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JÖNKÖP I NG INT ERNA T I ONAL BU S INE S S SCHOOL JÖNKÖPING UNIVERSITY
To p i c : E v a l u a t i o n o f T h i r d p a r t y l o g i s t i c s p r o v i d e r s
A n d t h e i r s e r v i c e s i n S w e d e n
Master Thesis
Author: Godspower Oduose
Tutor: Leif Magnus
Jönköping November 2011
ABSTRACT
This thesis focuses on third party logistics providers in Sweden and their service offerings. The author
examines, evaluate and discuss the range of third party logistics services provided by third party
logistics companies in Sweden. Furthermore, the author categorized the third party logistics providers
using some of proposed frameworks and theories for differentiating third party logistics providers
from previous researchers. This was done to determine the relevant categories that the third party
logistics providers in Sweden belongs to. Moreover, the author made a comparison of the competence
of third party logistics providers in terms of the number of services they offer in Sweden.
The author used the qualitative research approach as the thesis is more exploratory in nature. Basically,
exploratory research is conducted to obtain greater understanding of a concept or to help clarify
ambiguous problem. The author interview four (4) third party logistics providers in Sweden and other
information such as the provider’s website information and annual reports was used in the analysis.
It is interesting to note that, relationship between third party logistics providers and their customer is a
major factor when classifying providers into different category. Some of the theories proposed by
previous researcher on the classification of third party logistics provider have become obsolete due to
the fact that the relationship between the third party logistics providers and their customers has evolve
over the years from formal cooperation to strategic alliance and joint ownership.
Some of the companies are less competent than others in terms of the services they offer in each of
the third party logistics service categories. This does not necessarily make them weaker because the
services they offer in each of the categories are being driven by the company’s business strategy to stay
competitive in the third party logistics industry. Furthermore, although size and global status give some
competitive advantages, adopting different strategies such as creating a niche market in a particular
service or a particular industry will provide major competitive advantages to third party logistics
providers.
Table of Contents
1.0. INTRODUCTION ............................................................................................................................................. 1
1.1. BACKGROUND ....................................................................................................................................................... 1
1.2. PROBLEM STATEMENT ............................................................................................................................................. 1
1.3. PURPOSE ................................................................................................................................................................. 2
1.4. RESEARCH QUESTION .................................................................................................................................................. 2
1.5. DELIMITATION ........................................................................................................................................................ 3
2.0. FRAME OF REFERENCE ............................................................................................................................... 4
2.1. WHAT IS THIRD PARTY LOGISTICS? .......................................................................................................................... 4
2.2. THIRD PARTY LOGISTICS PROVIDER CLASSIFICATION ............................................................................................... 4
2.3. THIRD PARTY LOGISTICS SERVICES .......................................................................................................................... 7
2.4. COMPARISON OF THIRD PARTY LOGISTICS SERVICES BETWEEN PROVIDERS ........................................................... 12
3.0. METHODOLOGY .......................................................................................................................................... 13
3.1. RESEARCH DESIGN ............................................................................................................................................... 13
3.2. RESEARCH APPROACH ........................................................................................................................................... 13
3.3. RESEARCH STRATEGY AND DATA COLLECTION ..................................................................................................... 13
3.4. SELECTING THE SAMPLE AND INTERVIEW METHOD ............................................................................................. 14
3.4. DATA ANALYSIS ..................................................................................................................................................... 15
3.5. VALIDITY AND RELIABILITY .................................................................................................................................. 15
4.0 EMPIRICAL STUDIES .................................................................................................................................... 17
4.1. ADITRO LOGISTICS SWEDEN ................................................................................................................................. 17
4.1.1. Company Background ........................................................................................................................................ 17
4.1.2. Third party logistics services provided by Aditro Logistics ........................................................................................... 18
4.2.0. GREENCARRIER SCANDINAVIA AB ..................................................................................................................... 22
4.2.1. Company Background ........................................................................................................................................ 22
4.2.2. Third party logistics services provided GreenCarrier Scandinavia AB ............................................................................ 22
4.3.0. KUEHNE + NAGEL ............................................................................................................................................. 24
4.3.1 Company background .......................................................................................................................................... 24
4.3.2. Third party logistics services provided ...................................................................................................................... 24
4.4.0. VOLVO LOGISTICS SWEDEN ............................................................................................................................... 28
4.4.1. Company background ......................................................................................................................................... 28
4.4.2. Third party logistics services provided ...................................................................................................................... 28
5.0. ANALYSIS........................................................................................................................................................ 33
5.1. CLASSIFICATION OF THIRD PARTY LOGISTICS PROVIDERS ...................................................................................... 33
5.2. COMPARISON OF THIRD PARTY LOGISTICS SERVICES BETWEEN PROVIDERS ........................................................... 35
6.0. CONCLUSION ................................................................................................................................................ 38
6.0. CLASSIFICATION OF THIRD PARTY LOGISTICS PROVIDERS IN SWEDEN ................................................................... 38
6.2. COMPARISON OF THIRD PARTY LOGISTICS SERVICES BETWEEN PROVIDERS ........................................................... 39
7.0. FUTURE RESEARCH .................................................................................................................................... 41
8.0. DISCUSSION ................................................................................................................................................... 42
9.0. REFERENCES ................................................................................................................................................ 43
10. APPENDIX A .................................................................................................................................................... 48
List of Figures
Figure 1: TPL firms classified according to abilities of general problem solving and customer
adaptation
Figure 2: Categorization of logistics functions
Figure 3: Scope of activities
Figure 4: Aditro Logistics Retail logistics services illustration
Figure 5: Aditro Logistics Consumer Logistics illustration
Figure 6: Aditro Logistics Industrial Logistics illustration
Figure 7: Classification of Swedish TPL providers according to abilities of general problem
solving and customer adaptation
List of Tables
Table 1: The most frequently used 3PL services, 2003 and previous years.
Table 2: Summary of third party logistics services
Table 3: Comparative function of 3PL providers.
Table 4 Summary of TPL services provided by the Four (4) TPL companies
Table 5: Comparison of third party logistics services between providers
1
1.0. Introduction
1.1. Background
The idea of adopting third party logistics services has grown in different industries around the world
during the past several years and it involves outsourcing logistics activities that were traditionally
performed in-house. According to Lieb and Randall (1996), the functions performed by third party
logistics providers comprise of the entire logistics process or more commonly selected activities with
the process. Additionally, factors such as globalization, customer orientation, lead time reduction, cost
reduction and outsourcing are some of the major driving force for this interest in advanced logistics
(Hertz & Alfredsson, 2002). Moreover, concepts such as reengineering and supply chain management
have made many companies to consider adopting the use of third party logistics services (Lieb &
Randall, 1996).
Furthermore, Murphy, Dalenburg & Daley (1991), states that most large multinational firms use third
party logistics providers to some level and find ways to consolidate their supplier bases by using single-
source suppliers. This has led to third party logistics providers looking for ways to provide a broad
range of logistics services to meet their client’s requirement.
According to Lieb and Bentz (2004), some of the third party logistics services includes freight payment,
shipment consolidation, direct transportation services, customs brokerage, warehouse management,
order fulfilment, re-labelling and repackaging, just to name a few.
Different authors have written about the benefits and risks of using third party logistics services and
the use of third party logistics services by large American firms. Little has been discussed about the
third party logistics providers and the services they offer in Sweden.
1.2. Problem statement
According to Gooley (1997), Europe is widely regarded to be the founders of third party logistics but
over the years the industry evolved and third party logistics has now become a common phenomenon.
Most researchers has written about the reason and benefits of third party logistics (Langley & Sink,
1997, Bhatnagar, Sohal & Millen, 1999), classification of different third party providers (Hertz and
Alfredsson, 2002, Virum, 1993, Virum & Bagchi, 1998), the use of third party logistics by firms in
American and Australia (Lieb and Randall, 1996, Sohal, Millen & Moss, 2002 respectively),
development of third party logistics in Europe (Laarhoven, Berglund & Peters, 2000). Little has been
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written about the third party logistics providers and services in Scandinavia and more specifically there
is very little research done on third party logistics providers and their services in Sweden.
From previous researches and with the political changes including the establishment of the European
Union and subsequent spread of the privatization and deregulations seems to indicate that there is a
likeness that third party logistics faces different challenges and offer different services because of their
geographical location.
