Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author. CHAPTER ONE INTRODUCTION The Use of Third Party Logistics Services in China A research report presented in partial fulfillment of the requirements of the degree of Master of Logistics and Supply China Management at Massey University, Auckland, New Zealand Jie Chen 2012 ii ABSTRACT The aim of this study is to understand the current status of Chinese third party logistics (3PL) industry, and investigate the situation of 3PL services usage in China. An empirical research study is carried out to determine: the extent use of the third party logistics services in China, reasons for Chinese firms outsourcing logistics activities, reasons for Chinese firms not outsourcing logistics activities, the level of satisfaction of the company that outsource 3PL for their 3PL providers, selection criteria for choosing 3PL providers, organization impact of logistics outsourcing and future trend of Chinese logistics services. The results of this study are gathered through an online survey questionnaire. The respondents are working in the Chinese firms with the management level position or above. The data is analyzed by SPSS, ANOVA and Chi-square test. The present study has found that outsourcing 3PL services become very popular in China, more than half of Chinese firms outsource 3PL services. The use of 3PL services will be increasing in the future. Most user firms are satisfied with their providers? performance. However, there is still high expectation for providers to improve. In general, Chinese outsourcing firms believe that outsourcing 3PL services would gain a number of benefits and impose positive impacts on their firms. iii ACKNOWLEGMENTS I would like to thank many people who helped to accomplish this research report. Achievement of this study cannot be realized without your help and support. Firstly, I would like to thank my supervisor, Professor Norman Marr for his academic supervision through the entire study. Thanks for his invaluable advices and professional guidance through the entire process. I am very appreciated that the efforts and time he had put in this study. I would like to thank Alan Win, the lecturer of postgraduate of logistics and SCM study. Thank him for being patience to me and his encouragement. I also would like to thank Bill Wang, the lecturer of logistics & SCM. Thanks for his professional guidance and advice on my survey questionnaire translation. I am grateful to all participants in this study. Their contributions ensured the overall achievement of this research Finally, my sincere thanks go to my parents and my friends. Thanks for their patience and enormous support. iv TABLE OF CONTENT ABSTRACT ................................................................................................................... ii ACKNOWLEGMENTS .............................................................................................. iii TABLE OF CONTENT ................................................................................................ iv LIST OF TABLES ....................................................................................................... vii LIST OF FIGURES ................................................................................................... viii CHAPTER ONE: INTRODUCTION ............................................................................ 1 1.1 Introduction ....................................................................................................... 1 1.2 Background ....................................................................................................... 1 1.3 Logistics in China ............................................................................................. 3 1.4 Research Problems ............................................................................................ 8 1.5 Main Aim and Objectives ................................................................................. 9 1.6 Thesis Outline ................................................................................................. 10 CHAPTER TWO: LITERATURE REVIEW .............................................................. 12 2.1 Introduction ..................................................................................................... 12 2.2 Definition of Supply Chain Management ....................................................... 12 2.3 History and Definitions of Logistics ............................................................... 17 2.4 Third Party Logistics ....................................................................................... 20 2.4.1 Definitions of Third Party Logistics ............................................................. 20 2.4.2 Third Party Logistics Partnership .................................................................. 23 2.5 Extent of Use of the Third Party Logistics Services ....................................... 25 2.5.1 Level of Commitment to the Usage of Third Party Logistics ................. 26 2.5.2 Total Logistics Budget -3PL ........................................................................... 28 2.5.3 Geographical Coverage Provided by Third Party Firms .......................... 30 2.5.4 Third Party Services Utilized ......................................................................... 30 2.5.5 The Length of Third Party Services. ............................................................. 33 2.6 Reasons for Outsourcing Logistics Activities ................................................. 34 2.7 Reasons for Not Outsourcing Logistics .......................................................... 39 2.8 Selection Criteria of Choosing 3PL Providers ................................................ 41 2.8.1 Logistics Performance Measurement ........................................................... 45 2.9 Organizational Impacts of Using Logistics Outsourcing Services ................. 47 2.10 Future trend of logistics services .................................................................. 49 2.11 Summary ....................................................................................................... 50 CHAPTER THREE: METHODOLOGY .................................................................... 53 3.1 Introduction ..................................................................................................... 53 3.2 Research Objectives ........................................................................................ 53 3.3 Research Philosophies: Positivism & Phenomenology .................................. 54 3.4 Quantitative & Qualitative Research Method ................................................. 55 3.5 Survey Type .................................................................................................... 57 3.5.1 Questionnaire ..................................................................................................... 57 3.5.2 Survey Questionnaire Design ......................................................................... 58 3.6 Data Collection ............................................................................................... 62 v 3.6.1 The Sampling Methods .................................................................................... 62 3.6.2 Respond Rate ..................................................................................................... 63 3.7 Data Analysis .................................................................................................. 64 3.8 Summary ......................................................................................................... 65 CHAPTER FOUR: RESULTS & DISCUSSIONS ...................................................... 67 4.1 Introduction ..................................................................................................... 67 4.2 Research Objectives ........................................................................................ 67 4.3 General Information of the Company ............................................................. 68 4.3.1 Total Number Employees ................................................................................ 68 4.3.2 Business Category ............................................................................................ 69 4.3.3 Company Location ........................................................................................... 69 4.3.4 Sales Revenue .................................................................................................... 71 4.4 Outsourcing / Not Outsourcing ....................................................................... 72 4.4.1 Use of 3PL .......................................................................................................... 72 4.4.2 Reasons for Outsourcing ................................................................................. 73 4.4.3 Reasons for Not Outsourcing Logistics Activities ..................................... 76 4.5 Extent of Use of the Third Party Logistics Services ....................................... 78 4.5.1 Logistics budget allocation ............................................................................. 78 4.5.2 Geographical Coverage ................................................................................... 79 4.5.3 Logistics Services Used & Satisfaction Level ............................................ 80 4.5.4 Total 3PL Services Providers ....................................................................... 83 4.5.5 Length of using 3PL services ......................................................................... 85 4.5.6 Length of Third Party Contracts .................................................................... 88 4.6 Decision Making Process ................................................................................ 89 4.6.1 Selection Criteria of Choosing 3PL Service Providers ............................. 89 4.6.2 Criteria for Evaluating the Performance of Company?s Providers ......... 90 4.7 Organization Impacts ...................................................................................... 92 4.7.1 Impact of Outsourcing 3PL Services ............................................................ 92 4.7.2 Elimination Logistics Positions ..................................................................... 93 4.7.3 Necessity of Retraining Logistics Employees ............................................ 94 4.8 Future Trend of Logistics Services in China................................................... 95 4.8.1 Satisfaction Rate of Current 3PL Services Providers ................................ 95 4.8.2 The Use of 3PL Services in the Future ......................................................... 96 4.9 Summary ......................................................................................................... 97 CHAPTER FIVE: CONCLUSION.............................................................................. 98 5.1 Introduction ..................................................................................................... 98 5.2 Research Objectives ........................................................................................ 98 5.3 Conclusions ..................................................................................................... 98 5.3.1 Objective 1: The Extent of Use of the Third Party Logistics Services in China .............................................................................................................................. 99 5.3.2 Objective 2: Reasons for Chinese Firms Outsourcing Logistics Activities ..................................................................................................................... 100 5.3.3 Objective 3: Reasons for Chinese Firms Not Outsourcing Logistics Activities ..................................................................................................................... 100 vi 5.3.4 Objective 4: Selection Criteria of Choosing 3PL Providers .................. 101 5.3.5 Objective 5: Organization Impact of Logistics Outsourcing ................. 101 5.3.6 Objective 6: Future Trend of Chinese Logistics Services ...................... 102 5.4 Limitations .................................................................................................... 102 5.5 Future Research ............................................................................................ 102 REFERENCES: ......................................................................................................... 106 APPENDICES ........................................................................................................... 116 APPENDIX A: Determinants of Successful Third Party Relationships ............. 116 APPENDIX B: Invitation Letter ......................................................................... 119 APPENDIX C: Questionnaire-Survey on the Use of 3PL in China ................... 120 APPENDIX D: ANOVA: 3PL Services & Length of Service Used 1 ................ 129 APPENDIX E: ANOVA: 3PL Services & Length of Service Used 2 ................ 130 vii LIST OF TABLES Table 1.1 Regulatory Frameworks for Foreign Participation in Logistics Sectors . 5 Table 1.2 Pre- and Post- WTO Rules and Regulations ........................................... 7 Table 2.1 Definitions of Supply Chain Management ............................................ 13 Table 2.2. Definitions of the Discipline of Logistics. ........................................... 19 Table 2.3 Data of Previous Studies in Different Countries ................................... 27 Table 2.4 Geographical Coverage &Total Logistics Budget ................................ 28 Table 2.5 Shippers Outsource a Wide Variety of Logistics Services in 2009 ....... 32 Table 2.6 Length of Contracts & Length of Using 3PL Services ......................... 33 Table 2.7 Top Five Reasons for Outsourcing Logistics Activities ........................ 35 Table 2.8 Reasons for Outsourcing ....................................................................... 38 Table 2.9 Reasons for Not Outsourcing ................................................................ 39 Table 2.10 Criteria for Evaluating Performance ................................................... 46 Table 2.11 Future Trend of Logistics Services ..................................................... 50 Table 3.1 Features of Two Main Philosophies ...................................................... 54 Table 4.1 Total Current Employees ....................................................................... 68 Table 4.2 Main Business Category ....................................................................... 69 _Toc311578771Table 4.3 Annual Sales Revenues (?millions) in 2009 ................. 71 Table 4.4 Total Companies Outsourcing/ Not Outsourcing .................................. 72 Table 4.5 Chi-square Test: Reasons for Outsourcing & Total Number of Employees ............................................................................................. 75 Table 4.6 More Logistics Expertise/Equipment & Total Employee Numbers ..... 76 Table 4.7 Reducing Inventory & Total Employee Numbers ................................. 76 Table 4.8 Chi-square Test: Reasons for Not Outsourcing & Total Employees ..... 78 Table 4.9 Loss Logistics Control & Total Number of Employees ........................ 78 Table 4.10 Percentage of Total Logistics Budget Allocated to 3PL Providers ..... 79 Table 4.11 Geographical Coverage ....................................................................... 80 Table 4.12 Percentages of Third Party Logistics Services Used ........................... 81 Table 4.13 The Satisfaction Level of Outsourced Third Party Logistics Services 82 Table 4.14 Percentage of Total Number of 3PL Providers ................................... 83 Table 4.15 Number of 3PL Providers Used & Total Employees Number ............ 84 Table 4.16 Number of 3PL Provider Used & Length of Using 3PL Services ...... 85 Table 4.17 ANOVA: 3PL Services & Length of Service Used ............................. 87 Table 4.18 Total Number of Employees & Length of Using 3PL Services .......... 88 Table 4.19 Degree of Importance of Selection Criteria ........................................ 90 Table 4.20 Degree of Organization Impacts ......................................................... 93 Table 4.21 Percentage of Satisfaction Rate with Current Providers ..................... 96 Table 4.22 Percentage of Future Usage of 3PL Services ...................................... 97 viii LIST OF FIGURES Figure 2.1 A Model of Supply Chain Management .............................................. 16 Figure 2.2 Relationships between Shipper and 3PL Provider .............................. 24 Figure 2.3 The Relationship between Three Parts ................................................ 25 Figure 2.4 Total Logistics Expenditures -3PL ...................................................... 29 Figure 3.1 Research Process ................................................................................. 66 Figure 4.1 Company Location .............................................................................. 71 Figure 4.2 Main Reasons for Using 3PL Services ................................................ 74 Figure 4.3 Main Reasons for Not Using 3PL Services ......................................... 77 Figure 4.4 Length of Using 3PL Services ............................................................. 86 Figure 4.5 Duration of Contract ............................................................................ 88 Figure 4.6 Degree of Importance Criteria when Evaluating Provider?s Performance ........................................................................................ 91 Figure 4.7 Main Reasons for Retraining ............................................................... 95 CHAPTER ONE INTRODUCTION 1 CHAPTER ONE: INTRODUCTION 1.1 Introduction The aim of this study is to understand the current status of Chinese third party logistics (3PL) industry, and investigate the usage of 3PL services in China. This chapter provides the background of logistics and supply management. The background includes the growth of 3PL and the increased importance of logistics and supply chain management. The second part of this chapter provides the overview of logistics industry in China and explanation of the development of the Chinese logistic industry. The third part of this chapter introduces the progress of generate research problems. The research problems are generated from the previous literatures. The rest of this Chapter provides the main aims and objectives of this study, and also presents the outline of this thesis. 1.2 Background In recent years, logistics and supply chain management have been attracting wide attention and have become increasingly important over the last two decades. Over the period, the condition of the environment has changed significantly, and the concept of logistics and supply chain management has been evolving. Nowadays, logistics and supply chain management has been reviewed as an increasingly popular business strategy as it can reduce costs and improve customer values. Traditionally, logistics and supply management were delegated to operational level in purchasing and distribution departments, but now logistics and supply management are evolving due to strategic alliances, technological changes, cycle time compression, and the increasing competitive environment. There are also some internal changing factors such as the implementation of decision support systems, information systems CHAPTER ONE INTRODUCTION 2 integration, increasing performance expectations and spanning of logistics to impact traditional functional areas (Meade & Sarkis, 1998). Globalisation, new technologies, customer orientation and outsourcing, which are the major factors that contribute to the interest in logistics force organization to gain competitive advantages (Lambert D.M., Stock J.R. & Ellram L.M., 1998). The third party logistics industry began in the 1980s, it was a $40 billion industry in 1998. The experts predicted this industry would grow 20% per year (Simchi-Levi D., Kaminsky P. & Simchi-Levi E., 2003). In 2006, total spending on outsourced contract logistics globally was US$148 billion, and with a further US $117 billion spending on forwarders (Transport Intelligence). As the third party logistics industry rapidly growing and keep playing a more significant role in global supply chains, it is becoming increasingly complex. Fuller, O?Conor and Rawlinson (1993) claimed that one important reason for the growth of 3PL services was the variety of customer needs. This variety of customer needs forcing companies to compete in various business fields that were logistically distinct. These distinct services are provided more efficiently by integrated services providers. The role of third party logistics providers and the range of services that they are providing have been evolved. 