growing trends in third party logistics: a case study of .... sept ijmte - 943.pdf · literature...

Growing Trends in Third Party Logistics: A Case Study of

Rajasthan

Ms. Shilpi Chakravarty Research scholar, IIS University, Jaipur

Dr. Chhavi Jain

Sr.Assistant Professor, Dept of Management Studies, IIS University, Jaipur

Abstract:

Third party logistics is the growing topic throughout the world. In India it is at very budding stage but still

most of the multinational and global firms are trying to establish it. This paper study the current trend of

3PL in Rajasthan, and identify the important factors on which there will work needed. A survey is conducted

to identify the perception of exporter and importer while selecting 3PL service providers. As a result top

five factors are revealed which play an important role while choosing outsourcing service providers which

includes, on time delivery, quality of transport and trade, ability to tack and trace the consignment etc.

Introduction

Ever since the liberalization of the economy of India, there has been a path to become one of the

top economic powers in the world. New areas for progress and development have opened up;

manufacturing and retail sectors earned popularity because of the changes in China’s export policy

of not exporting their manufactured items, by which Indian manufacturing firms have benefitted.

Hence this 3PL sector will contribute to GDP significantly in the long term. The growth and

competitiveness in these sectors largely depend on the efficiency of the logistics functioning that

facilitate the companies’ ability to reach out to their customers on time and at the desired location.

Realizing this, many manufacturers and exporters are now restructuring their logistics processes

in a manner to incorporate partnerships with expert logistics service providers and outsourcing

such activities as domestic transportation, international transportation, customs clearance,

warehousing, forwarding, cross-docking, product labelling, packing, assembly, reverse logistics,

freight bill auditing and payment, IT services, fleet management, logistics consultancy services

provided by 3PLs, order entry, processing and fulfilment and limited liability partnership

(LLP)/4PL service.

International Journal of Management, Technology And Engineering

Volume 8, Issue IX, SEPTEMBER/2018

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3PL Market Structure in India

The 3PL market in India is consist of two segments: the first one is asset based in which assets

like trucks, distribution centres and warehouses are utilized in logistics supply, and the second

one is non-asset based. There is a vast difference between the nature of Indian 3PL and its

counterpart elsewhere, especially in the U.S., Table 2.

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

Parameter USA India

Usage of 3PL 73% 57%

Common activities

outsourced

Warehousing (73.6%) Outbound Transportation (57%)

Outbound Transportation

(68.2%)

Inbound Transportation (53%)

Freight bill payment (66.4%) Custom clearing and forwarding

(53%)

Inbound warehousing (57.1%)

Reasons for not

outsourcing

Control would diminish (73%) Poor infrastructure of provider (87%)

Costs would not be reduced

(64%)

Inability to respond to changing

needs (89%)

Service commitment would not

be met (47%)

Unreliable promised from providers

(82%)

Logistics is a core competency

(44%)

Concerns about capability of

providers (77%)

Necessity of e-

commerce

62% 66%

Collaborative

relationship

84% 13%

Gain sharing is

important for

relationship

87% 6.5%

Source: 3PL Practices in India, Sahay. B. S., www.cscmpindia.com/Events/20112003/3.PDF



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Literature Review on third party logistics

Liu & Lyon (2014) described in this paper is to evaluate the relationship between the service

capabilities and performance of UK and Taiwanese third-party logistics (3PL) providers. A study

presented is based on a recent survey. The results identify the most important services offered by

3PLs (Third party logistics) and the most important aspects of 3PL operational performance. In

Taiwan the most important service capabilities were tracking and tracing followed by outbound

distribution and logistics information system. For UK outbound distribution was viewed most

important followed by order fulfilment and rate negotiation.

ProTrans(2001) explained that 3PL is the company performs the logistics activity on behalf of

the shipper, these all are the integrated activity not a standalone one. There will be continuous

relation between the shipper and the service provider.

Harlldorsson and Skjott Larcen(2004) postulate that cost reduction, customer satisfaction and

higher level of services are the reason to choose 3PL, while the negative factor associated with this

loss of employee morale due to shift of control and power.

Golop and Regan (2001) conclude that 3PL service provider were interested in developing

information system and inventory and order fulfilment management.

Bardhan et al (2007) stated that investing in IT by logistics firms are fruitful decision to gain

competitive edge and lead in global supply chain network. Few studies indicates better quality and

increase in profitability for logistics firm. (Menon et al 2007).

Sink and Lengley(1997) suggested to emphasis on the issues like development of selection criteria

service implementation , formation of cross functional buying team, top management commitment

etc.

Bergland et al(1999) identified the factors which give rise to 3PL market which includes reduction

of labour cost, reduction in asset intensity, restructuring of distribution, while on supply side,

industry deregulation and profit margin decline in services were the reason of growth.