Marketline (1998) predicted that the share of logistics expenditure outsourced in Europe will increase
from 18% in 1998 to 22% in 2002. Mckinno and Forster (2005) Delphi survey were in agreement with
Marketline (1998) prediction and also added that this upward trend of logistics expenditure will
continue over the next five years, however, IT systems, product customization and reverse logistics are
the three activities reckoned to experience the most rapid rates of outsourcing, with external
expenditure on increasing by 31%, 28%, and 28% by 2005.
With this prediction in mind and the political changes mentioned earlier, what are the third party
logistics services being offered in Sweden? What category does the third party logistics providers
belong? And how are the services being offered in Sweden by third party logistics provider compared
to each other? These are some of the questions that the author will address.
1.3. Purpose
The purpose of this thesis is to examine, evaluate and discuss the range of third party logistics services
provided by third party logistics companies in Sweden. Furthermore, the author will categorize the
third party logistics providers using some of the previously proposed framework for differentiating
third party logistics providers. Moreover, there will a comparison of the competence of third party
logistics providers in terms of the number of services they offer in Sweden.
1.4. Research Question 1.) What relevant categories does the third party logistics providers in Sweden belong to?
2.) How do the third party logistics provider’s competence compare to each other in terms of the
number of services they offer?
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1.5. Delimitation
The thesis relied on more of secondary data and small pool of interviews of different third party
logistics providers in Sweden.
4
2.0. Frame of Reference
2.1. What is Third party logistics?
According to Langley and Sink (1997), there seems to be no definition of third party logistics definition
that will satisfy all industry observers and views third party logistics as using the services of an external
supplier to perform some or all of a firm’s logistics. In support of Langley and Sink (1997), Bhatnagar
et al (1999) also refer to third party logistics as the use of external companies to perform logistics
activities either in part or full. Furthermore, Laarhoven et al (2000) defines third party logistics as
activities performed by a logistics service provider on behalf of a shipper and consisting of at least
management and execution of transportation and warehousing. Other activities such as inventory
management, information related activities, value added activities are also included.
Moreover, according to Hertz and Alfredsson (2002) third party logistics is “an external provider who
manages, controls, and delivers logistics activities on behalf of a shipper” and their relationship can be
formal or informal. Bachi and Virum (1996) referred to third party logistics as a logistics alliance that
shows a close and long term relationship between a customer and a provider in connection with the
delivery of a wide range of logistics needs.
In summary, all these definitions of third party logistics all point to the fact that third party logistics is
the use of external logistics service providers or companies to perform some part or full integrated
logistics activities.
2.2. Third party logistics provider classification
Over the years, the relationship between third party logistics providers and their customers has evolved
from a focus on contract to partnership and agreement; it is more or less a mutual beneficial and
continuous relationship between both parties (Virum, 1993 and Bagchi & Virum 1998)
According to Anderson (1995a), Strategic alliance plays a pivotal role between third party logistics
providers and their customers because it helps to guarantee the quality of performance. Furthermore,
third party logistics providers can be classified based on the type of alliances they formed with their
customers such as scope of partnership, design and management, degree of customization and
dedication, knowledge level of shippers and providers and material flow characteristics (Hertz &
Alfredsson, 2002).
Virum (1993) further states that third party logistics providers may be grouped into three classes based
on the degree of integration and interdependency between the providers and the shippers. The classes
are: Formal co-operation venture, logistics joint venture and joint ownership.
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Class 1 (known as Formal co-operation venture): This is a contractual agreement between the providers and
the shippers where the providers are responsible to carry out some specified logistics services for the
shipper for a given time period (typical time period will be from a number of months up to one year).
Laarhoven et al (2000) has different view that states a contractual agreement between third party
logistics provider and their customers should contain some management, analytical or design activities
and the length of the cooperation between both parties should be at least one year time period in order
to “distinguish third party logistics from traditional arm’s length sourcing of transportation and/or
warehousing”.
Class 2 (Known as Logistics joint venture): In this class, there is a higher degree of integration and
interdependency between third party logistics provider and their customer. The alliance between both
parties may include a larger number of logistics services and the resource requirement for the provider
is higher. Also there is a deeper insight into the sharing of information such as business strategies,
plans and operations between both parties and the contract period is normally in the range of three to
four years.
Class 3 (known as Joint Ownership): This class represents the highest degree of integration and
interdependency between the parties of the alliance. The resources that are jointly owned maybe
warehouses, equipment for materials handling, data systems and specialized means of transport.
Moreover, Berglund (1997) is of the view that the extent third party logistics providers are
geographically based and to what extent themselves are outsourcing the logistics can be used to
differentiate between third party logistics providers.
From a different viewpoint, Hertz and Alfredsson (2002), states that third party logistics providers can
be divided into four quadrants namely: standard TPL provider, service developer, customer adapter
and customer developer. (See Figure 1)
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Figure 1: TPL firms classified according to abilities of general problem solving and customer
adaptation. Source: Hertz and Alfredsson (2002)
The third party logistics providers that belong to the first quadrant (service developer) usually provide
advanced value-added services that could involve differentiated services such as packaging, cross-
docking, track and trace, special security systems to different customers. The advanced services
packages provided by the first quadrant TPL providers usually involves several sets of more
standardized activities turned into modules that could be combined based on customer request or
demands and the focus of this quadrant is more on creating economies of scale and scope (Hertz &
Alfredsson, 2002).
The third party logistics providers that belong to the second quadrant (customer developer) are more
advanced compared to the other three quadrants. It involves high integration with the customer which
entails taking full control of the logistics operations of the customer (Hertz & Alfredsson, 2002).
Anderson (1995b) refers to this quadrant as 4PL and according to Moore (1987) the TPL providers in
this quadrant shares the risk and rewards of the logistics management with their customers.
The third party logistics providers that belong to the third quadrant (standard TPL provider) usually
provide standardized third party logistics services such as warehousing, distribution, pick and pack, just
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to name a few and they provide these services at the side of their normal business (Hertz &
Alfredsson, 2002)
The third party logistics providers that belong to the fourth quadrant (customer adapter) usually
provide services that will improve the efficiency in the handling of customers’ existing activities and
not making much development of services (Hertz & Alfredsson, 2002).
In summary, the classification or segmentation of third party logistics providers above will impact the
type of services being provided.
2.3. Third party logistics services
Generally, the scope of services offered by third party providers may range from a relatively limited set
of services to a comprehensive, fully integrated set of logistics activities (Langley & Sink, 1997).
Langley and Sink (1997), and Rabinovichl, (1999) identified the following as third party logistics
services:
• Transportation
• Warehousing
• Freight consolidation and distribution
• Product marking, labelling, and packaging
• Inventory management
• Traffic management and fleet operations
• Freight payments and auditing
• Cross docking
• Product returns
• Order management
• Packaging
• Carrier selection
• Rate negotiation
• Logistics information systems
Moreover, Lieb and Bentz (2004) identified twenty-six (26) third party logistics services used in 2003
and the previous three years. (See table 1)
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Table 1: The most frequently used 3PL services, 2003 and previous years. Source: Lieb & Bentz,
(2003)
As can be seen from Table 1, over the years there has been an increase in third party logistics services
such as track and trace, operation of IT systems, and purchase of materials (starting from 2001),
reverse logistics, measurement of carrier performance, after sales service, and product testing (2003).
In continuation, Vaidyanathan (2005) divided these third party logistics services or functions into four
categories namely: Inventory and logistics management, customer service, warehousing, and
transportation as shown in Figure 2 below.
Figure 2: Categorization of logistics functions. Source: Vaidyanathan (2005)
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Furthermore, with the continuous and growing demand of customers, the survival of third party
logistics providers is dependent on their ability to provide these four (4) generalized services globally
(Vaidyanathan, 2005). They are global warehousing, global inventory and logistics management,
transportation, and customer service.
Global warehousing: Over the years, there is growing customer demand of just-in-time (JIT) delivery
of materials and warehousing. Companies need an efficient end to end supply chain and a single point
of failure in warehousing will lead to big problem in order fulfilment. This continuous change in
demands has made third party logistics providers to invest heavily in fulfilment equipment and
advanced technologies and also add other value-added services such as packaging, product making, and
labelling, receiving, sort and direct put away, directed put-away, wave management, merge and pack-
out, manifest documents, bar code printing, pick and pack activities to the warehousing functionality.