3PLs have evolved from narrowly focused only on shippers and freight forwarders to providing a number of varied outsourcing services. The traditional 3PL services was included transportation, warehousing and customs clearance, but today full range of services that 3PLs offer include many non-traditional services, such as inventory planning and management, sourcing, production planning, merge-in-transit network design and operation, reverse logistics, flow-through production support/metering and network simulation (Simchi-Levi et al., 2003). The literature on international logistics provider shows that there are three waves in the history of 3PL evolving journey. The first wave happened in 1980?s or even earlier with the emergence of traditional logistics providers. These providers? activities usually emerged from a traditionally strong position in either warehousing CHAPTER ONE INTRODUCTION 3 or transportation. The second wave should back to the early 1990. The number of network players started their logistics activities such as DHL, TNT and FedEx by then. The third step was in late 1990s. At that time, a number of players from areas of information technology, management consultancy and even financial services worked together with players from first and second waves (Berglund, Laarhoven, Sharman & Wandel, 1999). 1.3 Logistics in China Nowadays, China is becoming the strong economic power and with great future potential. The growth rate of Chinese annual GDP surpassed 10 percent in the past decades. The Economists (2001) forecasted that China would become the second largest economy in the world within 20 years. Since 1994, China has attracted a lot of attention consistently from Multinational Corporations (MNCs). One important reason is the low manufacturing costs and great domestic market potential. After China accessing to the WTO, more people have a wider access to purchase both domestic and foreign goods. The total trade and investments value in China has been increasing rapidly. Moreover, China has overtaken USA and became the number one country in term of attracting foreign investment after 2002(Goh & Ling, 2002). In 2003, more than 80 percent of fortune 500 companies made their investment in China (National Bureau of statistics of the People?s Republic of China, 2003). The growth of the logistics industry in China has been increased dramatically. In 1952, freight turnover in China was 76 billion ton-kilometres, but it was increased to 4381 billion ton-kilometres in 2000. From 1980 to 2000, the total volume increased by 3.8 times (Luo & Findlay, 2001). From 1992 to 2004, the average annual growth rate of the logistics industry in China was 22.2 percent (Logistic Information Center of China and China Federation of Logistics and Purchasing, 2005). The China Federation of Logistics and Purchasing and Mercer Management Consulting reports CHAPTER ONE INTRODUCTION 4 that the number of the companies that outsource logistics and transportation services in China will continue to increase 25 percent. The main reason for the sharp expansion is due to many multinational and transnational companies moving their logistics businesses to China. Second reason is that a number of Chinese companies increase outsourcing logistics services in order to reduce costs and focus on improving their core competency. Last reason is that Chinese government begins to encourage companies to invest in the logistics industry (Mercer Management Consulting, 2002). Prior to the mid-1980s, China adopted central-planned economy policy and used three-tier system to dominate the distribution sector. Both production and distribution were conducted solely. All the productions and related logistics activities were controlled and planned by the central government. Distributors only provided basic logistics services such as transportation and warehousing but no marketing support. Distributors did not have right to import products by themselves since that right was reserved for foreign trade corporations (FTCs). Warehouses built during the pre-1960s were mostly single-storey (Jiang & Prater, 2002). The transportation system was still a weak link in the China at that time. There were insufficient rail or road lines between the regions. The coordination between different modes of planning and development was required. The general service quality was low. After 1980s, the Chinese government started to reform. The control from central government shifted to the provinces and municipalities level, which means they have right to establish their own trading companies. Therefore, the economic system was changed from planned economy towards marketing economy. It resulted in the shifting of sole state-owned production to private-owned, joint ventures and even foreign companies could gain entry into the Chinese market. In the late 1980s, the domestic enterprises that met specified trade volumes were permitted to import and export directly. This reform led to the development of the logistics industry in China CHAPTER ONE INTRODUCTION 5 (Jiang & Prater, 2002). Prior of China entering the WTO, there were few foreign logistics companies. The Chinese logistics industry was comprised of these single logistics service providers that could only provide warehousing and transportation services (Liu Y., 2008). The regulated sectors of Chinese logistics industry included freight forwarding, trucking, shipping, aviation and customer brokering. If the foreign logistics service providers intended to enter the Chinese logistical services market, they had to have the special licenses approved by the concerned Chinese authorities, such as the Ministries of Communications (MOC) and Foreign Trade and Economic Cooperation (MOFTEC) (see table 1.1 for more details). Table 1.1 Regulatory Frameworks for Foreign Participation in Logistics Sectors Source: Loo D. (2002) China joined the WTO on December 11, 2001. Since then, logistics service industry in China has achieved significant improvement. The rules and regulations governing the permission for logistics services were becoming easier. The government tried to provide better environment for the economy development. For example, carriers could be free to offer single-source logistics management after the accession into the WTO, and foreign 3PL providers were allowed to have minority ownerships in joint ventures upon accession and hold majority equity shares within one year (see table 1.2 CHAPTER ONE INTRODUCTION 6 for more details). Therefore, the foreign logistics service providers were allowed having more flexibility and better control over the number and type of services they wish to provide. In the meanwhile, the government reinforced construction of infrastructure and logistics networks after accession into the WTO, such as railways, highways and regional logistics parks. The total length of highways in China was increased 50,000 kilometres just from 1999 to 2000, which led the total highway length in China up to 1.4 million kilometres, of which 1.32 million kilometres is paved (National Bureau of Statistics of the People?s Republic of China, 2001). In 2005, the combined length of expressways in China was 1.93 million kilometres. It was the second longest expressway in the world. In the meanwhile, China had 133 airports, 1246 aircraft and 1257 aviation routes (National Bureau of Statistics of the People?s Republic of China, 2006). The foreign logistics services providers brought great impact on the development of Chinese domestic 3PL companies. For example, they brought advances logistics concepts, high level of technologies and new management systems into Chinese logistics industry. The accession of WTO brought not only tremendous opportunities but also the intensive competition from global players. This increased competition in Chinese logistics industry forced many 3PL providers to improve. After China entered into the WTO, Chinese government has removed many restrictions in the logistics industry. However, the restrictions affected the sales, service, and distribution sectors to foreign firms were still not removed until 2005. Comparing with western developed countries, China still has some gaps need to fill. For instance, China still need more qualified logistics personnel and adequate supply to meet variety of demands. These kinds of problems will lead to high logistics costs. For instance, the total logistics costs comes to 20% of gross domestic product (GDP) in China, but in developed countries such as the United States, the total logistics costs only comes to 10% of GDP (Dekker, 2002). However, today?s challenge will be tomorrow?s opportunity. The existing constraints could be turned to opportunities by creating innovative CHAPTER ONE INTRODUCTION 7 solutions with Chinese characteristics (Jiang & Prater, 2002). Therefore, Logistics in China still has a lot of potential. Table 1.2 Pre- and Post- WTO Rules and Regulations Sources: Goh & Ling (2002) CHAPTER ONE INTRODUCTION 8 1.4 Research Problems There are a lot of literatures in studying the area of third party logistics industry. Some researchers studied the advantages and extent of usage of 3PL. However none of them studied the usage of 3PL services in China in 2010. Lieb, Millen and Wassenhove (1993) compared the experiences of the European manufacturers with US by using 3PL services. The authors tested the level of commitment to the usage of 3PL, the logistics budget allocated to third party providers and utilization of 3PL services. They found a higher level of commitment to using 3PL services in Europe. Dapiran, Lieb, Millen and Sohal (1996) presented an overview of the 3PL usage by large Australian firms, and then compared the Australian firms to US firms in their usage of 3PL services. Bhatnagar, Millen and Sohal (1999) also studied third party logistics services with a Singapore perspective. The study found that most users were satisfied with their providers and believed that 3PLs would lead to positive developments within the organizations. Sohail and Sohal (2003) examined the usage of third party logistics services in Malaysia. The study determined the extent of use of the third party logistics services, decision making process for choosing contract logistics and its impact on the organization. Lieb and Bentz (2005) conducted a survey in year 2003 and year 2004, focused on the use of 3PL services by large American manufacturers. Austin, Sohail and Rushdi (2004) studied the usage of 3PL service in Sub-Saharan Africa. The empirical research was focused on Ghana. They found over 80% of users of 3PL have a positive impact on their own companies. Zhang (2009) researched the usage of third party logistics in New Zealand. This research investigated the use of third party logistics by the companies in New Zealand from the user?s perspective and identified the opportunities in the New Zealand environment. A number of researchers investigated the Chinese logistics industry but from different perspectives. These studies introduced the past and current situation of 3PL services in China. However, none of these studies focus on investigating the current usage and CHAPTER ONE INTRODUCTION 9 future trend of 3PL services in China in recent years. Jiang and Prater (2002) studied Chinese distribution and logistics development. The research reviewed the traditional Chinese distribution system and compared it with the systems used in foreign countries. Dai, Deng, Ou, Tsui, Wang & Zhang (2002) conducted a survey among Chinese and foreign 3PL providers from the provider?s perspective. Goh and Ling (2002) did a similar study on logistics development in China. They found that booming economy, entering the WTO and e-commerce were the main forces for the changing China?s distribution and logistics system in China. In 2003, Dai et al conducted a survey which focused on Chinese logistics. In 2005, Dai et al did another survey report on China road transportation enterprise. Wang, Zantow and Lai (2006) carried out a study about the strategic aspects of 3PL provider in China. This was the first study to examine 3PLs providers in mainland China. Liu (2008) studied the current situation for Chinese 3PL companies to face. Liu unveiled the current situation of Chinese domestic 3PL providers and also discovered the competitive strategies pursued by the Chinese 3PL providers. Anything happened in China Logistics industry is a hot topic in recent years. Many researchers studied the third party logistics industry in different ways compare with different countries. However, there is a lack of study focusing on the usage of third party logistics services in China in recent years. Therefore, this study investigates the usage of third party logistics in China from the user?s perspective, and provides the in-depth research by descriptive and statistical analysis. 1.5 Main Aim and Objectives The aim of this study is to investigate the current usage of third party logistics in China from the user?s perspective. An empirical research is carried out to determine: ? The extent of use of the third party logistics services in China ? Reasons for Chinese firms outsourcing logistics activities CHAPTER ONE INTRODUCTION 10 ? Reasons for Chinese firms not outsourcing logistics activities ? The level of satisfaction of their 3PL providers ? Selection criteria of choosing 3PL providers ? Organization impact of logistics outsourcing ? Future trend of Chinese logistics services. 1.6 Thesis Outline The thesis is consisting of five chapters: Chapter one is the introduction. This chapter presents a background of the logistics and supply chain management and reviews the background of logistics in China, and then discusses the motivation of the research problem, states the research objectives and related questions. Chapter two is the literature review. It presents the concept of logistics and supply chain management, third party logistics, and provides insight into research strategies and methodologies that are considered appropriated to the research problem and objectives. The literature review shows a rational guideline for the whole research. Chapter three describes the methodologies and techniques that are used in the research process. The quantitative method is used for conducting this research. The data collection method is the non-probability sampling. This chapter also describes the number of participants of this study, operational procedures, methods of questionnaire and selection of data for analysis. Chapter four includes the survey results and discussions. The statistical program CHAPTER ONE INTRODUCTION 11 SPSS (Statistical package for the Social Sciences) uses for analyzing the data. The statistical techniques include descriptive statistics, ANOVA (analysis of variance) and Chi-square test. These techniques provide in-depth investigation of the relationships between different variables. Chapter five is the conclusion. The final chapter reviews the study objectives and summarizes the overall conclusions from the survey results and discussions. Limitations of this study and suggestions for the future research are presented as well. CHAPTER TWO LITERATURE REVIEW 12 CHAPTER TWO: LITERATURE REVIEW 2.1 Introduction In recent years, logistics has attracted a lot of attention from business operators and scholars. There are a large number of studies and discussions which have contributed to the overall development of logistics. This chapter starts with the definition of Supply Chain Management, Logistics Management and Third Party Logistics. It helps readers to review these fundamental concepts. From the previous researches several key factors have been identified that impact the overall usage of 3PL logistics services. These factors are the extent of use of the third party logistics services; decision making process for choosing contract logistics services provider and impact of the usage of contract logistics services on the organization (Lieb, 1992). These factors determine the future usage of contract logistics services. This chapter reviews the literature with reference to these factors. Furthermore, reasons for outsourcing and not outsourcing logistics activities, the level of satisfaction of their 3PL providers and the future trend of logistics services in different countries. 2.2 Definition of Supply Chain Management The definitions of supply chain management (SCM) may differ across authors. Table 2.1 shows the variety of definitions of supply chain management. Lee (1995) defined supply chain management as? ?The integration of material, information and financial flows in a network of companies or organizations that make and deliver of products and services from the source to the consumer? (p.272). CHAPTER TWO LITERATURE REVIEW 13 Table 2.1 Definitions of Supply Chain Management Source: Mentzer et al., (2001) Monczka, Trent, and Handfield (1998) stated: ?The primary objective of SCM is to integrate and manage the sourcing, flow, and control of materials using a total systems perspective across multiple functions and multiple tiers of suppliers? (p.133). CHAPTER TWO LITERATURE REVIEW 14 Other definitions of supply chain management are listed in table 2.1. Basically, these different points of view from different authors can be classified into three categories: a management philosophy, implementation of a management philosophy, and a set of management processes: ? SCM as a Management Philosophy In this philosophy, SCM viewed the supply chain as a single entity rather than as a set of fragmented parts (Ellram and Cooper, 1990). Cooper et al (1997) defined SCM as a set of beliefs that each firm in the supply chain affects the performance of all the other supply chain members directly and indirectly. Ross (1998) said: ?SCM as a management philosophy seeks synchronization and convergence of intra-firm and inter-firm operational and strategic capabilities into a unified, compelling marketplace force? (p.116). As SCM is regarded as a management philosophy, it should have the following characteristics: a system approach can manage the total flow of goods inventory from the supplier to the end users and view the supply chain as a whole. A strategic orientation towards cooperative efforts to synchronize, converge intra-firm and inter-firm operational, strategic capabilities into a unified whole. It is also a focus to create unique and individualized customer value to meet customer needs and make them satisfied (Mentzer et al. 2001). ? SCM as a Set of Activities to Implement a Management Philosophy When SCM is regarded as a set of activities to implement a management philosophy, Mentzer (2001) suggested that various activities were necessary for implementing a SCM philosophy successfully. These activities include: 1 Expend integrated behavior to incorporate customers and suppliers. CHAPTER TWO LITERATURE REVIEW 15 2 Mutually sharing information, risks and rewards between supply chain members. Information sharing can make strategic data available to other supply chain members. Risk and reward sharing should be the long term focus. 3 Cooperation is required among the supply chain members in order to have an effective SCM 4 Supply chain members should have the same goal and the same focus on serving customers. 