Third party purchase: Effectiveness of value-added services by third-party logistics providers

Abstract

Third-party logistics (3PL) has attracted the attention of many organizations in recent times. The increase in international trade and technological developments has significantly improved the commercial integration between countries. The globalization of supply chains enables many organizations to emphasize logistics as part of their corporate strategy. 3PL providers can play a crucial role in the outsourcing of logistics activities. Based on the latest report for 2013 third-party logistics by Langley and Capgemini (2013), the total revenue of the Asia-Pacific region was ranked No. 1 in 2011 among other regions in the world. Although the development of the logistics industry in the Asia-Pacific region is fast, there are still many challenges faced by the logistics providers. Most 3PL providers offer the basic services, but rarely perform value-added services. This research mainly focuses on New Zealand and the People‟s Republic of China because both countries have established close trading business relations, such as the Free Trade Agreement (NZChina FTA). The primary objective of this research is to evaluate third party purchase (3PP) as a value-added service offered by 3PL providers, based on transaction cost theory. Questionnaires and interviews are the two major research methods for this research. Structural equation modelling was used to test the hypothesized relationships. The qualitative data is qualitatively triangulated to explain the relationships through analysis by using Nvivo software. From the perspective of 3PL providers, this study illustrates that uncertainty, frequency, and transaction size, but not asset specificity, are significantly associated with 3PP service. From the perspective of 3PL users, the uncertainty factor is significantly related to 3PP service. In both countries, 3PP service is significantly associated with value-to-client and benefit-to-provider. The primary contribution from this research is to help 3PL providers gain sustained competitive advantages through offering 3PP service. Also, the research illuminates that 3PL users are able to receive more benefits by using 3PP service. This paper also discusses the theoretical contribution and managerial implications of these findings. Future research can focus on other value-added services and geographical regions.