(Vaidyanathan 2005)
According to Laarhoven et al (2000), third party logistics partnerships five years ago were mainly
limited to basic transportation and warehousing functions. Although these third party services are still
dominant component in TPL partnership, an additionally information based and value-added activities
such as track and trace activities and order picking activities has be introduced as part of warehousing
activities. This information based and value-added activities are on the increase as shown on Figure 3
below.
10
Figure 3: Scope of activities. Source: Laarhoven et al (2000)
Global inventory management and logistics: According to Fisher and Cachon (2000), orders were
the only information exchange in the traditional supply chain inventory management but over the years
information technology has revolutionized the traditional supply chain inventory management and
now allows companies to share demand and inventory data quickly and inexpensively.
Furthermore, information technology has enabled and widens the activities of inventory management
to include functions such as global inventory visibility, back-order capability and fulfilment, order-entry
management, forecasting, cycle count and auditing, shipment management and customs
documentation e.t.c. This global inventory management system has the capability to optimize
inventory based on service contracts and required response times including the placement of
warehouses and automated replenishment of parts. Vaidyanathan (2005)
Global Transportation: According to Lancioni, Smith and Oliva (2000), global transportation is one
of the dominant component or activity in third party logistics processes. It also has a major impact in
providing efficient customer services in relation to on time delivery, accuracy and the ability to offer
tracking information (Swenseth and Godfrey, 2002).
Furthermore, Crainic and Laporte (1997) states that the process of freight transportation is complex
because of the variety of players involved and each having its own peculiar characteristics and
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requirement. The role of traditional transportation of just moving goods from point of origin to
destination through different multi-modal transportation has increased to include services such as fleet
management, cross-docking, merge in transit and product return just to name a few (Lieb & Bentz
2004, Perego, Perotti & Mangiaracina 2011).
Global customer services: Third party logistics providers are providing different range of customer
services such as warranty parts recovery, financial services, automating letters of credit (LOC), auditing,
order management, fulfilment, carrier selection, rate negotiation, international trade management and
help desk activities, custom brokerage, selection of software, consulting services, after sale services,
operation of IT systems (Lieb & Bentz 2004, Vaidyanathan 2005).
According to Khazanchi, Lewis and Boyer (2007), innovation plays a key role in providing global
customer services and can be a source of additional revenues from new services and help to save costs
or improve the quality of existing process. Moreover, McGrath and Ming-Hone (1996) states that
innovation in customers services can offer potential competitive advantages to TPL providers.
Table 2: Summary of third party logistics services
Inventory and logistics Management
Customer service Warehouse Management
Transportation
� Freight Consolidation � Freight Distribution � Shipment planning &
Management � Traffic Management � Inventory
Management � Carrier Selection � Order
entry/Management � Back-order capability
& fulfillment � Forecasting � Cycle count and
auditing
� Freight Payments
� Auditing � Order
Management � Fulfillment � Help Desk � Carrier
selection � Rate
Negotiation � Warranty parts
recovery � Custom
brokerage � Selection of
software � Consulting
services � After sale
services � Operation of
IT systems � Reverse
logistics
� Packaging � Product
Making � Labeling/re-
labeling � Warehousing � Receiving � Sort and direct
put away � Merge and
pack-out � Manifest
documents � Bar code
printing � Pick and pack � Product testing � Assembly &
Installation
� Fleet Management & operations
� Cross docking � Product return � Merge in Transit
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2.4. Comparison of third party logistics services between providers
According to Langley and Sink (1997), in order to evaluate a prospective third party logistics provider,
a set of criteria must be defined. He further states that quality, cost, capacity, delivery capability and
financial stability are the typical evaluation. In addition, Vaidyanathan (2005) also include cultural
compatibility, customer references, financial strength, operating and pricing flexibility, and IT
capabilities play a predominant role in evaluating third party logistics providers. Furthermore, Menon
et al (1998) states that performance metrics that must be part of the evaluation criteria must include
responsiveness to unexpected events, error rates, and lead.
Vaidyanathan (2005) later developed a framework taking into account all the criteria above and
evaluate third party logistics providers using the general third party logistics services (Global inventory
management and logistics, Global customer services, Global warehousing, Global transportation, and
Global IT services)
(See Table 3 below)
Table 3: Comparative function of 3PL providers. Source: Vaidyanathan (2005)
The author will attempt to use this framework to compare the third party logistics services offered by
providers in Sweden.
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3.0. Methodology
This section covers the methodology that was used in collecting data in order to answer the research
question. This chapter is composed with the following sections; research design, research approach,
research strategy and data collection, sample collection and the methods used to increase the validity
and reliability of this thesis.
According to Frankel, Naslund and Bolumole (2005), the choice of research methodology is made
based on the research problems and objectives.
3.1. Research Design
According to Easterby-Smith, Thorpe and Lowe, (1991, p.21), research design is the “overall
configuration of a piece of research”. In addition to that, Mile and Huberman (1994, p.16) states that
research design provides the opportunity for “building, revising and choreographing the overall
research study”. To put it in other words, it means a research design defines the study’s purpose
(Frankel et al, 2005).
3.2. Research approach
According to Frankel et al (2005), research methodologies range from two extremes of objective,
scientific research styles which is referred to as quantitative to the subjective, interpretative, and more
constructive research styles which is referred to as qualitative. The author used the qualitative research
style as the thesis is more exploratory in nature. According to Wiley (n.d), exploratory research is
conducted to obtain greater understanding of a concept or to help clarify ambiguous problem.
Furthermore, exploratory research method may include literature search, experience survey, focus
group and analysis of selected cases (MBA Knowledge Base, 2011).
3.3. Research strategy and Data collection
The primary focus of qualitative methods is to create meaning and explanations to research
phenomena and the research strategy in data collection method is typically associated with but not
limited to observation, interviews and questionnaires, diary methods, documents and texts, case
studies, the researcher’s impressions and reactions to the observed phenomena (Frankel et al 2005).
Since this research is more exploratory in nature, a pilot studies research strategy was adopted. A pilot
studies are “surveys using a limited number of respondents and often employing less rigorous sampling
techniques than are employed in a large quantitative studies” (Wiley n.d, p.44)
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Data collection was based on primary data (interview) and secondary data such as annual reports of
different third party logistics companies in Sweden, and website information.
3.4. Selecting the Sample and Interview Method
The author requested for interviews from twenty (20) third party logistics companies in Sweden. This
twenty (20) third party logistics companies was chosen from the list of third party logistics providers in
Sweden publish on intelligent logistic (2007) journal (see appendix A) and well known third party
logistics provider in Sweden such as Aditro Logistics.
The author sent out a semi- structure interview questions to the twenty companies and none of the
companies replied. The author sent an email reminded to all twenty companies and still no response.
The author called several times and almost all of the twenty companies were not interested citing
different reasons such as too busy with project in hand.
The author changes the approach and study the services advertised on the company’s website and
called each of the company to confirm if they actually offer those services in Sweden. Out of the
twenty (20) companies only four (4) responded to the enquiry questions. Subsequently, the author
asked follow up questions based on the response of the interviewee. As a result of this, the questions
for the interview where slightly different for each of the companies but enough data were collected
that can help answer the research questions. All the four (4) companies where interviewed via
telephone and two (2) of the interviewee wants to be anonymous.
List of companies’ interviewed
Aditro Logistics -: Mr. Tomas Axelsson (Sales Manager, Jönköping)
GreenCarrier Scandinavia AB -: Mr. Atle Mustorp (Sales Manager, Virtual warehouse)
Kuehne + Nagel Sweden -: Anonymous
Volvo Logistics -: Anonymous
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3.4. Data analysis
Yin (2003) states that in order to address the initial propositions of the study, researchers need to
examine, tabulates tests, categorizes, or combines the evidence and this was referred to as data analysis
study. Furthermore, Miles and Huberman (1994) categorise data analysis into three simultaneously
different activities as follows:
• Data reduction: This involves the focusing, selecting, abstraction, simplified and
transformation of data. The principal objective of data reduction is to arrange the data in a way
that conclusions can be verified and drawn accordingly.
• Data display: In data display, the data is concentrated and organized so as to make it simpler
for the basis of drawing a relevant conclusion.
