and closeness between the companies. The lack of understanding of communication differences can be fatal to business relations. Thai company may perceive European as being very offensive, whereas European may become irritated and confused by the indirect and reserved style of Thais. Given these differences in directness of communication, it seems that in negotiating with Thais, a soft and polite approach will work better than a direct and straightforward approach. On the other hand, in negotiating with people, the reverse should be true.
Reliability (accounted for 6.53%) The 3PLs needs to be extremely reliable. A mistake
on products means problems for customer, which could damage company’s image. So if 3PL is unable to perform complex tasks reliably and efficiently, company will lose a great deal of time to correct these errors, which in turn will have a negative effect on company profit margin.Nowadays, 3PLs in Thailand are in growth stage so the factor of reliability is quite importance in Thai company. We can say that reliability factor is most important in this stage when the Thai company decides to outsource logistics. Moreover, 3PLs can attract Thai company who want to use 3PLs by showing how much that 3PL can help company to reduction cost.
Price (accounted for 6.47%) is the
5𝑡ℎ important factor that affects company in logistics outsourcing. Price is the cost to be paid to the 3PL for service. The low price of 3PLs is an opportunity for T.T. Company, it can help T.T. Company to decrease product’s price.Low price of 3PLs allows company to have more competitive advantages when it wants to negotiation with its customer. However, low price of 3PLs mat have a negative impact on service quality. T.T. Company should not satisfice service quality with price.
Cost Reduction (accounted for 6.28%) 3PLs could cut its cost further under T.T.
Company’s requirement. Company should select 3PLs who could save company money. This means that 3PLs should find ways to be more efficient in trickling cost savings for T.T.
Company. Logistics outsourcing should offer many cost‐related advantages such as cost reduction in investment, labor and equipment maintenance. Large 3PLs serve a large number of customers are able to utilize facilities better and reduce logistics costs by achieving economies of scale.
Flexibility (accounted for 1.04%) is about the ability of 3PL to adapt to market
demands. In another words, the ability of the 3PL to respond to internal or external environment changes that affect whether the 3PLs could deliver products in a timely and cost-effective manner. Flexibility enables the user to give customized service to its customers, particularly in special or non-routine requests. In a changing world, it is important for 3PLs to be fixable and adaptable to the changes in government’s regulation, economic conditions, and customers demand.Manda (2012) mentioned almost of Thai business will consider benefit of using a 3PL provider is the ability to scale space, labor, and transportation according to inventory needs.
Businesses with seasonal periods can enjoy stress free transitions between company and customers, having the ability to utilize more space when needed. And they think using a 3PL allows business to grow into new regions without barriers. 3PL providers have distribution centers and warehouses strategically located to allow for quick shipping of goods to anywhere in the world. Decentralized distribution offers lower costs, and provides quicker delivery times. 3PL providers have the resources to seamlessly support growth into new markets, there are the main reasons for logistics outsourcing in Thai company.
5.3.3 Compare the Results with Those of Other Papers
There have been numerous studies which investigated the key factors affecting the selection of third-party logistics providers. We already do a literature review in chapter 2. We compare our results with those of 14 papers in chapter 2 by Table 12. In table 12, a score for each factor is calculated. This was done by awarding six points to the most importance factor identified by each other paper (Erdal 2009), five points to the second important factor, four to the third, three to the fourth, two to the fifth, one to the sixth, and zero to less than or equal to the seventh. The score for each other papers are summed up and are presented in the right-hand column in Table 12. The maximum score could be 42, in which case all fourteen studies
would have found the same factors to be the top driver for selection logistics outsourcing. The table shows that price (scores 31 points), Service Quality (27 points), On-time Performance (26 points), Management Capability (20 points), Financial (15 points) and Speed (12 points) are the most common factors for selection logistics outsourcing.
Table 12 Comparison results with those of other 14 papers
Ranked Factors in our
2Spencer et al. (1994), Kannan and Tan (2002)
(2003), Petroni and Bralia (2000) 8
Price
3Aghazadeh(2003), 4McGinnis et al. (1995), 6IWLA (2003), 2Moberg
20
Ranked Factors in our
research Papers Score
and Speh (2004), 6Qureshi et al.
(2007)
Customer Support IWLA (2003), 1Moberg and Speh
(2004) 6
5Petroni and Bralia (2000), 1Bottani and Rizzi (2006), 9Chen and Wu (2011), 3M cGinnis et al. (1995),
4Qureshi et al. (2007)
15
Network Coverage 4Huang and Kadar (2002) 3
Decreased Labor Problem IWLA (2003) 0
Variety of Service
4M o b e rg a n d S p e h ( 2 0 0 4 ) ,
3Efendigil et al. (2008), Petroni and Bralia (2000), IWLA (2003)
Globalization Moberg and Speh (2004), Qureshi
et al. (2007) 0
Speed 5Spencer et al. (1994), 2Chen and 12
Ranked Factors in our
5Huang and Kadar (2002), Moberg
and Speh (2004) 2 Chen and Wu (2011), IWLA (2003)
5
Note: *3Efendigil et al. (2008) means Efendigil et al. (2008) rank service quality as the third important factor in their papers
From Table 12, we find that service quality and price are considered as important factors in our study and other papers
However, service quality is the most import factor for T.T. Company. The reason may be that the top four most important factors for T.T. Company are service quality, easy to work with, communication and reliability and no one is price related. They are directly or indirectly service-related, showing that service considerations dominate over price.
Maybe, price are a qualifying, not a winning factor. Setthakaset and Basnet (2005) and Selviaridis and Spring (2007) also suggest that company needs to balance low price with good service of 3PLs.
Easy to work with and Communication are two important factors in our study.
However, other studies do not consider them as important factors. Since both of two factors are under relationship dimension, it may indicate the characteristic of Thai culture business.
European tends to be individualistic and self-reliant, having low collective responsibility for members of the family. In contrast, Thailand is moderately collectivistic.
Individual independence is weak, and reliance on the group is expected. Thai company emphasizes interdependence, conformity, belongingness, empathy, face, and obedience.
Thai company environment have been found to place a high value on maintaining harmony in interpersonal relationships. Moreover, they hold high collective responsibility for members of the company. Inside connections are essential for Thai people to support friends and family. Therefore, price is less important than maintaining a long-term relationship. To be treated nicely could enhance cooperation between two parties. Therefore, 3PLs working with Thai company must try to establish contacts among them. 3PLs may enhance the relationship by joining the social activities of Thai people, sending greeting cards or gifts, talking to them face-to-face rather than by telephone or memos and letters, inviting them to lunch or dinner, and adapting manners and customs that fit the Thai culture business.
Finally, on-time performance, financial stability, management quality, and speed are considered as important factors in other papers. However, T.T. Company may not think them important since Thai culture is relationship oriented. These four factors which are not human-related so it not considered as important in T.T. Company