5 Integration of processes from sourcing to manufacturing and to distribution across the supply chain 6 SCM requires partners to build and maintain long- term relationships. Forming strategic alliances with supply chain members which include suppliers, customers or intermediaries can help creating unique customer value in order to provide a competitive advantage (Mentzer et al. 2001). ? SCM as a Set of Activities to Implement a Management Philosophy When authors defined supply chain management, some authors (Londe 2001, Lambert, Stock &Ellran, 1998) have focused on the management processes. They regarded SCM as a set of management processes. For example, La Londe (2001) defined SCM as a process of managing relationship, information, and materials flowing across enterprise borders. SCM delivers enhanced customer service and economic value from sourcing to consumption through synchronized management of the flow of physical goods and associated information. Earlier, Lambert, Stock, and Ellram (1998) proposed that all supply chain members must adopt a process approach and overcome their own functional silos in order to implement SCM successfully. All of the functions in a supply chain are considered to be key processes. Lambert, Stock, and Ellram (1988) suggested the key processes typically include customer relationship management, customer service management, demand management, order fulfillment, manufacturing flow management, procurement, and product development and CHAPTER TWO LITERATURE REVIEW 16 commercialization (Al-Mudimigh, Zairi & Ahmed, 2004). From above mentioned three different points of view, Mentzer et al (2001) defined supply chain management as: ?the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole? (p.18). This definition led to the development of the conceptual model. As shown in figure 2.1, the supply chain is pictured as a pipeline which shows the direction of the supply chain flows that include the products and services, financial resources, the information associated with these flows and the informational flows of demand and forecasts. Figure 2.1 also shows the critical role of customer value, the satisfaction of achieving competitive advantage and the profitability for the individual companies in the supply chain. Figure 2.1 A Model of Supply Chain Management Source: Mentzer et al. (2001) CHAPTER TWO LITERATURE REVIEW 17 2.3 History and Definitions of Logistics Logistics is more widely recognized by the general public in the last 20 years. However, there is still confusion about its definition. The reasons are there are a number of terms used to describe the logistics, such as, logistics management, physical distribution management, integrated logistics management, operational management, distribution, materials management and marketing logistics. Logistics management is the mostly accepted terms. Logistics management is used by different institute which includes public/government sectors, nonprofit sectors and service organizations such as banks, restaurants, hospital and hotels (Coyle, Langley & Bardi, 2009). The term Logistics was derived from military term in the eighteenth century in Europe. The military definition of logistics includes supply items such as food, fuel, transporting material, spare parts and personnel (Webster?s New Encyclopedic dictionary, 1993). As early as 1989 (Simpson and Weiner), Logistics was discussed as: ?Strategy is the art of handling troops in the theatre of war; tactics that of handling them on the field of battle ? The French have a third process, which they call logistics, the art of moving and quartering troops.? (p. 536) The term logistics was first defined in 1905, Barker (1905) defined logistics as a branch of the art of war pertaining to the movement and supply armies. In 1960s, the logistics concept began to appear in the business-related literature under the label of physical distribution. Business logistics evolved into a dichotomy of (Langley, 1986) ? Inbound logistics (materials management or physical supply) to support production, where the plant is the customer ? Outbound logistics (physical distribution of product) to support external CHAPTER TWO LITERATURE REVIEW 18 customers. During 1990s, logistics was regarded as a supply or demand chain that linked all of the organizations from the suppliers to the customer. In the twenty-first century, logistics is reviewed as a part of management and has four sub-divisions which include (Russell, 2000): ? Military or engineering logistics. The design and integration of all aspects of support for the operational capability of military forces and their equipment. The equipment is used for ensure readiness, efficiency and reliability. ? Business logistics. It is the part of the supply chain process which plans, implements and controls the effective flow and storage goods and services, and support information to meet customer requirements. ? Event logistics. The network of activities, personnel and facilities that is required to organize, schedule and use the resources for an event to take place and withdraw after the event efficiently ? Service logistics. The acquisition, scheduling and management of the assets or facilities, personnel and materials to support and sustain a service operation or business. The general definition of logistics that covers above four sub-divisions is: ?Logistics is the process of anticipating customer needs and wants; acquiring the capital, material, people, technologies, and information necessary to meet those needs and wants; optimizing the goods ?or service-producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way.? (The Council of Logistics Management, 1991, p.3) CHAPTER TWO LITERATURE REVIEW 19 Table 2.2. Definitions of the Discipline of Logistics. Source: Russell, (2002) The definitions of Logistics described by different perspectives in a variety of sources are shown in table 2.2. Lambert et. al., (1998) pointed out this definition offered by the council of supply chain management was mostly utilized. This definition includes the flow of goods and services and information in both the manufacturing CHAPTER TWO LITERATURE REVIEW 20 and service sectors. Manufacturing includes all types of companies that producing goods such as producing computers, automobiles, cosmetics aircraft and food items. The service sector includes government organizations, hospitals, banks, retailers and wholesalers (Lambert et. al., 1998). Logistics management is regarded as an extension of physical distribution management. It usually connects to the management of the materials and information of the business, through the distribution channel to the end users. Logistics pretty much depends on the nature of the business and the industry. Logistics management includes everything from a decision on a product to the management of incoming raw materials, the production process, storage the finished goods, delivery the products to the customer, and after-sales service (Chapman, Soosay & Kandampully, 2002). All of these above mentioned definitions in common are the concept of integrating many activities to support the organizational objective. In general contexts, logistics is expressing or implying a sense of meeting the material system or processing needs of a customer. 2.4 Third Party Logistics There are some other names to describe the phenomenon of third party logistics (3PL) such as contract logistics or integrated service provider. The term third party logistics has been used more and more commonly. The growth of intensive competition and complex business conditions force organizations to have competitive advantages consistently. Therefore, organizations regard 3PL providers as an effective strategy to lower the operation costs and achieve a high service performance (Liu, 2008). 2.4.1 Definitions of Third Party Logistics Third party logistics and related concepts are developed by researchers or consultants in collaboration with businesses demanding or offering third party services. There CHAPTER TWO LITERATURE REVIEW 21 are different types of definitions of 3PL. For example, after the comparison between the spreading of 3PLs in US and European production industries Lieb et al. (1993) used the definition was: ?Third-party logistics involves the use of external companies to perform logistics functions that have traditionally been performed within an organization. The functions performed by the third party can encompass the entire logistics process or selected activities within that process? (p1). This definition indicates that 3PL includes any form of externalization of logistics activities that previously performed in-house. It also illustrates the scope of definitions. The above definition applied the outsourcing concept of logistics function and the following definition has fulfilled the missing part of the above definition. ?A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or "bundled" together by the provider.? (Bagchi P.K. & Virum H., 1996. p.94). The council of Logistics Management defined 3PL as: ?Outsourcing all or much of a company?s logistics operations to a specialized company.? (Lindskog, 2003. p.140). Third party logistics can be seen as one unit of the supportive supply chain. It means 3PL providers provide support to alternative supply chain strategies. Lambert et al (1998) defined supportive members as: ?companies that simply provide resources, knowledge, utilities or assets for the primary members of the supply chain? (p.2). The benefits that 3PL services can bring to the organization base on the literatures are not only lower the operating costs and improve service performance, but also find CHAPTER TWO LITERATURE REVIEW 22 global solutions, enable entry to new markets, control costs, investments, and services, improve customer satisfaction and improve flexibility, and find more cost efficient service solutions (Anu & Bask 2001). A European definition stated: ?Third-party logistics (3PL) are activities carried out by an external company on behalf of a shipper and consisting of at least the provision of management of multiple logistics services. These activities are offered in an integrated way, not on a stand-alone basis. The cooperation between the shipper and the external company is an intended continuous relationship? (ProTrans, 2001, p. 2). This definition emphasized that 3PL agreement not only to provide the services, but also be responsible for integrating and managing the producing party such as lower tier providers. Tiered execution of services is very common among 3PL providers (Berglund, et. al., 1999). In recent years, focus of third party logistics providers has moved to strategic development. Third party logistics providers start to support logistics operations through value-added services and supply chain solution services (Rushton A., Oxley J. & Croucher P., 2000). Value-added service in logistics is defined as ?add a lot of additional value to the products being distributed? (Rushton et al., 2000. p.62). The major value-added services have been summarized as follows: ? Specialist or niche service, where the operations is specifically designed for a particular product ? Time reliable services, which are set up to support the just-in-time operations of major manufacturers ? Assembly that is fulfilled by third-party distributor ? Refurbishment: in the light of current environmental legislation CHAPTER TWO LITERATURE REVIEW 23 many ,manufacturers have endeavored to re-engineer their products so that parts from some used products can be reused in new products ? Repacking, which is another area of value added development, like a torch together with battery ? Packaging return: collect packaging for reused or disposal 2.4.2 Third Party Logistics Partnership In 1993, the first survey was conducted in Europe. It found that partnerships were modest in scope and level of ambition. Partnerships were limited to the basic warehouse activities and transportation in the logistics industry. Top management was only involved to a limited extent and contracts were extremely detailed. The provider only had little opportunities for own initiative. The cooperation was limited between the 3PL providers and shippers. However, the situation changed with time passing on, the value added activities and service range became a much larger extent than it in 1993 (Van Laarhoven, Berglund & Peters, 2000). The figure 2.3 shows that the 3PL provider is in the middle to connect between two participants which are shippers and suppliers in the relationship. As a result it is become involved as a third party (Larsen, 1999). The relationship between shippers and 3PL providers? function is on a continuous scale. It is going from single transaction to integrated service agreements as shown in figure 2.2. The left part of scale focuses only on single transactions and corresponds to the traditional relationship between buyer and seller on the transport market. The three forms of cooperation on the right side of the scale are regarded as form of strategic alliance. Bagchi and Virum (1996) defined the logistics alliance as: CHAPTER TWO LITERATURE REVIEW 24 ?A logistics alliance indicates a close and long-term relationship between a customer and a provider encompassing the delivery of a wide array of logistics needs? (p.97). Figure 2.2 Relationships between Shipper and 3PL Provider Source: Larsen (1999). In a logistics alliance, the parties ideally consider each other as partners. They collaborate in understanding and defining the customer's logistics needs. Both partners participate in designing and developing logistics solutions and measuring performance. This definition emphasizes the strategic dimension of the concept and presumes that 3PL could fulfil several characteristics before the relationship between buyer and seller of logistics functions. These characteristics includes the certain duration, joint efforts to develop further cooperation, a customization of the solution, together with a fair sharing of benefits and risks (Larsen, 1999). Bagchi & Virum, (1996) also pointed out the primary goal in a logistical alliance was to achieve a win-win arrangement. The figure 2.3 demonstrates the relationship between the three parts and the tiered service production structure. The third party logistics providers are also called first tier supplier. The relationship between first tier suppliers (shippers) and provider are CHAPTER TWO LITERATURE REVIEW 25 called first tier relationship. The second tier suppliers, who have the indirect relationship to the primary participants, are the suppliers of 3PL provider. Figure 2.3: The Relationship between Three Parts Source: Berglund (2000) The two parties regard each other as partners. Both partners are responsible for designing and developing logistics solutions and measuring performance. Therefore, how to achieve a successful relationship between providers and users has became a hot topic among the researchers. Virum (1993) have stated that the information sharing was the most important factor to the successful relationships between providers and users. Leahy S.E., Murphy P.R. & Poist R.F. (1995) stated that the growth of logistics outsourcing was impressive. The major factor of successful logistics outsourcing was the ability to manage these third party relationships. Leahy et al (1995) also generated a list of twenty five factors which are affecting the successful relationship between providers and users (see appendix A). 2.5 Extent of Use of the Third Party Logistics Services Lieb et al. (1993) defined the extent of usage as the following factors: ? Level of commitment to the usage of third party logistics CHAPTER TWO LITERATURE REVIEW 26 ? Percentage of total logistics budget allocated to third party providers ? Geographical coverage provided by third party firms ? Third party services utilized ? The length of third party contracts. Sohail et al (1999) suggested that the longer the relationship between organization and the 3PL provider, which means the more extensive of the use of 3PL services and the higher the level of commitment to the relationship, and also the more chance for organizations to be willing to invest in contract logistics. 2.5.1 Level of Commitment to the Usage of Third Party Logistics Lieb (1992), Lieb and Randall (1996), Lieb et al. (1993) compared the experiences of the European manufacturers with US manufacturers of using 3PL services. The study indicated that European firms were more significantly committed to their 3PL companies rather than US manufacturers did. Dapiran et al. (1996) presented an overview of the 3PL usage by large Australian firms, and then compared the Australian firms to US firms in their usage of 3PL services. The study indicated that more than one-fifth Australian firms characterized their commitment to 3PL as extensive. Millen R., Sohal A., Daparin P., Lieb R., & Wassenhove L.N.V., (1997) did a study that compared American firms with Western European firms. It revealed that around one-half of the users in Western Europe firms characterized their commitment as extensive, and in US firms more than one-half of the US firms characterized their commitment as limited or very limited. Bhatnagar et al (1999) studied third party logistics services under a Singapore perspective. The result showed that over three-quarters of the users in Singapore characterized their commitment to 3PL services as moderate to extensive. In Ghana (Sohail M.S., & Al-Abdali O.S., 2005), most of the users described that their commitment to 3PL services as moderate to extensive. In India (Sahay &Mohan, 2006), 68 percent of the users described their commitment to 3PL services as moderate and 32 percent of CHAPTER TWO LITERATURE REVIEW 27 the users used the services very limited. Table 2.3 Data of Previous Studies in Different Countries Authors Published year Sample size Number of respondents Respond rate TPL user More than one provider None users AUS Dapiran et al. 1996 308 84 27 67 33 33 AUS Millen et al. 1997 308 84 27 64 67 36 USA Lieb & Randell 1996 38 79 USA Lieb & Randell 1996 92 22 60 70 USA Millen et al. 1997 500 131 26 37 1 USA Lieb &Bentz 2005 450 60 13 80 60 WE Millen et al. 1997 500 73 26 52 0 SG Bhatnagar et al. 1999 1000 126 17 60 74 MY Sohail &Sohal 2003 800 124 16 68 63 SA Sohail & Al-Abdali 2005 2000 496 25 64 36 India Sahay & Mohan 2006 500 130 26 55 82 45 Sweden Sjoholm & Wang 2007 350 90 25.7 55.6 61.4 44.4 NZ Zhang 2009 250 84 35 48 85 36 Source: S?holm & Wang (2007) Table 2.3 provides an overview of previous studies that have been made in different countries. It demonstrates that over 60 percent of respondent companies use 3PL services in Australia, USA, Singapore, Malaysia, Mexico and Saudi Arabia. In Australia, the figure is 75 percent (Sohal A.S., Millen R. & Moss S., 2002), Malaysia 63 percent (Sohail & Sohal, 2003), USA 79 percent ( Lieb & Bentz, 2005), Saudi CHAPTER TWO LITERATURE REVIEW 28 Arab 63.5 percent (Sohail & Al-Abdali, 2005), Singapore 60.3 percent (Bhatnagar, et al., 1999) and Mexico 78.7 percent (Arroyo P., Gaytan J., & de Boer L., 2006). The other Countries which have more than half of the companies using 3PL services are as following: Western Europe (52%) (Millen et al, 1997), India (55%) (Sahay & Mohan, 2006) and New Zealand (57%) (Zhang, 2009). 2.5.2 Total Logistics Budget -3PL Table 2.4 Geographical Coverage &Total Logistics Budget Source: Sj?holm & Wang (2008) Table 2.4 provides the percentages of the total logistics budget allocation and the percentages of the geographic coverage in different countries. The study carried out by Dapiran et. al., (1996) presented that one-quarter of the Australia firms allocated more than 50 percent of their total logistics budget to 3PL providers. Millen et al (1997) indicated that European firms were significantly more committed and allocated a larger share of the overall logistics budget to their 3PL providers when compared CHAPTER TWO LITERATURE REVIEW 29 with US counterparts. Bhatnagar et al (1999) found that 20 percent of the Singapore firms allocated over 30 percent of their total logistics budget to 3PL providers. In Ghaba (Sohail M.S., Austin, N.K. & Rushdi M., 2004), there was only 6 percent of the users spent over 50 percent of logistics budget to outsourcing logistic. Sohail et al (2004) stated that there was nearly 45 percent of the users allocated 20 percent or less of their logistics budget to 3PL providers in Saudi Arab, and 13 percent of the users allocated over 60 percent of their logistics budget to 3PL providers. However, 63 percent of the firms allocated 11-20 percent of their budget to 3PL providers in India (Sahay & Mohan 2006), and only 29 percent allocated over 50 percent of logistics budget to 3PL providers. In New Zealand (2009), 39 percent of the firms allocated more than 40 percent of their total budget to 3PL providers. Figure 2.4 Total Logistics Expenditures -3PL Source: Capgeminni & Langley, (2009) Capgemini consulting and Langley (2009) conducted a survey that showed the percentage range of total logistics expenditures to be allocated to 3PL use in different regions. In figure 2.4, it shows the current percentage and also the expected CHAPTER TWO LITERATURE REVIEW 30 percentage of total logistics expenditures in different regions. The percentage of logistics shippers? budgets that was devoted to outsourcing in 2009 in different regions are as following: Europe (66%), Asia Pacific (62%) and Latin America (51%). These figures are slightly higher than those reported in the 2008 study. Therefore, there is a small increased in the expenditures on the 3PL services in these regions. 