• Conclusion drawing and verification: This includes the researcher comments and clarification
of issues on the research. This is achieved by noting regulations, patterns, explanations,
configurations, casual flow, and propositions.
These three activities were adopted by the author in the data analysis process. The author data analysis
process was based on adopting relevant concepts that relate to the thesis and make comparison
between the theories and empirical data obtained. In order to simplify things, the process of linking the
theories to the empirical data and draw relevant conclusion was carried out by matching different
theories and empirical data and then categorized them.
3.5. Validity and reliability
According to Mentzer and Flint (1997), validity in research is a hierarchy of procedures to ensure that
what the researcher concludes from a research study can be stated with some confidence (that is, the
conclusion is valid). In addition to this, Yin (1994) states that validity determines how and what to
measure by the researcher in a research study. Furthermore, validity is composed of four components
namely (Mentzer and Flint, 1997):
Statistical conclusion validity: This measures the statistical relationship between two phenomena.
Internal validity: This measures if the relationship is plausibly causal
Construct validity: Given causal probability, it measures the exact constructs in the relationship. This
is a complex concepts and it addresses concerns at the entire study level as well as the detailed
measurement level. It addresses questions such as how can the author be certain the theoretical
phenomena have been correctly defined and measured in the study?
16
External validity: Given causal probability between these specific constructs, it measures how
generalizable is it across persons, settings and times.
Moreover, according to Mentzer and Flint (1997), validity does not mean much without reliability and
defined reliability as how consistently the measures yield the same results through multiple
applications. Yin (1994) states that, validity and reliability are two measurement instruments measuring
the level of trustworthiness and credibility of a research study.
In order to validate the thesis, the author made use of peer reviewed literatures from experts in the
field of third party logistics and empirical data that was collected from third party logistics providers
and information from their website was confirmed by them.
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4.0 Empirical Studies
4.1. Aditro Logistics Sweden
4.1.1. Company Background
Aditro Logistics is a carrier- independent contract logistics Provider Company within the Aditro
Group and it is owned by Nordic Capital which is a Nordic private equity investment. Aditro group
has about 2000 employees and around 210 million Euro turnovers (Aditro Logistics About, 2011).
Aditro Logistics is a provider of IT-driven outsourcing solutions, business process consulting and IT
solutions for business process improvement. Its acclaimed core competence is third party logistics
services and also in areas like improving business processes within financial management, human
resource management and document management (Aditro Logistics About, 2011).
Furthermore, Aditro logistics provides logistics operations such as handling of logistics solutions for
many companies and management for retail trade and industry and owned about 140,000 square
meters of warehouse space (Aditro Logistics About, 2011).
According to Mr. Tomas Axelsson (sales manager, Jönköping), Aditro logistics is continuously
expanding its operation and its goal is to become a leader in the Nordic logistics market.
In 2008, they bought another operational unit in Borås and added a second terminal of 45,000 square
meters in Jönköping. With the inclusion of the new terminal, it has increased their total capacity in
Jönköping to 85,000 square meters.
Furthermore, in an effort of achieving their strategic plan of dominating the Nordic marketplace,
Aditro Logistics acquires Maersk logistics warehousing capacity in Borås although Maersk will continue
to offer international transportation services from their facility in Borås under a different brand name
known as Damco. The staff of Maersk, forklifts trucks, warehouse and some customers are part of the
acquisition agreement; this has help to increase Aditro Logistics customer base here in Sweden and
Denmark and also increase the Borås storage facilities to about 42,000 square meters (Aditro Logistics
News, 2011).
Beside this expansion in Sweden, Aditro Logistics has also expanded their operations in Norway by the
completion of their brand new terminal in June 2010. Moreover, as part of the plan of Aditro Logistics
aggressive growth strategy in the Nordic marketplace, they have double their Norwegian warehousing
18
capacity by building new logistics terminal Kopstad, which is located about 75km south of Oslo. This
new logistics terminal in Kopstad will replace the old warehouse in Stokke and two other external
warehouses Aditro has rented from other suppliers (Aditro Logistics News, 2011).
Furthermore, according to Mr. Tomas Axelsson, the new terminal has a capacity of 28,000 loading
pallets, and it is strategically located close to the motorway E18 which is the most important motorway
in Norway in terms of its nearness to the harbour where they can receive goods for their customers
from all over the world. In a statement, Mr.Rune Edvåg (Managing Director, Aditro logistics Norway)
states that this new warehouse has increase their efficiency since their entire operation is now
centralized and this will enable them to be more competitive (Aditro Logistics News, 2011).
All this new expansion in Aditro Logistics has yielded some good result. For example, Aurora Group
has outsourced all its logistics activities to Aditro Logistics. Aurora Group is now centralising all its
warehouse operations and distribution in Aditro Logistics Nordic central warehouse in Jönköping and
closing all its existing warehouses in Denmark, Norway, and Finland (Aditro Logistics News, 2011).
4.1.2. Third party logistics services provided by Aditro Logistics
According to Mr. Tomas Axelsson, Aditro Logistics provides third party logistics services that cover
the entire supply chain (from warehousing and distribution to fully integrated logistics solutions).
Aditro third party logistics services are categorized into three (3) main focuses namely: 1.) Retail
logistics (for manufacturers and suppliers to the retail trade). 2.) Consumer logistics (for e-
commerce and mail order). 3.) Industrial logistics (for industrial manufacturing and spare parts
management) (Aditro Logistics services, 2011).
Retail Logistics
According to Mr. Tomas Axelsson, Aditro Logistics provides third party logistics services such as
warehouse management that consist of freight management, inbound logistics, stock management,
value added services (pick and pack, re-labelling, e.t.c) order fulfilment and distribution to
manufacturers firm, sales companies, wholesalers Nordic distribution for specialised and retail trade.
19
Figure 4: Aditro Logistics Retail logistics services illustration. Source: Aditro Logistics Retail, 2011
Aditro Logistics provides specialised services such as handling of hazardous goods of different sizes
ranging from individual packs to full container load and specific request for cleanliness and climate
control. They operate several different distribution channels for cross-docking and collective shipping
of several suppliers’ products (Aditro Logistics retail, 2011).
As a carrier-independent provider, Aditro Logistics production equipment is designed to meet their
customer need for flexibility and scalability such as the ability to handle seasonal and campaign-
generated variations in volume.
According to Mr. Tomas Axelsson, Aditro Logistics maintain a close and long term relationship with
their customers and with the help of information technology, Aditro Logistics is integrated with their
customer system which is referred to as shop computer systems. This system helps to provide
customer control and traceability throughout the logistics flow.
Over the years, Aditro Logistics has developed customised services to meet the specific requirements
within several subsidiary sectors. The customised services offered are: (Source: Aditro Logistics Retail,
2011)
• Consumer products, such as foodstuffs and other convenience goods, hygiene products, health
foods, drinks and tobacco, ready-made clothing and accessories
• Media products, e.g. books, CDs and DVDs
• Capital goods and IT products
• Products for other specialised trade, e.g. construction, sport and children's products
20
Some of the Value-adding services provided include quality control, management of return flows,
repackaging, re-labelling, price marking, sales promotion and display material on behalf of sales teams
and marketing departments.
Figure 4 above illustrate the Aditro Logistics retail logistics services.
Consumer Logistics
Aditro Logistics also offers third party logistics services to internet-based retailers. The service ranges
from order capture via online interface to payment and returns handling.
Figure 5: Aditro Logistics Consumer Logistics illustration. Source: Aditro Logistics Consumer,
2011
Aditro Logistics has formed a strategic alliance with their internet-based retailer customer to provide
the fastest to a large consumer market by delivering services in accordance with their client’s promise
to the consumer (Figure 5 illustrate Aditro Logistics consumer logistics). With the help of their integrated e-
commerce solution, Aditro Logistics offers an integral platform for services such as order capture
(online shop & customer service), order management, distribution and handling of payments. some of
the value added services under their consumer logistics includes handling of packaging and campaign
material, handling of complaints and return flows, invoice printing and customised solutions such as
volume distribution for e-retailers and distance sellers, distribution of printed material, distribution of
marketing material and profiled products (Aditro Logistics Consumer, 2011).