Mathor and Sagar(2015) stated that the composition of India’s Foreign Trade has been changed

specially after liberalization and globalization, our major export now includes engineering goods



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, petroleum products, gems and jwellary, electronic goods etc. It was an achievement to transform

our self from a primary goods exporting company to manufactured goods exporting company.

Research Methodology

To determine the preference of exporters while choosing third party logistics. A survey

questionnaire is designed to identify the most important reason for choosing 3PL.

Reason of choosing 3PL

Perception while selecting service provider

Important factors that influence the decision

Efficiency of services provider

The respondents are asked to fill the questionnaire according to their point of view regarding third

party logistics. Personal visits are also arranged to meet the department taking decision regarding

outsourcing.

The sample size is 100 respondents of Rajasthan who are exporter importer and freight forwarders.

They are directly or indirectly dealing with #pl service provides.

Out of 100, 6 respondents filled there questionnaire incompletely. Hence the results are based on

only 96 respondents.

Results:

Descriptive analysis of Demography of the exporters/Importer /forwarders.

Here few questions was asked to the respondents to find out the profile of the customer by

identifying their commodity in which they are dealing, their years of experience and the

designation in the existing company.



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Tab 4.1

Parameter Category Frequency Percentage

Commodity Handicraft 110 30.7

Stone 56 15.6

Gems & Jewelry 97 27.0

Others 95 26.5

Total 358 100.00

Years of Experience More than 20 yrs 9 2.5

15-20 yrs 35 9.77

10-15 yrs 73 26.5

5-10yrs 95 26.5

Less than 5yrs 146 40.7

Total 358 100.00

Designation

Exporter/Importer 98 27.37

Forwarder 114 31.8

Marketing manager 57 15.92

Export Executives 89 24.8

Total 358 100.00



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Chart 4.1

Inferences: The table 4.1 shows the commodities exported by the respondents. It shows

that 30.7 % are dealing with Handicrafts who is the major player from Rajasthan. Next is

Gems & Jewelry with 27% followed by stones with 15.6% and 26.5 % are other

commodities.

Chart 4.1.2

Inferences: The table deals with work experience of the respondents in same industry. It

shows that major respondent i.e.40.7% are in the industry from last five years.26.5 %

Commodities that are Exported

Handicraft

Stones

Gems & jwellary

Others

Years of Experience in Industry

more than 20 yrs

15-20 yrs

10-15yrs

5-10yrs

Less than 5 yrs



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respondents are here from more than 5 yrs. 20.3 % are in this sector from last 15 yrs. 9.77%

are there from more than 15yrs while only 2.5 % are from more than 20yrs.

Chart 4.1.3

Inferences: This table indicates the designations of the respondents in the company most

of them are forwarders i.e. 31.8% than next are exporter or importer themselves i.e. 27.375

followed by export executives 24..8 and then marketing manager 15.

4.3 Graphical Analysis of Mode of logistics service channels:

Here respondents asked about the channel of logistics they are using.

Desingnation of respondents

Exporter/Importer

Forwarder

Marketing Manager

Export Executive



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Chart 4.3.1

Inferences:From the above table it has been observed that 9.8% respondents said they are using

direct logistic services whereas 90.2% respondents said they are not using direct logistic services

in the shipping industry.

Table 4.3.2

By Third Party Logistics (Freight Forwarders)

Frequency Percent

Yes 50 14.0

No 308 86.0

Total 358 100.0

9.8

90.2

Direct

Yes No



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Chart 4.3.2

Inferences:From the above table it has been observed that 14% respondents said they are using

by third party logistic services whereas 86% respondents said they are not using by third party

logistic services in the shipping industry

Table 4.3.3

Both Channels

Frequency Percent

Yes 315 88.0

No 43 12.0

Total 358 100.0

14.0

86.0

By Third Party Logistics (Freight Forwarders)

Yes No



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Chart 4.3.3

Inferences:From the above table it has been observed that 88% respondents said they are using

both channel for logistic services whereas 86% respondents said they are not using both channel

for logistic services in the shipping industry.

4.4 Graphical analysis of reasons of choosing Third Party Logistics:

Here respondents are asked to rank the reasons to use third party logistics services

Table 4.4.1

Efficiency of the customs clearance process.

Frequency Percent

Slightly Important

16 5.1

Important 170 54.0

Fairly Important 76 24.1

Very Important 53 16.8

Total 315 100.0

88.0

12.0

Both Channels

Yes No



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Chart 4.4.1

Inferences:Above table shows that the third party logistics has efficient custom clearness process

in shipping industry. Various opinions from diverse respondents exhibit that 5.1% respondents

rate slightly important, 54% respondents important, 24.1% respondents rate fairly important while

16.8% respondents rate very important with the same

Table 4.4.2

Quality of trade and transport-related infrastructure.