2.5.3 Geographical Coverage Provided by Third Party Firms In Australia, firms that used 3PL services for domestic purpose are more than for international purpose. However, in countries such as US, Western Europe, Singapore and Malaysia, most of firms in these countries used 3PL services for both domestic and international purposes (Lieb & Bentz, 2005; Millen, et al., 1997; Sohail M.S., Bhatnagar R. & Sohal A.S., 2006; Sohail & Sohal, 2003). Lieb and Bentz (2005) pointed out that many companies from the following countries indentified that 3PL users used outsourcing logistics services in multiple geographies, such as Canada(42% of companies indicated that they used 3PL services for international purpose), Mexico (47%), Latin America (53%), Western Europe (65%), Eastern Europe(58%), Asia (excluding China), China (63%) and India(21%). Lieb and Bentz also indicated that the significant growth of 3PL in China reflected the rapid economic growth of the country. 2.5.4 Third Party Services Utilized Different firms may outsource the different third party services, which depends on the organization needs and strategies. The services that firms usually outsource includes: warehouse management, shipment consolidation, fleet management, order fulfilment, product returns, carrier selection, logistics information systems, rate negotiation, product assembly, order processing and inventory replenishment (Bhatnagar et al, 1999). CHAPTER TWO LITERATURE REVIEW 31 In 1991, Bardi and Tracey conducted a survey of the transportation practices of US manufacturers. They found that freight bill, auditing, payment and transportation reports were the most frequently used transportation functions. In 1993, Lieb et al compared European firms with US firms. They found that the firms from both regions agreed that outsourcing need not be an all or nothing proposition, and the mix of internal and external logistics services may provide better control and balance the consistency and flexibility, also the expertise and the good practices can be shared. The study also indicated that the most frequently used 3PL services were warehousing, shipment consolidation and fleet management in both regions. In 1996, Dapiran et al indicated that fleet management, warehouse management and shipment consolidation were the most frequently used 3PL services. McMullan A., (1996) found that the most outsourced services among the clients of the consulting group, KPMG, in the Asia-Pacific region were transportation, maintenance and warehousing. Bhatnagar et al (1999) indicated that more than one-half of the firms in Singapore outsourced the shipment consolidation service, and 40 percent of the firms outsourced order fulfilment, carrier selection and freight payment services. The least outsourced services included product assembly or installation, order processing and inventory replenishment. In Malaysian, (Sohail & Sohal, 2003) the frequently used contract logistics services were shipment consolidation (58.3%), fleet management (48.8%), and Freight payment (41.7%). In Saudi Arabia (Sohail et al, 2005), almost one-third of the firms outsourced shipment consolidation. The other frequently used services include freight payment, order fulfilment, and product assembly and installation. In India (Sahay & Mohan, 2006), more than half of the respondents indicated that the outsourced logistics services they were using at that time included transportation, and custom clearing and forwarding. The other outsources services included import and export management, warehousing, labelling and packing, fleet management and consolidation. In New Zealand (Zhang, 2009), more than half of the firms indicated that the most frequently used 3PL services included domestic transportation(82%), freight forwarding (64%), warehousing (62%) CHAPTER TWO LITERATURE REVIEW 32 and international transportation (62%), and 47 percent of the firms outsourced customs clearance and brokerage. Table 2.5: Shippers Outsource a Wide Variety of Logistics Services in 2009 Source: Capgeminni & Langley (2009) In the CapGemini?s 14th Annual Report (2009) (as shown in table 2.5), it demonstrates that the percentages of third party logistics utilized in different regions. The results presents the most frequently outsourced activities are transactional, operational and repetitive compare with the results in previous years. These activities are domestic (86% across all regions) and international transportation (84%), customs brokerage (71%), warehousing (68%), and forwarding (65%). The report indicates that the less used activities tend to be more strategic, customer-facing and IT intensive, such as transportation planning, information technology, supply chain consultancy, and customer service. Moreover, the percentage of respondents outsourcing logistics activities was higher than it in Europe, Asia Pacific, and lower in North America or Latin America compared with previous years. Also there was an increase in the percentage of utilization of customs brokerage, forwarding, and fleet management services. However, the overall business volumes declined in 2009. CHAPTER TWO LITERATURE REVIEW 33 2.5.5 The Length of Third Party Services. Table2.6 Length of Contracts & Length of Using 3PL Services Length of contracts Length of using 3PL services Country Authors Published year < 1 yr 1-3 yrs 3-5 yrs >5 yrs <1 yr 1-3 yrs 3-5 yrs >5 yrs AUS Dapiran et al. 1996 0 83 17 0 6 24 18 52 AUS Millen et al. 1997 0 83 17 0 6 24 70 0 USA Lieb & Randell 1996 6 15 79 0 USA Lieb & Randell 1996 9 21 70 0 USA Millen et al. 1997 4 86 4 6 9 36 55 0 USA Lieb &Bentz 2005 4 86 4 6 9 21 70 0 WE Millen et al. 1997 9 75 9 7 4 17 79 0 SG Bhatnagar et al. 1999 4 12 12 72 4 12 12 72 MY Sohail &Sohal 2003 1.2 13 7.2 45 10 26 18 46 GH Sohail et al. 2004 5 27 68 0 SA Sohail & Al-Abdali 2005 10 37.5 1 0 42.5 15 35 16 34 India Sahay & Mohan 2006 18.8 28.6 Sweden Sjoholm & Wang 2007 10.2 75.5 12.2 2 6 14 10 70 NZ Zhang 2009 9 82 6 3 4 25 15 56 In 1993, Lieb et al. found that almost all of respondents in both Australia and US firms negotiated specific 3PL contracts of periods ranging from one to three years. The figures were observed in the Europe study were significantly higher than it in Australia and US. Bhatnagar et al (1999) pointed out 84 percent of Singapore firms had been using contract logistics services for more than three years. It showed there CHAPTER TWO LITERATURE REVIEW 34 was a significant amount of Singaporean firms using 3PL. In Ghana (Sohail et al, 2004), 68 percent of firms have been using the 3PL services between three and five years. In Saudi Arabia (Sohail & Al-Abdali, 2005), over 60 percent of the respondent companies had their contracts with 3PL providers. In Malaysia (Sohail, et al, 2006), study showed that 40 percent of the respondents have contracts with their 3PL providers, and almost one-half (45%) of the firms signed a contract for usage of services for more than 5 years. In New Zealand (Zhang, 2009), study showed that 69 percent of respondents had their contracts with 3PL providers, and 82 percent of them had the contracts in the length between one to three years (see table 2.6 for detailed information). 2.6 Reasons for Outsourcing Logistics Activities The decision for whether a firm should outsource or not can be complex as the activities of the modern organizations tend to be integrated with each other. The reason for outsourcing is that outsourcing can bring the competitive advantages to the organization. The advantages can be categorized as strategic or tactical, long-term or short term, tangible or intangible. Wilding R. & Juriado R., (2004) provided a literature review of empirical papers on outsourcing and they investigated the most important reasons for outsourcing logistics activities. These reasons are listed in table 2.7. CHAPTER TWO LITERATURE REVIEW 35 Table 2.7 Top Five Reasons for Outsourcing Logistics Activities Sources: Wilding & Juriado (2004) ? Cost reduction The most important strategic reason for outsourcing logistics activity is the cost reduction or cutting down the amount of capital invested (Wilding & Juriado, 2004). The costs can be reduced includes operational costs and IT costs. Lacity M.C. & Hirschheim R., (1993) stated that through outsourcing organizations could cut costs by 10 to 50 percent. 3PL providers could provide expertise and up to date software and hardware. Therefore, with the help of 3PL providers, the organization is able to build and maintain/run an application cheaper than it can be done in-house for organization (Collins J.S. & Millen R.A., 1995; Lacity M.C. Willcocks L.P. & Feeny D.F, 1996; Lacity M.C. & Willcocks L.P., 1998). Economies of scale can lower the costs. 3PL providers can economies of scale to the organization due to consolidation of shipments originating from different sources. The providers can use their facilities to operate at lower costs and achieve savings that could not be generated internally. The labour costs can be reduced by international outsourcing. The costs can also be reduced by purchasing a service at a fixed cost per transaction. Therefore, organization may avoid the price uncertainty (Strassmann P.A., 1997). However, cost reduction is hard to realize due to unrealistic fee structures projected by service providers or due to company is lacking of awareness of internal logistics costs (Ackerman K.B., 1996). Therefore, the outsourcing option may be chosen for providing an indication of in-house costs and serve as an external benchmark CHAPTER TWO LITERATURE REVIEW 36 for logistics efficiency (van Larrhaoven, et al, 2000). ? Focus on core competences One of the most frequently citied benefit for using 3PL providers is that allows a company focus on its core competencies. Managers should apply their experience and knowledge to core competencies. They should outsource logistics activities in which they are less competent and benefit from providers? expertise. It is usually very difficult for a person to become an expert in every part of business. However, outsourcers are able to provide logistics expertise to the companies (Simchi-Levi et. al., 2008). ? Provides flexibility The flexibility that outsourcers can provide includes technological flexibility, flexibility in geographic locations, flexibility in service offerings and flexibility in resource and workforce size (Simchi-Levi et al, 2008). Most of 3PL providers constantly update their information technology and equipments, but individual companies may not have enough time, resources or expertise to update their technology constantly. Therefore, third party logistics providers might be able to meet the requirement of a company in a quicker and more cost-effective way. Third party logistics provider can provide company flexibility in geographic locations. For example, 3PL providers can provide a regional warehouse for an organization, so that the organization can meet the customer requirements without constructing a new facility (Sj?holm & Wang, 2007). Also the flexibility in resource and workforce size could let the managers change the fixed costs into variable costs so as to change the business conditions more quickly (Simchi-Levi et al, 2008). ? Improve customer service Organizations can improve their customer service by using the competencies of the 3PL providers. A number of studies find that the prime motivation of the implement of 3PL is the desire for the organizations to improve their customer CHAPTER TWO LITERATURE REVIEW 37 service. Lack of specific knowledge of tax regulations, customs and infrastructure of the foreign counties force organizations to look for expertise from 3PL service providers (Foster T.A. & Muller E.J., 1990). 3PL providers not only contribute to improved customer satisfaction, but also provide access to international distribution networks (Bask A.H., 2001). As a result, outsourcing the non-strategic activities and using external logistics expertise allow organizations to concentrate on increasing their own core competence (Sink H. & Langley C.J., 1997). ? Utilization and efficiency related Regarding to operational advantage of using 3PL providers, the previous studies showed that benefits included reduction of the cycle times, inventory levels and lead times (Bhatnagar R. & Viswanathan S., 2000; Daugherty P.J. & Droge C., 1997). By focusing on lead times and improved quality, it led to improve the efficiency of the supply chain performance. Bhatanagar et al (1999) emphasized on speeding up the flow of information to the upstream supply chain partners and accelerating logistics activities such as delivery of materials or products through the entire supply chain. Moreover, after using outsourcing process, the size of the user?s logistic department will be decreased, the utilization of warehouse will be increased and also the planning and control process will also be simplified (Van Laarhoven et al., 2000). CHAPTER TWO LITERATURE REVIEW 38 Table 2.8 Reasons for Outsourcing Source: Razzaque M.A. & Sheng C.C., (1998) Previous studies indicated that firms outsourced logistics functions for different kinds of reasons. In America, Bardi E.J. & Tracey M., (1991) stated that the reasons for the growth of logistics outsourcing were for customized services, reducing inventory, cost reduction, enter to new markets, becoming more active in international shipping, gaining the use of sophisticated technology, more professional and better-equipped logistics services. The European study (Van Laarhoven et al, 2000) showed that the main strategic reasons for outsourcing their logistics activities were for the need of reducing cost or cutting down the amount of capital investment and focused on core competencies. Sahay & Mohan (2003) did a research on supply chain management in India and they identified that outsourcing of logistic activities became very popular in India organizations. The number of 3PL providers was increased over the last couple of years. The main reasons for using of 3PL service in India were for cost reduction (27 per cent), strategic reasons (26 per cent), process effectiveness (24 per cent), and lack of internal capability (11 per cent). In New Zealand (Zhang, 2009), more than half of the respondents indicated that the most important reason for CHAPTER TWO LITERATURE REVIEW 39 outsourcing logistics activities was logistics cost reduction. The other important reasons were for focusing on core competencies (48%), reduction in capital investments (44%), improving the logistics process and customer services (33%) and expansion to unfamiliar markets and accessing to emerging technologies (15%). The other reasons for outsourcing logistics activities were suggested by other logisticians are listed in table 2.8. 2.7 Reasons for Not Outsourcing Logistics There are a number of reasons to encourage organizations to outsourcing, in the contrast, there are also many reasons to discourage organizations to outsourcing logistics activities. As shown in table 2.9 the main obstacles and problems of outsourcing indentified by different authors are summarized. The impacts of these obstacles and problems are also summarized. Table 2.9 Reasons for Not Outsourcing Source: Lau K.H. & Zhang J., (2006) CHAPTER TWO LITERATURE REVIEW 40 ? Loss of control Loss of control is the most commonly mentioned problem to discourage organizations from outsourcing logistics activities (Bardi & Tracey, 1991; Bownman R.J., 1995; Byrne, P.M. 1993; Cooke J.A., 1994). As the number of outsourcing business activities being increased, the ability to retain the control over their 3PL providers is decreasing. The problem is difficult to indentify the key performance metrics and their value, especially the service types of tasks when their final product is intangible and hard to quantify (Sanders N.R., Locke A., Moore C.B. & Autry C.W., 2007). This case is especially true for outbound logistics where the employees of 3PL provider might interact with the organization?s customers. Many 3PL providers work very hard to solve this problem. For example, providers paint company logo on the sides of trucks, to advertise the customers that they are the hiring company. They may also provide extensive reporting on each customer interaction (Simchi-Levi et al, 2008). ? Ascertaining the true cost Organizations may underestimate or overlook the costs easily, because the variations of outsourcing engagements (Lieb & Randall, 1996), and it is hard to allocate the internal costs of outsourcing logistics activities, especially when outsource information technology (Quinn J.B. & Hilmer F.G., 1994). ? Logistics is the only core competency in the firm If logistics is one of the core competencies of the company, then outsourcing these activities will make no sense to the company. Providers may not as capable as the firm?s in-house expertise (Simchi-Levi et al, 2008). ? Difficulty in obtaining organizational support Obtaining organizational support has been regarded as one of the difficulties for outsourcing logistics services (Bowman, 1995). The study made by Elmuti D. CHAPTER TWO LITERATURE REVIEW 41 & Kathawala Y., (2000) found that the inadequate support from both top management and supporting infrastructure in US, Europe, and the Middle Ease. ? A negative impact on employee moral The study carried out by Lieb & Bentz (2005) showed that 40 percent of the respondents reported a negative or very negative impact on employee morale. This figure was larger than it in any previous studies. This negative impact was related to fear of job loss that accompanied a decision to outsourcing. If a company outsourcing, the long term users cut more deeply into the full-time logistics workforce, and the remaining workers would be worried about their future. Sahay & Mohan (2006) stated that people issues were the critical factor that needed to be considered in outsourcing of logistics activities. Capgemini consulting and Langley (2009) researched a substantial number of organizations who did not currently use 3PLs. The results showed that the most frequently occurring reasons for these organizations not outsourcing included: cost reduction (32%), logistics is a core competency in the firm (27%), control over the outsourced functions would diminish (25%); logistics is too important to consider outsourcing (25%); service level commitments will not be realized (23%); and we have more expertise than 3PL providers (17%). 