21
Industrial Logistics
Aditro Logistics apart from providing flows to trade and end customer services, also offer just-in-time
deliveries components and pre-assembled parts to production lines, aftermarket solutions for handling
of spare parts and accessories for manufacturers and suppliers of both industrial and consumer
products (Aditro Logistics Industrial, 2011). (See Figure 6 below for illustration)
Figure 6: Aditro Logistics Industrial Logistics illustration. Source: Aditro Logistics Industrial, 2011
Aditro Logistics has its own IT expertise at local and central units to develop, operate and monitor
both systems and logistics flows. (Aditro website Industrial, 2011)
According to Mr. Tomas Axelsson, Aditro Logistics also provide global transportation by forming a
strategic partnership with leading transportation companies in the Nordic region and the three (3)
groups of Aditro Logistics third party logistics services discuss above are offered as integrated services.
Moreover, according to Mr. Tomas Axelsson, Aditro Logistics has a close and long term relationship
with their customers and the contract agreements with their customers are mostly more than one (1)
year period
22
4.2.0. GreenCarrier Scandinavia AB
4.2.1. Company Background
GreenCarrier was founded in Gothenburg, Sweden, in 1994. Their first office outside Sweden was
opened in Oslo, Norway, in 2001. Between 2006 and 2011, GreenCarrier has expanded into Finland,
Denmark, Estonia, Latvia, Lithuania, Ukraine, UK and China and today they have about 350
employees working in 27 offices in 10 countries (GreenCarrier About us, 2011).
In Sweden, GreenCarrier has 150 employees working in 10 offices in Göteborg (Sweden and
international headquarter), Helsingborg, Jönköping, Karlstad, Luleå, Norrköping, Skellefteå,
Stockholm, Sundsvall and Trelleborg. Their main market focus is the Nordic region, Baltic region and
china (GreenCarrier About us, 2011).
Greencarrier acquired the UK logistics company PTS UK, which focuses on road traffic to and from
Scandinavia. It also offers a variety of added-value services including facilities for sorting, order
picking, re-marking, shrink wrapping and labelling of goods (GreenCarrier News Archive, 2011).
4.2.2. Third party logistics services provided GreenCarrier Scandinavia AB
GreenCarrier Scandinavian AB offers the basic third party logistics services such as warehouse
management, and all forms of transportation. Their industry focuses are the textile, beverages,
industrial and retail (GreenCarrier About us, 2011).
According to Mr. Atle Mustorp (Sales Manager, Virtual warehouse), GreenCarrier offer all forms of
transportation worldwide and they only owned the road transportation vehicle that covers the traffic
between Sweden and the UK with the acquisition of a UK transport company known as PTS.
Moreover, GreenCarrier has a strategic partnership with different transportation in order to provide
different form of transportation in accordance to their customer demands and requirement.
Mr. Atle Mustorp also pointed out that although GreenCarrier offer all forms of transportation,
warehouse management is their core competence and their warehouse management solution is called
virtual warehouse management
They defined virtual warehouse as a warehouse and transport agent-neutral warehouse solution that
lets company store goods for which import duty and VAT is suspended in a private or public
warehouse of their choice (GreenCarrier Solutions, 2011).
23
So with the virtual warehouse management solution, clients of GreenCarrier do not have to declare
goods before it has been counted for, pay duty and VAT on goods before sale, pay duty and VAT on
re-exported goods and finally GreenCarrier clients do not have to pay VAT for goods sold to other
EU countries.
No physical changes in terms of location of the goods or separate handling of goods for which import
duty and VAT is suspended are necessary. Under this virtual warehouse management solution,
GreenCarrier handles all customs and permit documents and declarations in line with Swedish customs
directives (GreenCarrier Solutions, 2011).
GreenCarrier divides the virtual warehouse management solution into two versions:
Virtual warehouse EDI module: This is integrated with into their client’s business systems, thereby
streamlining the entire customs process.
Virtual warehouse web module: In this module, data are entered and accessed using the web
interface.
According to Mr. Atle Mustorp, customers has the option to choose which of the module best fits
their business strategy but GreenCarrier has linked its virtual warehouse EDI module to most of their
customer business systems in Sweden and either of the solutions will enhance clients liquidity and
quick return on investment.
GreenCarrier has a close and long term relationship with their customer. They chose virtual warehouse
management as their core competence or expertise in order to create a niche market and be
competitive in the growing third party logistics market. Their main customers are the outdoor clothing
manufacturing and the textile industry; some of the reason for using GreenCarrier virtual warehouse
management is to enhance their liquidity since most of them sells seasonal goods and have to place a
base order early in the season.
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4.3.0. Kuehne + Nagel
4.3.1 Company background
Kuehne + Nagel was founded in 1890 in Bremen, Germany by August Kuehne and Friedrich Nagel.
Kuehne + Nagel is a global logistics provider company and have over 60,000 employees in more than
900 offices in over 100 countries (Kuehne + Nagel About us, 2011).
Kuehne + Nagel offer several logistics services ranging from air freight, sea freight, road and rail
transportation, contract logistics (third party logistics) and lead logistics (Kuehne + Nagel About us,
2011).
Kuehne + Nagel offer several third party logistics that covers the entire supply chain to different
industries such as the automotive, aerospace, beverage and food, High tech, oil and gas, and health
sector etc (Kuehne + Nagel About us, 2011).
4.3.2. Third party logistics services provided
Kuehne + Nagel logistics in Sweden offers third party logistics services that include transportation,
warehousing, freight consolidation and distribution, product marking, labelling, and packaging,
inventory management, traffic management and fleet operations, freight payments and auditing, cross
docking, product returns, order management, packaging, carrier selection, rate negotiation, and
logistics information systems (Kuehne + Nagel Contract logistics, 2011).
They categorised their third party logistics services in different group in accordance to the requirement
of the industry they are serving. The main group of services they offer are: 1.) Inbound logistics, 2.)
In-house logistics, 3.) Outbound logistics, and 4.) After sales logistics.
1.) Inbound logistics services cover all the required activities to transfer goods from a sourcing
location to a warehouse, value-added storage facility or production plant (Kuehne + Nagel Inbound
logistics, 2011).
The inbound logistics services include (Kuehne + Nagel Inbound logistics, 2011):
Supplier management: They manage the supplier inbound shipment activities on behalf of their clients.
Supplier management services may be combined with other inbound logistics services to provide
vendor-managed inventory services.
Order management: They order management involves order-release management services to customers
who require inbound shipment of goods to be controlled based on actual consumption of products or
25
production schedules. The order-release management services include call-off services, demand
management and replenishment services and other similar services in which timed shipments of goods
are required.
Vendor-managed inventory system: Kuehne + Nagel work with their clients and client’s suppliers to
automate forecast management process using web-based software. This automated forecast
management systems helps to provide visibility by comparing actual demand against inventory held in
storage and in transit. Furthermore, the Vendor managed inventory system also alerts the clients and
their suppliers once the inventory falls below pre-determined levels. it also provide advanced shipping
notices (ASN) which gives detail information on in-transit inventory from suppliers that will allow
confident commitment to orders based on this inbound flow.
Transportation and transport management: Kuehne + Nagel’s inbound transport management services
include the arrangement of shipping, air or land-based transport to move their clients’ goods from
remote destinations to local warehouses or operating facilities. Kuehne + Nagel’s inbound transport
services include most forwarding and “in-country” freight movements.
Customs clearance: Kuehne + Nagel provide their clients with all required services such as customs
document preparation and delivery, management of the actual clearance process and import document
preparation to move their goods across international borders.
Warehousing: Kuehne + Nagel offer two types of warehousing solution namely: 1.) Multi-client
warehouse solution (client share warehouse space and equipments with other clients) and 2.) Dedicated
warehouse solution (the warehouse is designed to tailor with the clients unique needs with facilities and
equipments).
Kuehne + Nagel production system (KNPS): Focus on waste elimination in all aspects of the service delivery
process, worker empowerment, management through visual controls and dedication to total quality
control.
Collective services: This service deals with returnable Transit Packaging (RTP) that enables the efficient
processing of collection and return of goods for refurbishment. Each RTP is tracked from supplier to
retailer, from retailer to Kuehne + Nagel, and back to the supplier. All data is analysed through a Web-
based control system to identify slow-moving units or units in short supply. All operations can include
automation and recycled packaging.
26
Customer service management: This includes all on-site help desk services, customer care centre operations,
and field service support activities.