Frequency Percent

Slightly Important

31 9.8

Important 97 30.8

Fairly Important

108 34.3

Very Important

79 25.1

Total 315 100.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

SlightlyImportant

Important FairlyImportant

VeryImportant

5.1

54.0

24.116.8

Efficiency of the customs clearance process.



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Chart 4.4.2

Inferences:Data of above mentioned table accordingly renders about the third party logistics has

well-organizedquality of trade and transport- related infrastructure. Various opinions from diverse

respondents exhibit that 9.8% respondents rate slightly important, 30.8% respondents important,

34.3% respondents rate fairly important while 25.1% respondents rate very important with the

same

Table 4.4.3

Ease of arranging competitively priced shipments.

Frequency Percent

Slightly Important

22 7.0

Important 85 27.0

Fairly Important

95 30.2

Very Important

113 35.9

Total 315 100.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

SlightlyImportant


Very Important

9.8

30.834.3

25.1

Quality of trade and transport-related infrastructure.



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Chart 4.4.3

Inferences:Above table analysed that the third party logistics is ease of arranging price shipment.

Various opinions from diverse respondents exhibit that 7% respondents rate slightly important,

27% respondents important, 30.2% respondents rate fairly important while 35.9% respondents

rate very important with the same.

Table 4.4.4

Ability to track and trace consignments.

Frequency Percent

Slightly Important

24 7.6

Important 119 37.8



Total 315 100.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

SlightlyImportant


Very Important

7.0

27.0 30.235.9

Ease of arranging competitively priced shipments.



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Chat 4.4.4

Inferences: Above table examined that the third party logistics has ability to tract and trace

consignments. Various opinions from diverse respondents exhibit that 7.6% respondents rate

slightly important, 37.8% respondents important, 33% respondents rate fairly important while

21.6% respondents rate very important with the same.

Table 4.4.5

Frequency with which shipments reach consignee within the scheduled or expected time.

Frequency Percent

Slightly Important 30 9.5

Important 37 11.7



Total 315 100.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

SlightlyImportant


VeryImportant

7.6

37.833.0

21.6

Ability to track and trace consignments.



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Chart 4.4.5

Inferences:Above table advocates the number of respondents who think that the third party

logistics is always reach on scheduled or expected time. Various opinions from diverse

respondents exhibit that 9.5% respondents rate slightly important, 11.7% respondents important,

33% respondents rate fairly important while 45.7% respondents rate very important with the same.

Rank Analysis

Rank Analysis refers to the data transformation in which numerical or ordinal values are replaced

by their rank when the data are sorted.

0.0

10.0

20.0

30.0

40.0

50.0

SlightlyImportant


VeryImportant

9.5 11.7

33.045.7

Frequency with which shipments reach consignee within the scheduled or expected time.



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Table 5.2: Rank Analysis of Third Party Logistic Service Provider

Factors Influencing while Choosing Third Party Logistics

S. No. Name of the factor Weighted

Total Weighted

Mean Rank

1 Efficiency of the customs clearance process.

1111 74.07 4

2 Quality of trade and transport-related infrastructure.

1180 78.67 2

3 Ease of arranging competitively priced shipments.

884 58.93 5

4 Ability to track and trace consignments. 1161 77.4 3

5 Frequency with which shipments reach consignee within the scheduled or expected time.

1307 87.13 1

Source: Primary Data Collected through Questionnaires

Inference: As we can see in above mentioned table that according to the perception of customers

regarding frequency with which shipments reach consignee within the scheduled or expected

time is the major factor in third party logistic service provider in Rajasthan and it is ranked first

by respondents. The next major factor is quality of trade and transport-related infrastructure

and it is ranked second by the respondents. The factor which is ranked third by the respondents

is ability to track and trace consignments. The next factor which is ranked fourth by the

respondents is efficiency of the customs clearance process. The ease of arranging competitively

priced shipments is ranked as fifth by the respondents.



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Conclusion:

Hence by the means of this study we can identify that third party logistics is growing with time

throughout the world and its impact is also affecting Rajasthan who is amont the top states for

export from India. Therefore being a 3PL service providers following arear are being focused to

improve the services and grab more and more customers.

Customers need fast shipment, as the delivery of the good should be timely managed.

Quality of trade and transport related infrastructure should be improved.

Customers are now days techno friendly and they need to track their consignment by their

own, hence the tracking system should be updated.

Custom clearance is a tedious process so 3PL service providers should try to manage it

by their own without giving headache to exporter.

Last but not the least competitive prices is the important aspect to capture the market and

is a big reason to choose outsourcing of logistics.

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