2.8 Selection Criteria of Choosing 3PL Providers In order to develop goals and find the selection criteria for choosing 3PL providers, organizations should be able to determine which 3PL providers provide the best fit the organizational needs and existing operations. It helps organization streamline the screening process and increasing the probability of success of the relationship between organization and selected provider (Bhatnagar, et al., 1999). When selecting a 3PL provider, the clear objectives is to establish the selection criteria. CHAPTER TWO LITERATURE REVIEW 42 Managers should be asked to specify the important factors that define the decision making process and evaluate 3PL providers (Zhang, 2009). In terms of the selection criteria towards using a 3PL firms, Roberts K., (1994) found that the three most frequently used evaluation criteria for choosing a qualified logistics provider were the level of service provided, quality of the people and cost. Roberts also indicated that the major issues were cost and service, the most noticeable change was the emphasis on the quality of people, especially in the operational area. Therefore, in order to provide high level of services, providers must employ the best people with the relevant expertise. Kim J., Cheong K. & Cho G., (2002) stated that as the increasing competition in the logistic market, quality of service became one of the important differentiator among 3PL providers. The concept of service quality for providers is not only the technical aspects of providing service, but also need to understand how customers perceive and evaluate service quality, because service quality is related to customer satisfaction, both of them influence the organization performance. Fernie J. (1998), Kremic T., Tukel O.L., & Rom W.O., (2006), Wilding and Juriado (2004) also stated that cost was always a key and the top priority of selection criteria. Dapiran et al., (1996) and Lieb et al., (1993) also found that cost and service were the most important criteria and the other important selection criteria were experience of the third party provider, reputation, total package offered, information handling capability and compatibility of information systems. The experience 3PL provider should have depth-skilled, qualified management and characterize the organization workforce and highly thought between other clients (Bottani E. & Rizzi A., 2006). Lieb et al (1993) pointed that there was a trade off between service and cost. The providers with high quality of service and good reputation but the costs may be higher. Byrne (1993) argued that the reputation should be on the top of selection criteria of CHAPTER TWO LITERATURE REVIEW 43 choosing 3PL provider list. The study made by Closs D.J., Goldsby T.J. & Clinton St. R., (1997) indentified that information technology capabilities influence overall logistics competence significantly, because information technology links supply chain members such as manufacturers, distributors, transportation firms and retailers and it automates some elements of the logistics workload such as order processing, order status inquiries, inventory management and shipping tracking (Vaidyannathan G., 2005). However, there were also other contrasting views in the logistics literatures about the selection criteria for choosing the 3PL providers. Sink & Langley, (1997) indentified the most important criteria for the selection of third party providers was core competencies. Providers with the core strengths and operational expertise seemed to be able to get a level of comfort in the firm which has undefined competence and superficial experience could not provide. Therefore, the 3PL provider with experience, focus and more expertise will be regarded as more competent. The authors also indentified that the issues of expertise, reputation, experience and reliability often related to the provider?s core competencies. Price was only used as a tie-breaker or the secondary issue to service in the selection of potential 3PL providers. However, Wilding & Juriado (2004) argued that the core competence of 3PL firms was less important role within the consumer goods sector. They agreed that the outsourcing decision was based on service-related considerations which included core competencies of 3PL firms and operational flexibility. It means the selection of these criteria may depend on the market environment and the organization?s needs. Razzaque & Sheng (1998) mentioned that it is important to match the strength of 3PL provider to the weakness of the firm. It means companies need to focus on their core competences and employ 3PL providers for the functions which they do not have CHAPTER TWO LITERATURE REVIEW 44 expertise. Fernie (1999) stated that the selection criteria of choosing 3PL providers varies between countries and depends on the regulatory environment in that country and the competitiveness of the third party logistics sector and other distribution-related issues. Kremic et al. (2006) indicated the social cost element was one of selection criteria may influence the outsource decision. The social cost element includes low moral, high absenteeism within employees from 3PL logistics firm. The authors pointed out there are no guarantees of any cost savings. In many cases, the costs are actually higher after using outsourcing. Razzaque and Sheng (1998) suggested that the selection criteria of choosing 3PL provider for small firms should consider outsourcing as not a cost reduction exercise but more strategically and especially as an opportunity to get a competitive advantage. The survey conducted in Malaysia (Sohail & Sohal, 2003) focused on determining the most important factor in selection of 3PL providers. The results showed that one-third of the respondents stated that cost consideration was the most important selection factor, while 16.7% of respondents stated that service consideration was the most important factor. The survey made in Hong Kong showed that it was important to improve the customer service by offering flexibility in their operation in order to meet unanticipated customer needs such as fluctuate customer demands (Yeung J.H.Y., Selen W., Sum C. & Huo B., 2006). In China, Lai F., Zhao X. & Wang Q., (2006) stated that IT was one of the important selection criteria of choosing 3PL providers. It showed that IT influences 3PL firms? competitive advantages significantly. The America study showed financial stability was more frequently selected than both price and customer service. CHAPTER TWO LITERATURE REVIEW 45 2.8.1 Logistics Performance Measurement Logistics performance is a subset of the large notion of organization or organization performance (Chow G., Heaver T.D. & Henriksson L.E., 1994). The presence of meaningful quantity measures was used for assessing the performance of third party logistics providers. The major criteria for evaluating of company?s contract provider vary between the countries or authors (Bhatnagar et al., 1999). In Singapore (Bhatnagar et al., 1999), 90 percent of respondents suggested the major performance measures in their companies were on-time shipments, inventory accuracy, shipping errors and customer complaints. However, some of the factors were not be considered by many firms such as fill rate, number of stock outs, warehouse cycle time and total order cycle times. The results showed that the focus of many firms in Singapore is to provide the high level of service to the customer at the expense of internal inefficiencies. In USA, Minahan T. (1997) identified that the common performance measures were on-time shipment, inventory accuracy, shipping errors, customer complaints, number of dollars shipped, number of dollars/unit shipped, backorders, total order cycle time, fill rated, number of stock outs and warehouse cycle time. Earlier research carried out by McMullan A. (1996) in the Asia Pacific showed that the most frequently used 3PL service provider?s performance measures were on-time delivery, customer complaints, backorders and stock outs. The most frequently used warehouse performance measurements by respondents were inventory accuracy, on-time shipments and shipping errors. CHAPTER TWO LITERATURE REVIEW 46 Chen Y.C. (2002) listed the criteria for evaluating 3PL providers? performance and the definition of these criteria are shown in table 2.10) Table 2.10 Criteria for Evaluating Performance Source: Chen (2002) Chen also described six extracted criteria. They are: ? Customer: this criterion includes quality of product, customer complaints, and customer inquiry response and feed backs ? Efficiency: it includes fill rate, cycle time, on-time delivery, emergency shipping and level of satisfaction ? Stock-outs: it includes lead time, shipping errors, returns and number of stock-outs ? Delivery: it includes shipping delays, delivery defect ? Order: it includes order accuracy ? Personnel: this criterion includes employees attitude and sales feedback CHAPTER TWO LITERATURE REVIEW 47 2.9 Organizational Impacts of Using Logistics Outsourcing Services After outsourcing logistics services, there must be some organizational impacts. Therefore organizations should consider the impact on the organization carefully before making the decision to outsource. The previous studies showed that there was a positive or negative impact of outsourcing logistics services on logistics costs, customer satisfaction, logistics system performance (Bhatnagar et al., 1999) and employee morale (Sj?holm & Wang, 2007) The study conducted in Singapore (Bhatnagar et al., 1999) showed that there was some positive impact on logistics costs, customer satisfaction and internal logistics system performance. In the meanwhile, over 11.8 percent of the respondent indicated that there was some negative impact on employee morale and 7.9 percent of respondents indicated a negative impact on customer satisfaction. The results showed that people issue was the critical factor in logistics outsourcing decisions that need to be considered in Singapore. In Sweden (Sj?holm & Wang, 2007), more than half of the respondents indicated there was a positive impact on logistics costs (73.6%), customer satisfaction (69.4%) and logistics system performance (53.1%). However, 10.2 percent of respondents indicated that a negative impact on employee morale. Employee morale was the lowest impact in the rank. In New Zealand (Zhang, 2009), the study showed that there was 81% of respondents stated that there was a impact on on-time delivery performance, which is lower than in Australia (94%), Europe (98%) and USA (90%) (Millen et al., 1997). There was 77 percent of respondents indicated an impact on reducing logistics costs, 62 percent of respondents indicated a high or very high impact on customer service satisfaction. The other impact of using logistic outsourcing services included return on assets, logistics system performance, expanding geographic reach, reducing inventory levels, CHAPTER TWO LITERATURE REVIEW 48 return on investments, year on year growth in profits and acquiring new customers. The previous studies showed that there was a trend of elimination of full time internal logistics related positions after implementing 3PL services. The general methods used for this displacement were termination of employees and early retirement (Lieb 1992; Dapiran et al., 1996; Sohail et al., 2006; Sohail & Al-Abdali, 2005). The study carried out by Sj?holm & Wang (2007) reported that 67.3 percent of respondents in Sweden indicated that their firms have eliminated logistics positions. Over 50 percent of respondents indentified the impact on elimination of position in Australia (Daprian, et al, 1996), USA (Lieb & Randell, 1996; Millen et al., 1997), Malaysia (Sohail & Sohal, 2003), Saudi Arabia (Sohail & Al-Abdali, 2005) and Singapore (Bhatnagar et al., 1999). Another impact of using 3PL providers on the user firm is the need of retraining employees. The study carried out by Sohail & Al-Abdali (2005) showed that 38 percent of the respondents reported that retraining employees was necessary, in Malaysia (Sohail & Sohal, 2003) only 15 percent of respondents indicated there was a need for retraining employees, in Sweden (Sj?holm & Wang, 2007) the rate was 26.5 percent. The reasons for retraining the employees generated from previous studies included upgrading skills related to information systems in Australia (Millen et al, 1997), Saudi Arabia (Sohail & Al-Abdali, 2005) and Sweden (Sj?holm & Wang, 2007). The other areas need to be retained included familiar with new technologies and different management (Millen et al. 1997), improveing communication skills and improveing the ability to adjust to new environment (Sohail & Al Abdali, 2005). The studies reported that it was not necessary to retraining the logistics personnel includes Sohail & Al-Abdali, 2005; Bhatnagar et al., 1999; Millen et al.,1997; Lieb & Randell, 1991, 1994, 2000; Sahay & Mohan, 2006 and Sohail & Sohal, 2003. CHAPTER TWO LITERATURE REVIEW 49 2.10 Future trend of logistics services The focus of future trend of logistics services is on the utilization of third party logistics services, the level of satisfaction with their current 3PL providers? performance and considering changes in the level and nature of their involvement with 3PL providers. Most of previous studies showed that the user firms were satisfied or very satisfied with the performance of their current 3Pl providers. The detailed information is shown in table 2.11 In Australia and Malaysia, the satisfaction level was very high. Over 96 percent of the respondents indicated that they were satisfied or very satisfied with the performance of 3PL providers (Millen et al, 1997; Sohail & Sohal, 2003). In USA, India, Saudi Arabia and New Zealand, over 85 percent of users were satisfied or very satisfied with their 3PL providers (Millen, et al., 1997; Bhatnagar et al., 1999; Sohail et al., 2005; Sahay & Mohan, 2006). The previous study also showed that whether the respondent would modify their companies? use of 3PL services or not. Most of the user firms indicated that they would moderately increase or substantially increase use of 3PL services. In USA (Millen et al., 1997), West Europe (Millen et al., 1997) and sub-Sahara African (Sohail et al., 2004), over 90 percent of respondents identified that they would moderately increase use/or substantially increase use of 3PL services. In Australia (Daprian et al., 1996) and Malaysia (Sohail et al., 2003), over 80 percent of user firms indicated that they would moderately increase use and substantially increase use of 3PL. However, in Sweden the percentage of respondents would modify their companies? use of 3PL services was low (only 42 percent) and even 8 percent of users would eliminate use of 3PL services. CHAPTER TWO LITERATURE REVIEW 50 Table 2.11 Future Trend of Logistics Services Source: Sj?holm & Wang, (2007) 2.11 Summary This chapter reviews the previous literatures of basic definitions of supply chain management, logistics and third party logistics, and also identify the relationship between third party logistics providers and user firms. From many different points of view, overall the supply chain management is defined as ?the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole? (Mentzer J.T., Dewitt W., Keebler J.S., Min S., Smith C.D. & Zacharia Z.G., 2001, p.18). CHAPTER TWO LITERATURE REVIEW 51 Logistics is defined by The Council of Logistics Management (1991) as ?the process of anticipating customer needs and wants; acquiring the capital, material, people, technologies, and information necessary to meet those needs and wants; optimizing the goods ?or service-producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way? (p. 3). The definition of third party logistics is ?Outsourcing all or much of a company?s logistics operations to a specialized company.? (Lindskog, 2003. p.140) and plus the definition ?A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or "bundled" together by the provider.? (Bagchi & Virum, 1996, p94). Third party organization is in the middle between shippers and suppliers. 3PL can fulfil several logistics functions between buyer and seller. These functions includes the certain duration, joint efforts to develop further cooperation, a customization of the solution and together with a fair sharing of benefits and risks (Larsen, 1999). The successful third party relationship is one key to the success of the logistics and supply chain management. The extent of use of the third party logistics services includes: ? Level of commitment to the usage of third party logistics ? Percentage of total logistics budget allocated to third party providers ? Geographical coverage provided by third party firms ? Third party services utilized ? The length of third party contracts. The main reasons for organizations outsourcing 3PL services include: ? Cost reduction ? Focus on core competence ? Provides flexibility ? Improve customer service ? Improve efficiency CHAPTER TWO LITERATURE REVIEW 52 ? Utilization related ? Reducing inventory ? Enter to new market ? More logistic expertise/equipments The main reasons for not outsourcing 3PL services include: ? Loss of control ? Ascertaining the true cost ? Logistics is the only core competency ? Difficulty in obtaining organizational support ? A negative impact on employee moral ? Have more expertise than 3PL providers ? Price of outsourcing activities The third party logistics services have been frequently used by organizations include: ? Freight payment ? Transportation ? Rate negotiation ? Fleet management ? Warehouse management ? Shipment consolidation ? Order fulfillment ? Carrier selection ? Product assembly and installation ? Custom clearance and brokerage ? Import and export management ? Labeling and packing ? Inventory replenishment ? Logistics information system CHAPTER TWO LITERATURE REVIEW 53 The main selection criteria of choosing 3PL providers: ? Quality of service provided ? Price ? Employee morale ? Expertise or skilled logistics professionals ? Experience of the company ? Reputation ? Information technology capability ? The core competence of the company ? Operational flexibility ? Financial stability The main criteria for evaluating of 3PL providers: ? Shipment error ? On-time shipment ? Fill rate ? Number of stock outs ? Customer complaints ? The number of hours on order cycle time ? Quality of service ? Employees attitude The major organizational impacts of using logistics outsourcing services are: ? Logistics costs ? Customer satisfaction ? Logistics system performance ? Employee morale ? On-tome delivery performance ? Expending geographic reach ? Reducing inventory levels CHAPTER TWO LITERATURE REVIEW 54 ? Year on year growth in profits ? Acquiring more customers ? Elimination of full time logistics related positions ? Need of retaining employees The future trend of logistics services is focusing on the utilization of 3PL services, the level of satisfaction and considering changes of 3PL providers. These previous literatures show that positive results of today?s logistics industry and also believe that third party logistics will be developed continually. CHAPTER THREE METHODOLOGY 53 CHAPTER THREE: METHODOLOGY 3.1 Introduction This chapter introduces the research philosophies, research methods, type of survey and techniques used for collecting samples, and software used to analysis data. First part of this chapter reviews the research objectives of this study. Second part introduces two philosophies: positivism and phenomenology. Positivism is the one adopted in this study. Third part compares quantitative and qualitative research methods. After the comparison, quantitative method is more suitable and selected for this study. Fourth part describes the survey type of this study, which is online survey questionnaire, the design of the questionnaires and survey invitation are also included in this part. The fifth part introduces two sampling methods used for collecting responses, which are convenience and snowball sampling. The final response rate of this survey is also described in this part. The sixth part introduces the software and significant tests that are used to analysis data, which includes SPSS, ANOVA and Chi-square. 3.2 Research Objectives As mentioned earlier, the aim of this study is to identify the current status of third party logistics industry in China, and to investigate the current usage of 3PL services in China. The questionnaires would focus on these six identified areas: ? The extent of use of the third party logistics services in China ? Reasons for Chinese firms outsourcing logistics activities ? Reasons for Chinese firms not outsourcing logistics activities ? The level of satisfaction of their 3PL providers ? Selection criteria of choosing 3PL providers CHAPTER THREE METHODOLOGY 54 ? Organization impacts of logistics outsourcing ? Future trend of Chinese logistics services. 3.3 Research Philosophies: Positivism & Phenomenology Table 3.1 Features of Two Main Philosophies Source: Easterby-Smith M, Thrope M & Lowe A., (1991) There are two main research philosophies normally used in research studies: positivism and phenomenology. However, the choice of selecting an overall research philosophy needs to be made between these two. According to Araujo L.M., CHAPTER THREE METHODOLOGY 55 Easterby-Smith M.P.V. & Snell R., (1999), this whole mental exercise regarding the research philosophy that the research should follow is important, because the features of these two philosophies can help to choose the research methods and techniques that should be used for the study. It helps to decide the type of evidence gathered and its origin and the way to collect the evidence that will be analysed and interpreted. The knowledge of research philosophy is able to assist researchers to avoid inappropriate use and unnecessary work by identifying the limitations of particular approaches at the early stage of study (Araujo, et al, 1999). The Key features of positivism and phenomenology are shown in table 3.1 The choice of which is the best fit research philosophy for this study is made through understanding of both research philosophies. Positivism is one of the research philosophies chosen for using in this study. Positivism promotes a more objective interpretation of reality, and its reliability is higher than phenomenology. Positivism tends to produce quantitative data which fit with surveys and experiments well. Positivism is also concerned with hypothesis testing rather than generating theories, and is more commonly used in the scientific research (Collis J. & Hussey R., 2003). 