2.) In-house Logistics
Kuehne + Nagel provide sequencing and Just-in-Time (JIT) solutions that allow manufacturers to
synchronise with suppliers in support of production line demand. This process can also be used for
retailers, restaurants, and convenience stores, ensuring fast-moving items are replenished as required
(Kuehne + Nagel In-house logistics, 2011).
Furthermore, they also provide value-added services in their multi-client and dedicated warehouse that
include unloading, buffering, repacking, labelling/ticketing, testing, sequencing and re-sequencing,
kitting (kitting services involves integrating various parts into a kit or package for further processing or
shipment), sub-assembly, expediting, line feeding, empty load unit handling (Kuehne + Nagel
Production logistics, 2011).
3.) Outbound Logistics
Kuehne + Nagel outbound logistics services includes some of the earlier discussed services of the
inbound logistics such as Vendor management inventory, warehousing, transportation and
transportation management, Kuehne + Nagel production system (KNPS), customs clearance and
customer service management.
Other outbound logistics services include (Kuehne + Nagel Outbound logistics, 2011):
Order Kitting: Order kitting services include simple placement of multiple parts in a container, simple
assembly of items, packaging of items, etc. along with the administrative functions that go with these
types of activities.
Proof of delivery (PoD) management services: Kuehne + Nagel provide PoD to their customers to ensure that
products are delivered to the correct destinations. Proof of delivery management services include the
collection of signatures at time of delivery, reporting of delivery, scanning of delivery documents,
managing carrier delivery performance, etc.
27
4.) After sales Logistics
Kuehne + Nagel offer the following after-sales logistics services (Kuehne + Nagel After sales logistics,
2011):
Order Management: Under the order management service of the after sales logistics, services include the
handling of customer requests, the investigation of customer requests, the authorisation of a return
(those services that authorise a customer to return an item for specified reasons), the issuing of a return
authorisation number and the tracking of the returned material.
Warehouse / Pick up/Drop off (PUDO) / Depot Management: services include stock management, local pick
up and drop off, and depots that handle forward-deployed customer inventory.
Screening / Repair / Refurbishment: The screening services analyse the status of returned products to
determine the next processing step (scrap or repair, for instance). Kuehne + Nagel can provide
refurbishment and repair services as well as the management of repair vendors where the work is to be
carried out by external parties.
Transportation Management: Kuehne + Nagel offers all transportation services required to replenish
national warehouses, depots, PUDOs and rendezvous points.
Customer Service Management: covers all on-site support desk and customer response activities.
According to the anonymous source at Kuehne + Nagel Sweden, Kuehne + Nagel Sweden have a
close and long term relationship with their customer. In an effort to have high integration with the
customers, Kuehne + Nagel Sweden made some investment in their key client firms by way of buying
firms shares. This strategy investment will help create high integration and commitment between both
parties and most of the contract period is more than one (1) year.
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4.4.0. Volvo Logistics Sweden
4.4.1. Company background
Volvo Logistics is a part of the Volvo Group and has about 1000 employees around the world. Volvo
Group was founded in 1927 and Volvo has grown to become one of the world’s leading manufacturers
of heavy commercial vehicles and diesel engines. (Volvo Logistics About us, 2007)
Volvo Logistics serve the global automotive industry with a range of specially developed logistics
services across the entire supply chain. (Volvo Logistics Solutions, 2007)
4.4.2. Third party logistics services provided
Apart from providing all form of transportation and warehousing, Volvo Logistics is focused on three
core areas namely 1.) Emballage, 2.) Inbound, and 3.) Outbound (Volvo Logistics Solutions, 2007).
1.) Emballage: The Emballage services consist of packaging development and packaging
management (Volvo Logistics Emballage, 2007).
Volvo Logistics packaging development include packaging design of special packaging flow, concept
development, test and verification of prototypes, production drawings, purchasing of packages,
quality control, packaging instructions and administration.
Volvo Logistics packaging management is made up of three types of services namely: Standard
packing (this is a simple and standardised packaging owned and managed by Volvo Logistics),
special packaging system (this is customer-tailored packaging that is owned by the customer
but managed by Volvo Logistics) and packaging add-on services (includes cleaning and
maintenance, sorting, marking, bundling and return of empty packaging.
2.) Inbound: The inbound service consists of inbound transportation, logistics centres, and
customs services.
Inbound transportation: According to anonymous source from Volvo logistics, Volvo Logistics
are asset-free and this allow them to freely choose the transport modes that can best suit their
customer needs in terms of quality, cost and lead time.
The inbound transportation is divided into structural transport, premium network, and
inbound add-on services (Volvo Logistics Inbound transport, 2007):
29
Structured transport: This include full trailer load (FTL) and less than truck load (LTL) of
products flows directly from supplier to the manufacturing site serving many supplier and for
pickup of products on demand respectively.
Premium network: This includes transports outside the ordinary schedule such as express delivery
of certain components, temporary flows to catch up production peaks etc.
Inbound add-on services: include temporary warehousing, trailer yard management, transport
follow-up, budget evaluation etc.
Logistics centres: Volvo Logistics has set-up a number of regional and national logistics
centres in Europe, Asia and USA specially designed for suppliers and manufacturers within the
automotive industry. This helps to facilitates demands fulfilment on shorter lead times and
increased punctuality without the need for making any additional investments (Volvo Logistics
Centres, 2007).
Moreover, Volvo Logistics centres in Sweden are designed to meet the specific requirements
for the individual supply chain. They handle the entire process from analysis of flows and
locations to set-up, implementation and operation of the new logistics centre (Volvo Logistics
Centres, 2007).
Customs services: Volvo Logistics provides their customers with customs services that include
the daily handling of all or parts of customs issues such as customs clearance, declarations and
drawback, updating and determining of origin for production material and spare parts,
intrastate reporting and customs code classification, import duties and bonded warehouse
(Volvo Logistics Customs, 2007).
3.) Outbound: The outbound logistics service of Volvo Logistics includes outbound distribution,
Yard management and pre-delivery services, and special and secrecy deliveries (Volvo
Logistics Outbound, 2007).
Outbound distribution: Volvo Logistics has a distribution management system known as A4D
which is specially designed to support built-to-order vehicle production and provides full
control and transparency of the distribution flow for all parties involved (Volvo Logistics
Outbound distribution, 2007).
30
Volvo Logistics also work with their clients at the development stage to ensure the final
product can be transported safely without incurring any extra cost or making any special
arrangements (Volvo Logistics Outbound distribution, 2007).
Yard management and pre-delivery services: Volvo Logistics yard management service involves stock
keeping of client’s vehicles and providing high security in accordance with the customer
demands. Furthermore, Volvo Logistics pre-delivery services include a wide range of options
customised to the specific needs of their customer. They services include pre-delivery
inspection (washing, de-waxing, product inspections and repair), vehicle enhancement (fitting
of customer-specific equipment and accessories), and Maintenance (regular maintenance to
keep vehicle in good shape for delivery in the cases where they are stored for a longer time
period) (Volvo Logistics yard management, 2007).
Special and Secrecy deliveries: Volvo Logistics special and secrecy deliveries involve the
transportation of customer’s prototypes, test vehicles, exhibition material and other secrets.
The service covers the entire process including customs and temporary license plates etc.
Prototypes, test vehicles, vehicles for exhibitions and photography are transported in a specially
developed security trailers and containers. They are equipped with coded safe locks and cannot
be opened until the transport arrives at the receiver. The design allows a complete vehicle to be
loaded, thus eliminating the need for retrofitting at arrival (Volvo Logistics special & secrecy
deliveries, 2007).
According to the anonymous source from Volvo Logistics, Volvo Logistics works closely with
their customers and have long term relationship with their customers ranging from one (1) year
and up to ten (10) years.
31
Table 4 Summary of TPL services provided by the Four (4) TPL companies
Aditro Logistics GreenCarrier
Scandinavia AB
Kuehne + Nagel
Sweden
Volvo Logistics
Retail Logistics
• Freight
Management
• inbound logistics
• stock management
• pick and pack
• Re-labelling
• order fulfilment &
distribution
• Handling of
hazardous goods
• cross-docking
• quality control
• management of
return flows
• repackaging
• price marking
• sales promotion
Consumer Logistics
• order capture
• order management
• handling of
payments
• product return
management
• invoice printing
• volume distribution
• Transportation
• sorting
• order picking
• re-marking
• shrink wrapping
• labelling/re-
labelling
• virtual
warehouse EDI
module
• virtual
warehouse web
module
Inbound logistics
• supplier
management
• order management
• vendor-managed
inventory system
• transportation &
transport
management
• customs clearance
• warehousing
• KN production
system
• collective services
• customer service
management
In-house Logistics
• Multi-client
warehouse
• dedicated
warehouse
• unloading
• buffering
Emballage
• packaging
development
• packaging
management
Inbound
• inbound
transportation
• logistics centres
• customs
services
Outbound
• outbound
distribution
• yard
management
• pre-delivery
services
• special &
secrecy
deliveries
32
for e-retailers
Industrial Logistics
• deliveries of
components/pre-
assembled parts to
production lines
• after sales services
• repacking
• labelling/ticketing
testing
• sequencing and re-
sequencing
• kitting
Outbound Logistics
• Order kitting
• proof of delivery
management/servic
es
After Sales Logistics
• order management
• pick up & drop off
• deport management
• screening/repair/ref
urbishment
33
5.0. Analysis
As stated earlier, third party logistics has several definition but in summary, all these definitions of third
party logistics is the use of external logistics service providers or companies to perform some or full
integrated logistics activities. Based on this definition, it is safe to say that Aditro Logistics,
GreenCarrier Scandinavia AB, Kuehne + Nagel Sverige, and Volvo Logistics are third party logistics
providers because they all offer some of integrated logistics activities to their clients.
5.1. Classification of Third party logistics providers
Virum (1993) state that third party logistics providers may be grouped into three classes (formal co-
operation venture, logistics joint venture, and joint ownership) based on the degree of integration and
interdependency between the providers and the shippers.
Using this theory by Virum (1993), Aditro Logistics, GreenCarrier Scandinavia AB, and Volvo
Logistics belong to class 2 known as logistics joint venture. This is because Aditro Logistics,
GreenCarrier Scandinavia AB, and Volvo Logistics have a higher degree of integration and
interdependency with their customer. The alliance between them and their customers include a large
number of logistics services and both parties share a deep insight into the sharing of information such
as business strategies, plans and operations and the contract period is normally in the range of one to
four years.
Kuehne + Nagel is the only third party logistics provider among the four (4) companies interviewed
that belong to class 2 & 3 (joint ownership). They have a higher degree of integration and
interdependency with their clients. It is part of Kuehne + Nagel business strategic to purchase
companies shares from most of their key customer; this will improve the commitment and loyalty
between both parties. Kuehne + Nagel global size and their dominance in the third party logistics
industries are some of the reason they belong class 3 known as joint ownership.
Furthermore, it is interesting to note that none of the companies belong to class 1 (formal co-
operation) of Virum (1993) theory. This shows that the relationship between third party logistics
providers and their customers has evolved from formal co-operation to more of strategic alliance or
joint venture and both parties now work more closely together and are more committed in the process.
it also prove that Laarhoven et al (2000) view that states a contractual agreement between third party
logistics provider and their customers should contain some management, analytical or design activities
and the length of the cooperation between both parties should be at least one year time period was
correct.
34
Hertz and Alfredsson (2002) classification or differentiation of third party logistics provider framework
is more advanced and complex. As stated earlier, Hertz and Alfredsson (2002), divided third party
logistics providers into four quadrants namely: standard TPL provider, service developer, customer
adapter and customer developer.
Figure 7: Classification of Swedish TPL providers according to abilities of general problem
solving and customer adaptation. Adapted from Hertz and Alfredsson (2002)
Figure 8 is used to illustrate the classification of Swedish third party logistics providers. As can be seen
from figure 8, Volvo Logistics belong to the standard third party provider. Currently, Volvo Logistics
Sweden provide a standardized third party logistics services such as distribution (inbound and
outbound), warehousing, and packaging (Emballage). Vehicle manufacturing is the core business of
Volvo Group and Volvo Logistics is just a part business of Volvo Group and they only offer their
third party logistics services to the automobile industry. According to the anonymous source from
Volvo Logistics, they plan to expand their services offerings to other industries and also increase their
third party logistics services offerings in the coming years and when their plans are implement, they
might migrate to service developer as their services offering will be more of problem solving general
ability.
Furthermore, Aditro Logistics and GreenCarrier Scandinavia AB belong to the service developer
quadrant. They both provide advanced value-added services that involve differentiated services such as
35
packaging, cross-docking, track and trace, special security systems, different warehouse solutions
(virtual warehouse EDI module and virtual warehouse web module provided by GreenCarrier) to
different customers. Basically, Aditro Logistics and GreenCarrier normally package several sets of
more standardized activities based on customer request or demands and turn it into an integrated
module. According Mr. Tomas Axelsson (Sales Manager, Aditro), combining different set of
standardized activities into modules based on customer needs helps to create economies of scale and
scope. GreenCarrier is expanding its logistics operations by acquiring transportation firm (PTS
transport company, UK) and developing new offices and terminal in China, Norway, Finland and hope
to have more terminals around Europe. Currently, their main market is in the textile and outdoor
product manufacturing industries but with the continuous future growth, GreenCarrier plans to be
dominant in other industries. This is similar to Aditro Logistics; they have expanded their logistics
activities and operations around the Nordic region by the development of new bigger terminal in
Norway and the acquisition of Maersk warehouse capacity and equipments in Borås Sweden. With all
this expansion, GreenCarrier and Aditro Logistics intend to provide a high problem solving general
ability and high customer adaptation which will help move them into the customer developer quadrant.
Finally, Kuehne + Nagel provide third party logistics services that involve taking full control of the
logistics operations of their customer. They are highly integrated to their customers and have some of
the third party logistics providers as their client. One of the business strategies they applied in
increasing their integration with their customer is by buying business shares in their clients business
and they demand a comprehensive involvement of the client’s top management. This is why they
belong to the customer developer quadrant.
5.2. Comparison of third party logistics services between providers
Vaidyanathan (2005) uses a framework (see Table 3) to compare different third party logistics services
offered by different providers in determining which of the services are available and not available. In
this thesis, the author used a slightly different approach of comparison of third party logistics services
offered by the third party logistics providers interviewed.
All the four companies interviewed offered to some degree the third party logistics services under the
four main group classified by Vaidyanathan (2005). (See Table 2 & 4)
Although the third party logistics providers offered these different activities, the number of services
under inventory management and logistics, customer services, warehousing and transportation varies
among the four third party logistics providers interviewed.
36
The author compared the competence of the third party logistics provider’s services offered in Sweden
in terms of number of services they offer under each of the four categories using strong, fairly strong
and very strong to indicate their competence in each category.
Table 5: Comparison of third party logistics services between providers
TPL Providers Inventory Management and Logistics
Customer Services Warehousing Transportation
Aditro Logistics
Very strong Very strong Very strong Fairly strong
GreenCarrier Scandinavia AB
Fairly strong Very strong Very strong Fairly strong
Kuehne + Nagel Sweden
Very strong Very strong Very strong Very strong
Volvo Logistics
Strong Very strong Very strong Fairly strong
In comparing the competence of each of the providers services under the four categories adapted from
Vaidyanathan (2005), it shows that Kuehne + Nagel Sweden offer most of the services under each of
the four third party logistics services categories. This is as a result of their size and global status in the
logistics industry. In continuation, Aditro Logistics main competence is in warehousing and inventory
management and as can be seen from the empirical information from Aditro Logistics, they have made
a significant investment on warehousing by building and expanding their warehouse terminals.
Compared to the other three companies, Aditro Logistics is more competent than GreenCarrier and
Volvo Logistics in terms of the number of services they offer under each of the category. Furthermore,
although GreenCarrier offer different services on each of the categories, their main competence is in
warehousing (virtual warehouse) with the support of customer services activities. GreenCarrier
business strategy of competing with big logistics firms like Kuehne + Nagel is to create a niche market
by focusing on one of the main third party logistics services (warehousing) and with the support of
varying customer services or value-added services. GreenCarrier is slightly more competent than Volvo
Logistics in terms of the number of third party logistics services they offer in each of the category.