3.4 Quantitative & Qualitative Research Method There are two different research methods for gathering and analyzing research data and information: qualitative and quantitative method. In order to answer the purpose of this study, the choice of qualitative and quantitative research method needs to be taken. The purpose of both methods is to collect data and to get insights from the data. The qualitative method is the descriptions of things that are made without assigning numbers directly (Hair J.F. Jr., Money A.H. Samouel P. & Page M., 2007). The sample size of this method is generally small. Taylor P., Richardson J., Yeo A., CHAPTER THREE METHODOLOGY 56 Marsh I., Trobe K., & Pilkington A., (1995, P632) defined ?qualitative data covers a range of material from the descriptions of social life provided by participant observation and unstructured interviews to information from written sources, such as diaries, autobiographies and novels. Some researchers argue that qualitative data provides greater depth, a richer more detailed picture of social life.? According to Zikmund W.G. (2000), the primary target of qualitative method is to understand the investigated problem by collecting data. The primary instruments used in qualitative method are normally conversation, survey or interviews. The focus is on words, visual portrayals, narratives, meaningful characteristics, elucidations, interpretations and other expressive descriptions. The focus groups (Zikmund, 2000). It may also require relatively few cases, and then conducting examinations of cases arise in the natural flow of social life (Neuman W.L., 2006). The qualitative method depends on the skills of the researcher as an interviewer in gathering data, and not on the instruments employed to gather and analyze or measure the data. Therefore, gathering the information is to solve the certain problem (Zikmund, 2000). Taylor et al (1995, P632) stated ?quantitative data is numerical in form ? in the form of numbers??Questionnaires and structured interviews are the usual research methods??.Some researchers claim that unless human behaviors can be expressed in numerical terms, it cannot be accurately measured.? (P 632) Quantitative methods focus on the links among a number of defined and measurable attributes involving many cases. The aim of quantitative method is to classify features, to count them and to construct statistical models in order to explain what is observed (Brannick T., & Roch, 1997). The quantitative methods are emphasized on testing and verification. This method is considered easier to perform because it is based on controlled measurement and the results are presented in figures. In contrast, the qualitative approach may be more difficult to perform as the emphasis is on understanding and the result is presented by analyzing the stated meaningful words. The collection of data in quantitative methods is a collection of closed-ended information. However, the qualitative data includes open-ended information (Punch K.F., 2000). CHAPTER THREE METHODOLOGY 57 There are a number of proofs showing that the quantitative method is more suitable than the qualitative method in this study. The survey questionnaire is the method used for collected data. The survey is designed as number based. The data that is collected from the survey is analyzed through the statistical tests. The sample size is quite large. All of above meet the criteria of quantitative method but not fit to the qualitative method. Furthermore, the aim of study is to have an exploratory study about general understanding of 3PL usage in Chinese firms. The quantitative study is able to provide a greater generalization within the frame of research study, and the research questions can be answered by using quantitative method alone. The previous studies related to this topic used quantitative approach only and their results were measured in numbers (Zhang, 2009; Sohail et al., 2003; Bhatnagar et al, 1999; Lieb & Bentz, 2005; Wilding & Jutiado, 2004). In order to easily compare the results of the use of 3PL in China with it in other different countries, the quantitative method is a more appropriate method should be used in this study. 3.5 Survey Type 3.5.1 Questionnaire The questionnaire is ?a list of carefully structured questions, chosen after considerable testing, with a view to eliciting reliable responses from a chosen sample? (Collis & Hussey, 2003, p.173). The aim of using a questionnaire is to provide better understanding of the Chinese third party logistics industry and find out whether these participants are satisfied with their providers and the current 3PL situation in China. An online survey is selected for collecting responses. The online survey technique is new and keeps evolving. Today?s survey, software packages and online services make online survey research much easier and faster. The advantage of online surveys includes access to individuals in distant locations. Since all of selected CHAPTER THREE METHODOLOGY 58 participants are in China, and the survey is conducted in New Zealand, therefore the distance makes the contact more difficult. This problem can be solved by using an online survey tool. Another advantage of online survey is its ability to reach the participants who are hard to contact and the convenience of automatically collecting data, which can save researcher?s time and effort as an online survey allows a researcher to reach thousands of people in a short time. Due to the limited time and funds, online survey is selected. However, there are some problems of using online surveys, such as the response rate of online survey that may be low, uncertainty over the validity of the data, the design, implementation and evaluation issues of an online survey. More importantly, online surveys require all participants to have access to email or the web (Wright K.B., 2006). Survey Monkey is an online survey software package that is used for conducting this survey. It provides a variety of templates to create and implement online surveys more easily, as well as to export data to statistical software packages. The researcher can view the summary of the responses or browse individual response of each question. After collecting the responses, Survey Monkey is able to create a chart for each question, which makes analysing more easily. Another reason for choosing survey monkey online survey software is that it has a reasonable price. Paper survey is relatively more expensive, even the sample size is small. The costs of a traditional large-scale survey using mailed questionnaires can be enormous (www.surveymonkey.com). 3.5.2 Survey Questionnaire Design The purpose of this survey is to transform the main research problems into specific questions. In this study the main research problem is to find out the utilization of 3PL services in China. There are 21 specially designed questions in this survey. The survey is broken down into six parts and each part consists of small sets of more CHAPTER THREE METHODOLOGY 59 specific research questions. The six parts of the survey are: ? General information of the company ? Reasons for outsourcing/not outsourcing logistics activities ? Extent of use of the third party logistics services ? Decision making process (selection criteria of choosing 3PL providers) ? Organization Impacts ? Future trend of logistics services in China In order to make the survey questionnaires simple and short, the questionnaires are designed with mainly multiple choice questions and few matrix questions. To avoid the limit options problem, the choice of ?others, please specify? and a comment box is provided to allow respondents to enter their answers or comments (Questionnaire is in appendix C). There are four questions in the first part of survey, which includes the total number employees of the company, type of business, company location and the 2009 annual sales revenues. These questions provide the general information of the company. As known that China is a big country, so the qustion of companies? location was necessary. In this question, China is divided into seven parts: eastern part of China, southern part of China, northern part of China, central part of China, north-western part of China, north-eastern part of China and south-western part of China. The cities and provinces included in eastern part of China are Shanghai, Jiangsu, Anhui, Fujian, Jiangxi, Shandong, Ningbo and Xiamen. South part of China includes Guangdong, Guangxi, Hunan and Hainan. Northern part of China includes Beijing, Tianjin, Hebei, Shanxi and Neimengu. Central part of China includes Henan, Hubei and Hunan. North-western part of China includes Shaanxi, Gansu, Qinghai, Xinjiang and Ningxia. North-eastern part of China includes Liaoning, Jilin, Heilongjiang and Dalian. South-western part of China includes Chongqing, Sichuan, Guizhou, Yunnan and Tibet. Hong Kong, Macau and Taiwan was not included in CHAPTER THREE METHODOLOGY 60 this survey. The second part of the survey contains two questions. One is whether the company uses 3PL services currently. The question is designed in logic forwarding way, which means it skips to different questions depends on different answers. For example, if they choose ?no? it automatically skip to second question which asks the main reason for not using 3PL services. After they answered this question, it automatically skips to the end page of the survey and then, the survey is done for the respondents who do not use 3PL services. If the answer is ?yes? it means the respondent firm is using 3PL services, it skips to the question which asks the main reasons for using the services. After this question is answered, the respondents need to carry on and answer the part three of the survey. The part three of survey is the extent of use of the third party logistics services. There are six questions in this part. The first question asks the percentage of total logistics budget allocated to the main 3PL provider. The second question is asking if the company uses 3PL services for domestic purposes, international purpose or both. The third questions is the matrix question, respondents need to evaluate the existing 3PL services that have been used in their companies. The other three questions are about the length of using 3PL services, the number of 3PL providers have been using currently and the length of the contract between the company and the 3PL provider. There are only two questions in part four. One is a matrix question, which asks the main selection criteria for choosing 3PL providers in their company. The rating of these factors is also required. Another question is to choose the criteria used for evaluating the performance of the contracted providers. The part five of the survey is related to the impact on organisation for using 3PL, which includes 3 questions. The first question is the matrix question and asks respondents to choose the impacts on the company after using 3PL services and rate CHAPTER THREE METHODOLOGY 61 the level of the impact. The second question asks whether the company eliminated any internal logistics force after implementing of 3PL services. The last question is about whether retraining is required after implementing of 3PL services and the main reasons for retraining. The last part of survey is the future trend of logistics services in China. Three questions are included in this part. One is the overall level of satisfaction with their main 3PL providers. Another one is asking if they want to have any 3PL services that are not available in the market yet. The last one is asking if these respondents would modify the use of 3PL services in the future. At the end of page of survey, respondents could leave their names and email addresses in order to get a copy of survey results. The reason of adding this page is for the respondents who are interested to get the survey results. It may provide incentives to people who are interested in this survey result to answer the questionnaire. The problems of the questionnaires are basically about the rewording, removal or addition of some questions, and questionnaire design problems. Since the respondents of this study are the people who are working in China, therefore respondents may be all Chinese. In order to let the respondents to fully understand these questions, both Chinese version and English version of the questionnaire are provided to respondents. The translation of these questionnaires was discussed through telephone and emails. To make sure the questionnaires can be understood well and easily handled by the respondents, and to find out and problems contained in this survey, a pilot testing is carried out. Cooper P.R. & Schindler P.S., (2003) pointed out that a pilot testing is used for detecting weaknesses in design and instrumentation and to provide proxy data for selection of a probability sample. In order to do this pilot testing, the email CHAPTER THREE METHODOLOGY 62 invitation was sent to 7 respondents. All of them did this survey and sent feedbacks to the researcher. The respondents found out the questionnaire took them about five minutes to complete. One respondent reported that after question five, it took long time to get to question six. It may be caused by skip logic system that is based on the different question skip to different pages. Therefore more time may be needed to get to the next question. Another respondent concerned about one choice of main reasons for not using 3PL services. The respondent said the choice ?Logistics is the only core competencies? may only suit for logistics companies but not suit for most of companies. Therefore, the more appropriate way to say it could be ?logistics is one of our core competencies?. 3.6 Data Collection 3.6.1 The Sampling Methods There are two types of methods used for selected population, one is probability sampling methods, and another is non-probability sampling method. The probability methods can be used when those can be relied on to produce a sample that is close to representative, and all units has a known, but not necessarily equal chance of being included in the sample (Jeffrey, 2008). However, non-probability methods may produce a representative sample which you can not rely on, and the probability of a particular unit in the sample is unknown. The non-probability methods are very subjective depending on the researcher (Sekaran C., 2003). In this study, non-probability sampling methods are chosen as non-probability samples that are easier to draw. Convenience sampling is the main type of non-probability sampling. It is also the most widely used methods in social sciences. It involves large groups of subjects such as a class of students. Convenience sampling is a technique to be chosen for CHAPTER THREE METHODOLOGY 63 collecting samples. This sampling technique suits for the researchers who have the limited of funds and time (Jeffrey, 2008). By using convenience sampling, the sample is picked at random from the listed companies in the Chinese stock exchange. These listed companies are selected randomly from 3 different categories of the list: Shanghai A Stock, Shenzhen A Stock and small and medium-sized enterprises (SMEs) board. In order to ensure that there would be enough participants, another non-probability method snowball sampling is selected for drawing the sample population. Snowball sampling is a technique used in research to develop samples. The existing participants introduce other potential participants among their acquaintances. The advantage of this technique is that it can build up sample size quickly and maybe recruit others that would otherwise be hard to recruit (Jeffrey, 2008). The problem of this technique is the sample may particularly focus on the particular term of business categories and certain location of company. To avoid this problem, the careful selection of respondents with broad spread of workplace and location is needed. By using snowball sampling, some survey invitations were sent to selected respondents (Invitation letter is in appendix B). They are all working in China, and the companies they are working for are in different categories and located at different parts of China. If their positions are not high enough to fill the questionnaires, they asked their managers or bosses to answer the survey. Then these selected respondents sent the survey invitation to other potential participants. 3.6.2 Respond Rate A total of 400 companies in China were randomly selected. To make sure the response rate is high enough, every company was contacted by telephone before the email invitation was sent out, and each of them was asked if they were willing to participate in this survey. The email addresses of their managers or bosses were CHAPTER THREE METHODOLOGY 64 confirmed through the telephone too. The recipients who rejected to participate in this study did not give any reasons. The recipients have their rights to refuse as they have no obligation to accept the invitation to participate in this study. After contacting these firms, 400 email invitations were sent out, and a total of 89 responses were received. However, by checking through every response, it was found out that two of respondents did not finish their questionnaire and only 5 questions were answered at the end. Thus, the effective responses were 87 and the effective response rate was 21.75% (87 out of 400). There was no follow up questionnaires sent to participants as this questionnaire included all the questions need to be asked. The whole process of collecting these responses took one month to complete. Since the respond rate is favourable compare with previous studies. The respond rates of previous studies are shown as following. The study conducted in Singapore (Bhatnagar et al, 1999), the respond rate was 12.6%. The total responses were 126. The respond rate of study conducted in Malaysia (Sohail et al, 2003) was 16%, which were 124 responses out of 800 samples. The study made by Wilding and Jutiado (2004) which conducted in Europe, the response rate was 50 responses out of 300 samples (15%). The study of use of 3PL in US (Lieb & Bentz, 2005), the response rate was 60 responses out of 456 samples (13%). However, the response rate in New Zealand (Zhang, 2009) and Australia (Sohal et. Al., 2002) were much higher compare with other countries. The study of use of 3PL in New Zealand has a response rate of 35% (84 responses out of 240 samples) and the study conducted in Australia has a respond rate of 45%. 3.7 Data Analysis The statistics program SPSS (Statistical Package for the Social Science) is a widely used software for analysing quantitative data (Veal A.J., 2005). There are four main analysis procedures in this program: frequencies, crosstabs, means and graphics (Veal, CHAPTER THREE METHODOLOGY 65 2005). Frequencies are the number of counts and percentages of categories for individual variables. Crosstabs used to compare two or more variables by forming a two-way table. Means show the obtaining means or average of appropriate variables. Graphics is associated with the production of graphs and charts (Veal, 2005). The significant tests are also used in this research such as Chi-square and ANOVA. These significant tests can also be generated by SPSS program. Chi-square test is used to test relationships between two nominal variables (Jeffery, 2008). ANOVA is used to compare more than two means at a time (Veal, 2005). 3.8 Summary This research study is completed through several steps. The figure 3.1 presents the flowchart of the process used for carrying out this research study. 1. Identifying research problems, research questions and objective of this study after those previous literatures have been reviewed. 2. Conducting the questionnaire. After the questionnaire was translated and reviewed by the supervisor, sent it out to seven recipients to do the pilot study. 3. Collecting data: the process of data collection took approximately one month to complete. After contacting each respondent through phone then emailed survey invitations was sent to them. 4. Analyzing the feedback information from the 87 responses by using SPSS statistic program, and then using statistic tests to find out the relationships between the variables. 5. Summarizing the research findings and drawing the conclusion from these findings. The limitations of this study and the recommendations for future CHAPTER THREE METHODOLOGY 66 research are also included in this part. Figure 3.1 Research Process Identify research problems, research questions & Objectives Conduct the questionnaire Reviewed by supervisor Data collection Data analysis Conclusion Final copy of questionnaire Pilot study CHAPTER FOUR RESULTS & DISCUSSIONS 67 CHAPTER FOUR: RESULTS & DISCUSSIONS 4.1 Introduction In this chapter, the results obtained from survey are presented and analyzed. The results show the general information of the respondents? companies, the extent of use of the third party logistics services, the decision criteria of choosing 3PL providers, organization impacts and the future trend of logistics services in China. Then these empirical findings are used to compare with the results of similar previous studies. The significant tests such as Chi-square and ANOVA are used for the in-depth analysis of the relationships between different variables. 4.2 Research Objectives Just as the researcher mentioned hereinbefore. These six following objectives are established to achieve the aim of this research. ? The extent of use of the third party logistics services in China ? Reasons for Chinese firms outsourcing logistics activities ? Reasons for Chinese firms not outsourcing logistics activities ? The level of satisfaction of their 3PL providers ? Selection criteria of choosing 3PL providers ? Organization impact of logistics outsourcing ? Future trend of Chinese logistics services. CHAPTER FOUR RESULTS & DISCUSSIONS 68 4.3 General Information of the Company The survey contains five parts. The first part of questionnaire reports on the background information of the respondents? companies. This background information includes total number of employees of respondent company, company category, company allocation and annual sales revenue in 2009. There are 87 useful responses have been collected and ready for analysis. 4.3.1 Total Number Employees The first question of this survey asks the total number employees of respondents? companies. The responses of total employee number in correspondent companies are categorized into five groups which are shown in table 4.1. The percentage of each group is also presented in the table. From the table, it could be seen that the largest group of category is 1001-5000 and the percentage is 23 percent. The group of ?less than 200 employees? has a similar percentage with group ?1001-5000?, which is 21.8 percent. The smallest group is more than 5000 and the percentage is 16.1 percent. In this study, the companies have less than 1000 employees are regarded as small companies, the companies have more than 1000 employees are regarded as large companies. Sixty percent of respondents are from small companies in this study. Table 4.1 Total Current Employees Current employees Percentage <200 21.8 200-500 19.5 501-1000 19.5 1001-5000 23.0 >5000 16.1 Total 100.0 CHAPTER FOUR RESULTS & DISCUSSIONS 69 4.3.2 Business Category The second question of the questionnaire is related to business category. There is a broad spread in terms of main business category. As shown in table 4.2, nine business categories are provided for the respondents and the choice of ?other (please specify)? is also available. There were 10.3 percent of respondents chose ?other?, the responses includes real estate companies, consulting companies, airline and customer service companies. Of the respondents to this question, the business categories are mainly in manufacturing (18.4 percent), IT (14.9 percent), high tech (12.8), food industry (11.5 percent) and retail (10.2). The rest of business categories are all less than 10 percent. Healthcare and logistics have the lowest percentage of 4.6 percent. The outcomes show that companies which are in the traditional industries such as ?manufacturing? ?retail? and ?food industry? are as favor of outsourcing as high technology companies are. Table 4.2 Main Business Category Business Category Percentage manufacturing 18.4 IT 14.9 high tech 12.8 food industry 11.5 other 10.3 retail 10.2 textiles 6.9 electronic 5.7 logistics 4.6 healthcare 4.6 4.3.3 Company Location The company locations of these respondents are mainly on eastern part of China (41.9 CHAPTER FOUR RESULTS & DISCUSSIONS 70 percent) and Northern part of China ( 41.9 percent) (see figure 4.1 for more details), then are followed by southern part of China (29.1 percent), central part of China (20.9 percent), South-western part of China (20.9 percent) and north-western part of China (19.8 percent). The lowest percentage of companies is located in North-eastern part of China, only 7 percent. As mentioned ealier, the cities and provinces belong to eastern part of China include Shanghai, Jiangsu, Anhui, Fujian, Jiangxi, Shandong, Ningbo and Xiamen. Northern part of China includes Beijing, Tianjin, Hebei, Shanxi and Neimengu. The rate of using 3PL services in above cities are relativlily higher than it in other places. Acoording to DiBenedetto(2008), the most of the logistics activity in Asia is concenterated in China, and in the most promising logistics cities in China including Shanghai, Shenzhen, Hong Kong, Beijing and Tianjn (Fu, Bae & Kim, 2005). Previous Study also showed that the logistic industry has became a mainstay industry in Shanghai (Fu C.C., Bae J. & Kim G.O., 2005). All these cities mentioned are all beloned to eastern or nothern part of China except Shenzhen. CHAPTER FOUR RESULTS & DISCUSSIONS 71 Figure 4.1 Company Location 4.3.4 Sales Revenue Table 4.3 summarizes the annual sales revenues of respondents? companies in 2009. The sales revenue range is from ?less than one million Chinese Yuan? to more than ?100 million Chinese Yuan?. Table 4.3 Annual Sales Revenues (?millions) in 2009 Sales revenue in 2009 Percentage <1m 6.9 1.1-5m 12.6 5.1-10m 10.3 10.1-20m 9.2 20.1-50m 10.3 50.1-100m 6.9 >100m 40.2 Total 96.6 Missing 3.4 Total 100.0 CHAPTER FOUR RESULTS & DISCUSSIONS 72 Based on recent exchanged rate, one Chinese Yuan is approximately equal to five New Zealand dollars. Table 4.3 shows that the annual revenue of the most of respondents? companies (40.2 percent) surpassed one hundred million RMB in 2009. Almost 13 percent of companies earned 1.1-5 million RMB, and only 6.9 percent of companies earned ?less than one million Chinese Yuan? in 2009. 4.4 Outsourcing / Not Outsourcing 4.4.1 Use of 3PL Table 4.4 summarizes that the percentage of companies that outsource and do not outsource 3PL in each category. It shows that 69 percent of the companies outsourcing 3PL services and 31% of companies not outsourcing 3PL services. This current outsourcing rate is increased compared with the rate in year 2005 for Chinese firms outsourcing (56 Percent). The most frequently companies to do outsourcing (17 percent of outsourcing) have 1001-5000 employees. The least frequently companies to do outsourcing (10 percent) have 200-500 employees, and the companies with 200-500 employees companies also the most frequently do not outsource 3PL. However, only 3 percent of companies with more than 5000 employees do not outsource 3PL. Table 4.4 Total Companies Outsourcing/ Not Outsourcing Total number of employees Outsourcing Not outsourcing <200 14% 8% 200-500 10% 9% 501-1000 15% 5% 1001-5000 17% 6% >5000 13% 3% Total 69% 31% CHAPTER FOUR RESULTS & DISCUSSIONS 73 4.4.2 Reasons for Outsourcing Participants were asked to identify the reasons for their company outsourcing 3PL. Most respondents indicated that cost reduction (80 percent), focus on core strengths (76.7 percent) and improve customer service (75 percent) were the three most important reasons for outsourcing 3PL activities. Forty five percent of companies used 3PL because of ?improves efficiency? and 43.3 percent of companies indicated ?access to new market? was the reason for outsourcing (see Figure 4.2 for more details). Four respondents wrote down the other reasons for using 3Pl, there were ?fast?, ?productivity improvement?, ?disperse risks? and ?transportation for special equipment?. This outcome reflects that the companies in China take the cost-related reasons as critically important as comparing with service-related reasons and other reasons. The main reasons for using 3PL services are similar with previous studies conducted in Australia (Daprian, et al, 1996), USA (Lieb & Randell, 1996), Western Europe (Millen et al., 1997), Singapore (Bhatnagar et al., 1999), India (Sohail &Albdali,2005) and New Zealand (Zhang, 2009). CHAPTER FOUR RESULTS & DISCUSSIONS 74 Figure 4.2 Main Reasons for Using 3PL Services In order to find out whether each category of company employee numbers has different reasons for outsourcing 3PL activities, the relationship between reasons for outsourcing and company employee numbers was investigated by cross-tab and chi-square test. Table 4.5 shows that the relationship between the reason for outsourcing ?more logistics expert/equipment? and company employee numbers is significant at the 5 percent level (P value <0.05, ?2=11.304, df =4). As mentioned earlier, the companies have less than 1000 employees are regarded as small companies, and the total employees of more than 1000 are classified as large companies. Table 4.6 shows that the reason for more than half of companies that with the employees of ?501-1000? and ?>5000? outsourced 3PL services was 3PL providers having have more expertise/ equipment. However, the percentage of big CHAPTER FOUR RESULTS & DISCUSSIONS 75 companies and small companies of choosing the reason of 3PL provider ?has more expertise/equipment? is similar. Therefore, the difference between the large companies and small companies is not significant. Table 4.5 Chi-square Test: Reasons for Outsourcing & Total Number of Employees Reasons for outsourcing Total number of employees < 200 201-500 501-1000 1001-5000 > 5000 Chi-Square P value cost reduction 21% 10% 27% 23% 19% 7.123 0.129 focus on core strengths 22% 13% 24% 26% 15% 2.398 0.663 improve customer service 16% 18% 24% 24% 18% 3.397 0.494 provides flexibility 21% 5% 11% 32% 32% 6.508 0.164 more logistics expert/equipment 9% 4% 35% 22% 30% 11.304 0.023 reducing inventory 0% 10% 0% 40% 50% 12.844 0.012 access to new markets 15% 15% 15% 27% 27& 3.243 0.518 improve efficiency 11% 26% 19% 33% 11% 8.831 0.065 improve utilization 23% 15% 15% 31% 15% 0.682 0.954 other 0% 0% 25% 50% 25% 2.697 0.61 The relationship between the reason of ?reducing inventory? and company employee numbers is also significant at the 5 percent level (P value <0.05, ?2=12.844, df =4). Only 10 percent of small companies chose reason ?reducing inventory?. Table 4.7 also shows that no companies with ?less than 200 employees? and the companies with ?1001-5000 employees? outsourced 3PL because of reducing inventory. However, 40 percent of the companies that with ?more than 5000 employees? thought reducing inventory is one of the reasons. Compare small companies with big companies, large companies are more rely on the reason of ?reducing inventory?. It reflects that CHAPTER FOUR RESULTS & DISCUSSIONS 76 inventory reduction is more important to the large companies. Table 4.5 shows that there is no significant relationship between other reasons and company employee numbers. Table 4.6 More Logistics Expertise/Equipment & Total Employee Numbers More logistics expertise/equipment Total employee numbers Total <200 200-500 501-1000 1001-5000 >5000 No 83 89 38 67 36 62 Yes 17 11 62 33 64 38 Notes: all numbers are in percentage (%) Table 4.7 Reducing Inventory & Total Employee Numbers Reducing inventory Total employee numbers Total <200 200-500 501-1000 1001-5000 >5000 No 100 89 100 73 55 83 Yes 0 11 0 27 45 17 Notes: all numbers are in percentage (%) 4.4.3 Reasons for Not Outsourcing Logistics Activities Figure 4.3 shows that more than half of respondents regard ?logistics is the core competency? as the most important reason for not outsourcing. The second important reason for not outsourcing is ?loss of control of logistics? and ?having more expertise than 3PL companies?. Then followed by price of outsourcing activities (41.4 percent), ascertaining the true cost (34.5 percent), other (20.7 percent), difficult in obtaining organizational support (17.2 percent) and ?a negative impact on employee morale? (13.8 percent). Twenty-one percent of companies do not outsource because they do not need 3PL services, for example, some industries like finance, banking and real estate, they may not have needs for outsourcing. The relationship between reasons of not outsourcing and company employee numbers is investigated to find out whether the each category of company employee numbers has different reasons for not outsourcing. Table 4.8 shows that ?loss of control of CHAPTER FOUR RESULTS & DISCUSSIONS 77 logistics activities? is significant at the 5 percent level (P value <0.05, ?2=12.897, df =4). It means there is a relationship between ?loss of control of logistics activities? and ?total number of employees?. Figure 4.3 Main Reasons for Not Using 3PL Services From table 4.9, It can be seen that all big companies (employee number were ?>1000?) do choose ?loss of control of logistics activities? as the reason for not outsourcing 3PL. However, the selection rate of ?loss of control of logistics activities? among small companies is much lower than it among large companies. Overall, large companies are more afraid of losing control of logistics activities, in other words, control of logistics activities is more important to the large companies. CHAPTER FOUR RESULTS & DISCUSSIONS 78 Table 4.8 Chi-square Test: Reasons for Not Outsourcing & Total Employees Reasons for not outsourcing Total number of Employees < 200 201-500 501-1000 1001-5000 > 5000 Chi-Square P value loss of control of logistics activities 7% 33% 7% 33% 20% 12.897 0.012 logistics is the core competency 21% 32% 11% 21% 16% 2.951 0.566 ascertaining the true cost 10% 30% 30% 30% 0% 6.922 0.14 a negative impact on employee moral 0% 75% 0% 0% 25% 6.86 0.143 price of outsourcing activities 25% 42% 8% 17% 8% 1.866 0.76 difficulty in obtaining organizational support 60% 20% 0% 20% 0% 4.538 0.338 have more expertise than 3PL companies 20% 27% 13% 27% 13% 1.967 0.742 other 40% 40% 20% 0% 0% 2.93 0.57 Table 4.9 Loss Logistics Control & Total Number of Employees Loss of control of logistics Total employees number Total <200 200-500 501-1000 1001-5000 >5000 No 86 38 75 0 0 44 Yes 14 62 25 100 100 56 Notes: all numbers are in percentage (%) 4.5 Extent of Use of the Third Party Logistics Services 4.5.1 Logistics budget allocation The survey questionnaire probed the respondents to report on the percentage of total logistics budget allocated to the main 3PL providers. Table 4.10 shows the most frequent respondents? budget allocation is ?60-79 percent? (30 percent), then follow CHAPTER FOUR RESULTS & DISCUSSIONS 79 by ?<20 percent? (25 percent), ?40-59 percent? (20 percent) and ?20-39 percent? (13 percent). The least respondents? budget allocation is ?>80 percent? (12 percent). Table 4.10 Percentage of Total Logistics Budget Allocated to 3PL Providers Budget Allocation Percentage <20% 25 20-39% 13 40-59% 20 60-79% 30 >80% 12 Total 100 More than 60 percent of companies allocated more than 40 percent logistics budget to 3PL providers. The result is similar to it found from the study among Sweden firms, (Sj?holm & Wang, 2007). In Sweden, 61.2 percent of firms allocated more than 40 percent of their current annual logistics budgets to 3PL. However, the percentage of total logistics budget allocated to 3PL providers in other countries was much lower. In New Zealand, about 39 percent of respondents allocated more than 40 percent of their current annual logistics budgets to 3PL providers, and the rest of firms in New Zealand allocated less than 40 percent of their logistics budget to 3PL. The result findings in New Zealand were similar to in Australian (Sohal, et al, 2002), European firms (Wilding & Juriado, 2004) and Singaporean firms (Sohal, et al., 2006). 4.5.2 Geographical Coverage More than 60 percent of companies reported that they were using 3PL services for both domestic and international purposes, and only 13 percent companies were using 3PL services for international only (see table 4.11). The results are similar to the survey findings of Sweden (Sj?holm & Wang, 2007), India (Sahay & Mohan, 2006) and USA (Lieb & Randell, 1996, 1997). Sweden was on the top of the both CHAPTER FOUR RESULTS & DISCUSSIONS 80 domestic and international operations. Approximate 72 percent of organizations in Sweden used 3PL providers for both domestic and international purpose. Table 4.11 Geographical Coverage Geographical Coverage Percentage Domestic only 20 International only 13 Both 67 Total 100 4.5.3 Logistics Services Used & Satisfaction Level To find out the frequently outsourced logistics services in China, a list with 15 choices has been developed which covers the different logistics services that were generally provided by logistics service providers. Table 4.12 shows that the top ranked logistics services use among Chinese companies are transportation (98 percent), warehouse management (77 percent), custom clearance & brokerage (76 percent) and shipment consolidation (53 percent). More than 50 percent of respondents reported that their companies outsourced these mentioned four logistic services. Rate negotiation is the lowest frequently used logistics services in China. The study conducted by Capgemini & Langley (2009) also showed that the top ranked logistics services in North America, Europe, Asia pacific and Latin America were domestic transportation, international transportation, customer brokerage and warehouse. Compare with all regions, transportation is more prevalent logistics services used in China (98 percent versus 86 percent), as well as custom brokerage (76 percent versus 71 percent) and warehousing (77 percent versus 68 percent). The percentage of using custom brokerage in China is higher than it in other regions. This may be explained by two reasons. First, the Chinese economy is more based on large import and export quantities. Second, the customs rules in China are enormously complex (Capgemini, 2006). CHAPTER FOUR RESULTS & DISCUSSIONS 81 Table 4.12 Percentages of Third Party Logistics Services Used 3PL services Percentage Transportation 98 Warehouse management 77 Custom clearance & brokerage 76 Shipment consolidation 53 Label & packing 48 Other 39 Logistics information system 33 Fleet management 32 Inventory replenishment 31 Order fulfillment 25 Freight bill auditing/payment 24 Carrier selection 22 Product assembly and installation 17 Rate negotiation 14 The respondents were also requested to evaluate their companies current outsourced logistics services by using a five-point scale (results are shown in table 4.13), where 1=very dissatisfied, 2=dissatisfied, 3=neither, 4=satisfied, 5= very satisfied, and N/A means company did not use this service. As a study carried out by Fu et al. (2005), if a respondent gave a value of above 3.0 on the outsourced service means respondent is satisfied with the performance of that outsource service provider, alternatively if a respondent gave a value of below 3.0 on the outsourced service, it means respondent is not satisfied with performance of 3PL providers, it also means that 3PL service provider may lack the capability to carry out that particular service. Table 4.13 shows that the respondent rates of all 3PL outsourced services are equal or above 3, this means that the respondents are overall satisfied with their 3PL service providers? performance. The highest satisfaction rate goes to ?Warehouse management? (mean 4.03 with standard deviation 0.657), and then followed by ?other? (mean 4.0 with standard deviation 0), ?label and packing? (mean 3.9 with standard deviation 0.768) and ?Transportation? (mean 3.9 with standard deviation 0.810). The low satisfaction rate goes to ?product assembly and installation? (mean 3 with the largest standard deviation 1) and ?installation and Freight bill auditing / payment? (mean 3 with CHAPTER FOUR RESULTS & DISCUSSIONS 82 standard deviation 0.756). This may due to the low outsourcing rate of these services, only three respondents outsourced ?product assembly and installation? and only eight respondents outsourced ?freight bill auditing/payment?. Another plausible alternative explanation is possible lack of demand for services. The low satisfaction rate for these two outsourced services may also imply that services providers in China may lack of experience of these two services based on the low outsourcing rate. Therefore, the service providers in China need to improve the performance of the service of ?product assembly and installation? and ?freight bill auditing/payment?. Table 4.13 The Satisfaction Level of Outsourced Third Party Logistics Services Notes: all numbers are in percentage (%) except means To summarize, the 3PL service providers in China well perform the traditional logistics services such as ?transportation?, ?warehouse management?, ?label and packing?, ?shipment consolidation?, ?custom clearance and brokerage?, ?fleet management?, ?carrier selection? and ?order fulfillment?. Chinese companies outsource these traditional services rather than other ?value-added? services as the CHAPTER FOUR RESULTS & DISCUSSIONS 83 3PL providers in China are normally small and medium sizes (Fu et al., 2005). Thus, the small and medium sizes providers might lack of financial resources, employees with those abilities and operation scale to expand the scope of their services. The other reason might be inefficient demand for the services like ?product assembly and installation?, ?rate negotiation? and ?freight bill auditing /payment?. 