Volvo Logistics offered fairly strong services in each of the categories, but their main competence is in
warehouse activities such as packaging and other customer services. Compare to the other three third
party logistics provided, Volvo Logistics offers a limited third party logistics services. This is
understandable because the core competence of Volvo Group is in manufacturing and Volvo Logistics
37
is just a part business of the Volvo Group. Presently, Volvo Logistics primarily provide their services
to the automobile industry; this is viewed as a business strategy as they are one of the big players in the
auto industry and using this business strategy will give them some competitive advantages in the
logistics market.
It is interesting to note that the comparison between the four companies shows that each of the
companies are on a different level in terms of the number services they offer. It also shows that the
services they offer in each of the category is driven mainly by the company’s business strategy to
compete.
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6.0. Conclusion
6.0. Classification of third party logistics providers in Sweden
Several researchers or authors have written about the classification of third party logistics providers
from different perspectives. Although some of the previous authors viewpoints are quite similar, this
thesis focused on two distinct classifications of third party logistics proposed by Virum (1993) and
Hertz et al (2000).
Virum (1993) grouped the third party logistics providers into three classes (formal co-operation
venture, logistics joint venture, and joint ownership) based on the degree of integration and
interdependency between the providers and the shippers.
Using this theory by Virum (1993), Aditro Logistics, GreenCarrier Scandinavia AB, and Volvo
Logistics belong to class 2 known as logistics joint venture. This is because Aditro Logistics,
GreenCarrier Scandinavia AB, and Volvo Logistics have a high degree of integration and
interdependency with their customer. The alliance between them and their customers include a large
number of logistics services and both parties share a deep insight into the sharing of information such
as business strategies, plans and operations and the contract period is normally in the range of one to
four years.
Kuehne + Nagel was the only third party logistics provider among the four (4) companies interviewed
that belongs to class 2 & 3 (joint ownership). They have a higher degree of integration and advance
interdependency with their clients compare to the other third party logistics providers. They achieved
this higher degree of integration because of their business strategy that entails the purchase of their key
customer company’s shares. This business strategy increase commitment and loyalty between both
parties.
It is interesting to note that none of the companies interviewed belong to class 1 (formal co-operation)
of Virum (1993) theory. This shows that the relationship between third party logistics providers and
their customers has evolved from formal co-operation to more of strategic alliance or joint venture and
both parties now work more closely together and are more committed in the process. it also prove that
Laarhoven et al (2000) view that states a contractual agreement between third party logistics provider
and their customers should contain some management, analytical or design activities and the length of
the cooperation between both parties should be at least one year time period is correct.
39
Classifying third party logistics providers using Hertz and Alfredsson (2002) approach is more complex
and advance. They divided third party logistics providers into four quadrants namely: standard TPL
provider, service developer, customer adapter and customer developer.
From the analysis, the author is of the view that Volvo Logistics belong to the standard third party
provider because Volvo Logistics Sweden provide a standardized third party logistics services such as
distribution (inbound and outbound), warehousing, and packaging (Emballage) and Volvo Logistics is
just a part business of Volvo Group. Furthermore, Aditro Logistics and GreenCarrier Scandinavia AB
belong to the service developer quadrant because they both provide advanced value-added services
that involve differentiated services to different customers. Basically, Aditro Logistics and GreenCarrier
normally package several sets of more standardized activities based on customer request or demands
and turn it into an integrated module. Finally, Kuehne + Nagel belong to the customer developer
quadrant because provide third party logistics services that involve taking full control of the logistics
operations of their customer. They are highly integrated to their customers and one of the business
strategies they applied in increasing their integration with their customer is by buying business shares in
their clients business and they demand a comprehensive involvement of the client’s top management.
Notably, although Virum (1993) and Hertz and Alfredsson (2002) approach of classification are
different, relationship (degree of integration) between the third party logistics providers and their
clients is a major factor in the classification of the providers. Also it is much difficult to classify the
four (4) companies into the quadrants proposed by Hertz and Alfredsson because there is a thin line
difference between some of the quadrants. For example, there are no clear lines when evaluating the
provider’s relationship with their customer when classifying them into either service developer or
customer developer. This is because each of the companies has to a higher extent a close relationship
with their customers and they tend to provide services tailored to a specific customer and as well as
provide general services.
6.2. Comparison of third party logistics services between providers
In comparing the services offered by the four (4) third party logistics provider interviewed, the author
used a slightly different approach of comparison adapted from Vaidyanathan (2005) framework.
The author comparison is based on the competence of the third party logistics providers in terms of
the number of third party logistics services they offered in Sweden. Indicators such as strong, fairly
strong and very strong were used to show the service competence of the providers in each category.
(See table 5)
40
As shown in table 5, Kuehne +Nagel is the most competent provider in terms of the number of
services they offered in each of the category which is as a result of their size and global status. They
more services in all the categories compared to the other three providers.
Moreover, Aditro Logistics is slightly more competent than GreenCarrier and Volvo Logistics. Volvo
Logistics is the least competent among the four (4) companies interviewed. This is understandable
because Volvo Logistics is just a part business of the Volvo Group and presently, Volvo Logistics
primarily provide their services to the automobile industry; this is viewed as a business strategy as they
are one of the big players in the auto industry and using this business strategy will give them some
competitive advantages in the logistics market.
It is important to note that, although some of the companies are less competent than others in terms
of the services they offer in each of the categories does not necessarily makes they weaker. This is due
to the fact that the services offered in each of the categories are being driven by the company’s
business strategy to stay competitive in the third party logistics industry. Furthermore, although size
and global status give some competitive advantages, adopting different strategies such as creating a
niche market in a particular service or a particular industry will provide major competitive advantages
to third party logistics providers.
41
7.0. Future Research
This study is more of exploratory research, so it was quite difficult to fully categorise the third party
logistics providers in Sweden using the different classification theories proposed by previous
researchers.
Most of the traditional transport companies in Sweden are transiting into third party logistics providers
and it is interesting to note that most of the third party logistics providers have little knowledge about
which of the third party logistics providers category they belong to. Moreover, due to the small pool of
companies interviewed, it is difficult to ascertain the Swedish third party logistics settings and it also
limits some of the generalization in terms of the comparison between services offered by providers in
Sweden.
Future research should involve carrying out a survey of third party logistics providers and their services
provided in Sweden in order to fully classifying them using previous researcher theories and
framework. This will help providers to better understand what category they belong and as a result,
they would be able to streamline their operations and the services they offer more efficiently and
effectively.
Also research should be done on the users of third party logistics in Sweden; this will help to
understand the third party logistics service trends in Sweden and also determine the third party logistics
services for the future.
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8.0. Discussion
Third party logistics providers and services have continued to increase in the past years in Sweden.
Even with this continuous increase in third party logistics providers and services in Sweden, little has
been written to show the trends and characteristics of third party logistics providers and the services
they offer.
Although this is more of an exploratory research, the authors it is much difficult to classify different
third party logistics companies into the four (4) quadrants proposed by Hertz and Alfredsson (2002).
This is due to the fact that there are no clear lines when evaluating the provider’s relationship with
their customer when classifying them into either service developer or customer developer. The
empirical data from the four (4) companies interviewed shows that third party logistics companies in
Sweden has to a greater extent a close working relationship with their customers and they have the
competence to provide services tailored to a specific customer and as well as provide general services.
Other reason might be as a result of small pool of companies interviewed.
Furthermore, the relationship between the third party logistics providers and their customer plays a
vital role in the classification of third party logistics providers. But over the years, this relationship has
evolved from formal co-operation to more of strategic alliance or joint venture and both parties now
work more closely together and are more committed in the entire process. This has made some of the
proposed theories of the classification of third party logistics providers obsolete.
Although different third party logistics providers offers several services, the competence level in terms
of the number of services they offer in each of the four (4) main services (Inventory management,
warehousing, customer services and transportation) differs between the providers. Some of the
providers offer more services in some of the main third party logistics function such as warehousing
than others such as transportation. Having the least competency in terms of number of services
offerings by a third party logistics providers does not necessarily mean that they are weaker because the
competency in services offerings of the third party logistics providers is mainly driven by the business
strategy the company is adopting to stay competitive in the third party logistics industries.
Finally, although size and global status give some competitive advantages, adopting different strategies
such as creating a niche market in a particular service or a particular industry will provide major
competitive advantages to third party logistics providers.
43
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10. Appendix A