4.5.4 Total 3PL Services Providers The total number of 3PL services providers used by the respondents? companies was indicated by the respondents. Table 4.14 summarizes that the percentages of total number of 3PL providers used by Chinese companies. It shows that most of companies in China only used 2-5 providers (61 percent) and also shows that most of companies want to have a close and stable relationship with only few 3PL providers. Ten percent of companies used one 3PL provider, and 28.8 percent of companies used more than five 3PL providers, and only 3.3 percent of companies used more than fifteen 3PL providers. This survey results is similar to the other previous study results among Australia firms (Sohal, et al., 2002), US firms (Lieb & Bentz, 2005), Singapore firms (Sohail et al., 2006) and New Zealand firms (Zhang, 2009). The majority of the respondents? company from these countries also used two to five providers. However, the results of the study conducted in Malaysia are different from the others. Malaysian companies preferred to employ various logistics providers to enhance their services rather than one or two logistics providers. Table 4.14 Percentage of Total Number of 3PL Providers Total number of 3PL providers Percentage 1--1 10.2 2--5 61.0 6--9 15.3 10--15 10.2 >15 3.3 Total 100 CHAPTER FOUR RESULTS & DISCUSSIONS 84 The relationship between the number of 3PL providers used and total employees number of the Chinese firms was investigated to find out whether the company with different employee numbers used different number of providers (as shown in table 4.15 ). Table 4.15 Number of 3PL Providers Used & Total Employees Number Number of 3PL Providers Used Total Employees Number Total <200 200-500 501-1000 1001-5000 >5000 1-5 11 7 9 9 6 42 6-9 1 1 3 2 2 9 10-15 0 1 1 1 3 6 >15 0 0 0 2 0 2 Total 12 9 13 14 11 59 Table 4.15 shows the cross tabulation between number of 3PL providers used and total employees number. The Chi-square test is used to testify if there is any relationship between these two variables: length of using 3PL services and total employees number. The results show that the relationship between these two variables is not significant at the 5 percent level (P value=0.342>0.05, ?2=12.844, df =4). Therefore, there is no relationship between number of 3PL providers and total employees number. However, In USA and UK, researchers have found that larger companies often seek to use a smaller number of providers in order to easily control and closely monitor their outsourcing services (Waters D., 2003) Moreover, the relationship between number of 3PL providers used and length of using 3PL services was also investigated. Table 4.16 shows the cross tabulation between these two variables. It shows that twenty-six companies which are outsourcing 3PL services for more than five years only use one to five providers. It could be explained by the companies which have more experience of using 3PL services that they are more likely to use a small number of 3PL providers. They might want to create a long term and close relationship with small number of (less than five) CHAPTER FOUR RESULTS & DISCUSSIONS 85 providers rather than create a short term relationship with a lot of 3PL providers. Table 4.16 Number of 3PL Provider Used & Length of Using 3PL Services Number of 3PL Providers Used Length of Using 3PL Services Total <1year 1-3years 4-5years >5years 1-5 3 5 8 26 42 6-9 0 1 1 7 9 10-15 0 0 0 6 6 >15 0 1 0 1 2 Total 3 7 9 40 59 In order to explore further, Chi-square significance tests is generated to testify that whether there is a relationship between number of 3PL providers used and length of using 3PL services. The results show that the relationship between these two variables is not significant at the 5 percent level (P value=0.59>0.05, ?2=7.458, df =9). It means there is no significant relationship between number of 3PL provider used and length of using 3PL services. 4.5.5 Length of using 3PL services The results of this survey show that most of companies outsource 3PL services for more than five year (68.3 percent) and only 5 percent of companies are using 3PL services for less than one year. Figure 4.4 shows the rest of answers. This result shows that there is a long history in terms of using 3PL services in China, which is similar to the survey results for the companies using 3PL in USA (Lieb & Bentz, 2005) with 67 percent of companies outsourced logistics services for more than five years, 72 percent Singapore companies outsourced logistics services for more than five years (Bhatnagar et al, 1999), Australia with 66 percent (Sohal, et al, 2002) and New Zealand with 71 percent (Zhang, 2009). Sohail et al (1999) have indicated that the longer the relationship between organization and the 3PL providers was the more extensive of using 3PL services and the higher level of commitment to the CHAPTER FOUR RESULTS & DISCUSSIONS 86 relationship would be. As a result, figure 4.4 shows that the use of 3PL providers is extensive and the level of commitment is high in China. Figure 4.4 Length of Using 3PL Services In order to find out if there is a relationship between the length of using 3PL services and the used 3PL services. One-way analysis of variance (ANOVA) is used to compare the means. Appendix D and appendix E compared length of services used across each of 3PL services used and show the sum of square, the degree of freedom (df), the mean square (variance), the F ratio and the F probability (Sig.) of both between groups and within groups. Table 4.17 shows that the F ratio for the service ?warehouse management? is 3.319 and the F probability is 0.017 which is less than 0.05, so the null hypothesis is rejected. Therefore, there is a significant difference among the ?warehouse management? service and the length of using 3PL services. There is also a significant difference among the ?product assembly and installation? and the length of using 3PL services (F ration =2.745, Sig=0.038>0.05). It means different groups of CHAPTER FOUR RESULTS & DISCUSSIONS 87 duration of using 3PL services have different choices for using warehouse management service. The reason for the significant difference among the ?product assembly and installation? and the length of using may due to the small samples. There are only 18.6 percent of respondents using ?production assembly and installation?. It does not show there is a significant difference between the rest of 3PL services and the length of using. Table 4.17 ANOVA: 3PL Services & Length of Service Used 3PL services Sum of Squares df Mean Square F Sig. warehouse management Between Groups 32.550 4 8.138 3.319 .017 Within Groups 132.399 54 2.452 Total 164.949 58 product assembly and installation Between Groups 15.275 4 3.819 2.745 .038 Within Groups 75.132 54 1.391 Total 90.407 58 Furthermore, the relationship between the length of using 3PL services and the number of employees is also investigated. The cross tabulation between the two variables shows in table 4.18 and chi-square test is used to testify if there is a relationship between the length of using 3PL services and the number of employees. The results show that the relationship between length of using 3PL services and the number of employees is significant at the 5 per cent level (P=0.041>0.05, df=12, ?2=21.73). Table 4.18 shows that all 11 companies which have more than 5000 employees are using 3PL services for more than five years. More than half of the companies which have ?501-1000? and ?1001-5000? is using 3PL services for more than five years. Thus, the history of using 3PL services in large companies is longer than the small companies. CHAPTER FOUR RESULTS & DISCUSSIONS 88 Table 4.18 Total Number of Employees & Length of Using 3PL Services Total Employees Number Length of Using 3PL Services Total <1year 1-3years 4-5years >5years <200 3 3 2 4 12 200-500 0 1 2 6 9 501-1000 0 1 3 9 13 1001-5000 0 2 2 11 15 >5000 0 0 0 11 11 Total 3 7 9 41 60 4.5.6 Length of Third Party Contracts Figure 4.5 Duration of Contract All outsourcing companies were questioned the length of their current primary third party contracts in the survey. As shown in figure 4.5, only 21.7 percent of companies do not sign the contract with their 3PL provider, which means approximately 80 percent of companies have signed the contract with 3PL providers in China. Among the respondents? companies which signed the contract, 60 percent of them have a contract with their main 3PL services provider for ?1-3 years?, 11.7 CHAPTER FOUR RESULTS & DISCUSSIONS 89 percent companies indicated that their contract duration is ?4-5 years? and only 3.3 percent of contract duration was less than one year. 4.6 Decision Making Process 4.6.1 Selection Criteria of Choosing 3PL Service Providers The respondents were asked to indicate which criteria were important for selecting 3PL services providers. The key factors used for selecting logistics providers are established by reviewing the previous studies and researching the important factors normally used. Respondents were asked to rate each criterion for choosing 3PL providers by using a five-point scale, where 1=very unimportant, 2=unimportant, 3=neither, 4=important, 5= very important. Table 4.19 shows the average scores of the importance of criteria for selecting of 3PL services providers and the percentage of each scale. The results show that more than half of respondents believed that all of these criteria list in table 4.19 are ?important? or ?very important?. The most important criterion for choosing 3PL services providers is ?quality of services? (overall importance rating was 4.72) and 100 percent of respondents indicated that ?quality of service? was ?at least important? for selection of providers, and then the ?price? was the second most important criterion. More than half of the respondents thought that ?price? was very important (overall importance rating was 4.44). ?Reputation? was the third most important criterion for choosing third party services providers. The overall importance rating for ?reputation? was 4.39, 57.6 percent of respondents believed that reputation of the service provider was ?important?. ?Information technology capability? was regarded as the fourth most important criterion (overall importance rating was 4.17). The overall importance rating of these four criteria was all above 4.0 which means overall ?quality of service?, CHAPTER FOUR RESULTS & DISCUSSIONS 90 ?price?, ?reputation? and ?experience? are ?important? or ?very important" for selection of providers on average. Table 4.19 Degree of Importance of Selection Criteria Criteria of Choosing 3PL Providers Mean Very unimportant Unimportant Neither Important Very important quality of services 4.72 0 0 0 27.6 72.4 price 4.44 0 3.4 1.7 42.4 52.5 reputation 4.39 0 0 1.7 57.6 40.7 experience 4.17 0 6.9 6.9 48.3 37.9 employee morale 3.51 3.4 5.1 35.6 49.2 6.8 information technology capability 3.54 0 10.2 35.6 44.1 10.2 expert or skilled staff 3.64 0 11.9 27.1 45.8 15.3 core competencies 3.61 3.4 8.5 32.2 35.6 20.3 financial stability 3.90 1.7 3.4 22 47.5 25.4 other(please specify) 3.75 25 0 0 25 50 Notes: all values are in percentage (%) except means 4.6.2 Criteria for Evaluating the Performance of Company?s Providers Respondents were asked to indicate the selection criteria used for evaluating the performance of their 3PL services providers in the survey. Six evaluation criteria are provided in the questionnaire as illustrated in figure 4.6. CHAPTER FOUR RESULTS & DISCUSSIONS 91 Figure 4.6 Degree of Importance Criteria when Evaluating Provider?s Performance The results show that almost all of respondents (98.3 percent) use ?on-time shipment? criterion, which is the most frequently used criterion for evaluating the performance of company?s 3PL services providers. Eighty three percent of respondents indicated that they were using ?shipment error? as the criteria for evaluating the performance of their 3PL services providers. ?Shipment error? was the second frequently used criterion. More than 50 percent of respondents used ?fill rated? and ?customer complaints? as their evaluation criteria. The both were the third and fourth frequently used evaluation criteria. However, not many respondents used ?stocks out? and ?cycle time? as their evaluation criteria. One respondent pointed out that ?cost? was one of criteria to evaluate their 3PL services providers. More details were shown in figure 4.6 CHAPTER FOUR RESULTS & DISCUSSIONS 92 4.7 Organization Impacts 4.7.1 Impact of Outsourcing 3PL Services Outsourcing 3PL services imposes some impacts to the organization. The general impacts to the organization are provided in the survey. Respondents were asked to rate the level of impacts on their companies. The evaluation is done by using a five-point scale, where 1=very negative, 2=negative, 3=neither, 4=positive, 5= very positive. Table 4.20 demonstrates the average score of each impact (mean) and the percentage of each scale under the each impact. The maximum score is 3.98 and the minimum score is 3.07. The results show the 3PL service that has the highest positive impact on organizations is ?on-time delivery? (the average overall rating was 3.98 means it overall has a positive impact on the companies). On the other hand, employee morale is ranked as the lowest impact due to the implementation of 3PL. There is one respondent pointed out ?improve efficiency? was also one of positive impact to the respondent?s company. This result is the same as the results from other studies, such as Saudi Arabia (Sohail & Al-Abdali, 2005), West Europe (Millen et al., 1995, 1997); India (Sahay & Mohan, 2006), Malaysian (Sohail &Sohal, 2003) and USA (Lieb& Bentz, 2004). More than half of respondents indicated that the impact was ?positive? or ?very positive? in terms of ?on-time delivery? (75 percent ), ?expanding geographic reach? (66.6 percent, the average rating was 3.9), ?logistics system performance? (66.7 percent, the average rating was 3.8), customer satisfaction (71.7 percent, the average rating was 3.72), ?reducing inventory levels? (50 percent, the average rating was 3.63) and ?sales revenue? (51.7 percent, the average rating was 3.6). However, 13.4 percent of users indicated that ?employee morale? had a ?very negative? or ?negative? impact to their companies. Twelve percent of users indicated that CHAPTER FOUR RESULTS & DISCUSSIONS 93 ?customer satisfaction? and ?on time delivery? had the negative impacts. These results show that people issues are the critical factor and need to be considered in the logistics outsourcing industry in China. The user company should try to minimize theses negative impacts. The negative impact of ?employee morale? may be due to the elimination of logistics positions after implementing third party logistics. Table 4.20 Degree of Organization Impacts Impacts Mean Very Negative Negative Neither Positive Very positive On time delivery 3.98 0.00 11.70 3.30 60.00 25.00 Expending geographic reach 3.90 0.00 0.00 33.30 43.30 23.30 Logistics system performance 3.80 0.00 3.30 30.00 50.00 16.70 Customer satisfaction 3.72 0.00 11.70 16.70 60.00 11.70 Reducing inventory levels 3.63 0.00 5.00 45.00 31.70 18.30 Sales revenue 3.60 0.00 3.30 45.00 40.00 11.70 Acquiring new customers 3.45 1.70 5.00 56.70 35.00 8.30 Employee morale 3.07 1.70 11.70 65.00 21.70 0.00 Notes: all values are in percentage (%) except means 4.7.2 Elimination Logistics Positions Another impact of implementing third party logistics is the elimination of logistics related positions. Of these 3PL services users, 66.7 percent of them do not eliminate any logistics related positions after implementing third party logistics, and 33.3 percent of users eliminate some logistics related positions. These 33.3 percent of users were also asked to specify the number of eliminated working position. Most of companies eliminated less than 100 logistics positions, few companies only eliminated less than 10 logistics positions. CHAPTER FOUR RESULTS & DISCUSSIONS 94 Compare with other studies, the rate of the logistic working position being eliminated in China is relatively lower than the other countries. For most of countries, around 50 percent of companies eliminated the logistics positions, such as USA (69%) (Lieb &Randell, 1996), Australia (50 percent) (Daprian, 1996), Saudi Arabia (49%) (Sohail & Al-Abdali, 2005) and Sweden (67.3 percent) (Sj?holm &Wang, 2007). In USA, Western Europe, Malaysian, Saudi Arabia and Sweden, the most common way to address these displaced personnel is to transfer employees within the company. The other ways of dealing these displaced personnel includes early retirement, or release employees from their employment or terminated. 4.7.3 Necessity of Retraining Logistics Employees Since the 3PL services are introduced into a company, the normal business practice activity may shift, therefore the related training may become necessary. The necessity of retaining logistics employees and the reasons for retraining them were asked in the survey. Figure 4.7 demonstrates that 68.3 percent of companies do not think it necessary to retrain their own logistics employees. Of the respondents who believed the retraining was necessary, 26.7 percent of companies indicated that the main reason for the retraining was to ?familiar with different rules/management, 25 percent of companies thought ?improve the ability to adjust to the new environment? was the main reason for retraining, 20 percent of companies thought the main reason was ?familiar with new technologies?, 16.7 percent of companies believed the main reason was ?improve communication skills? and only 13.3 percent of companies thought ?upgrading skills? was the main reason. In Saudi Arabia (Sohail & Al-Abdali, 2005), Singapore (Bhatnagar et al., 1999), Australia (Millen et al., 1995, 1997), USA (Lieb & Randell, 1991, 1994, 2000); India (Sahay & Mohan, 2006) and Malaysian (Sohail & Sohal, 2003), studies results showed that retraining of logistics employees was not necessary. In Australia CHAPTER FOUR RESULTS & DISCUSSIONS 95 (Millen et al, 1995, 1997), Sweden (Sj?holm &Wang, 2007) and Saudi Arabia (Sohail& Al-Abdali, 2005), the main reason for retraining the logistics employees was to focus on upgrading skills related to use of computerized systems, which was different to China. Figure 4.7 Main Reasons for Retraining 4.8 Future Trend of Logistics Services in China 4.8.1 Satisfaction Rate of Current 3PL Services Providers The respondents were asked to rate their current 3PL services providers. The results are showed on table 4.21. Eighty percent companies are at least ?satisfied? with their 3PL services providers (Very satisfied 20% + satisfied 60%). Twenty percent of companies are ?dissatisfied? or ?very dissatisfied? with their 3PL services CHAPTER FOUR RESULTS & DISCUSSIONS 96 providers. It means that there is room of improvement for 20 percent of companies. The satisfaction rate for the service provided by the 3PL in China is a bit lower than it in the other countries. In USA (Lieb & Randell, 1991, 1994, 2000), India (Sahay & Mohan, 2006) and Saudi Arabia (Sohail& Al-Abdali, 2005), Over 85 percent of the respondents are ?satisfied? and ?very satisfied? with 3PL service providers. The percentage of ?satisfied? and ?very satisfied? rate in Australia (Millen et al., 1997) and Malaysia (Sohail & Sohal, 2003) are even higher (over 96 percent). Table 4.21 Percentage of Satisfaction Rate with Current Providers Satisfaction Rate Percentage Very satisfied 20.0 Satisfied 60.0 Dissatisfied 18.3 Very dissatisfied 1.7 4.8.2 The Use of 3PL Services in the Future The last question of this survey is to ask if the respondent?s company would modify the use of 3PL services in the future. More than 50 percent of companies would ?moderately increase? or ?substantially increase? the use of 3PL services in the future (56.6 percent). Thirty-three percent of companies would stay the same. It implies that the usage of 3PL services in China would be continually increased. More details are shown in table 4.22. The respondents were also asked whether they would like to have any 3PL services that are not available in the market yet. Fifteen percent of respondents responded ?yes?. However, no respondents provided the specific information about the services that should be appeared in the market. Only one respondent thought that there should be more and better 3PL services providers available in the market. It CHAPTER FOUR RESULTS & DISCUSSIONS 97 shows that there would be high expectations for Chinese 3PL services providers to improve. Table 4.22 Percentage of Future Usage of 3PL Services The use of 3PL services in the future Percentage Substantially decrease 6.7 Moderately decrease 3.3 No change 33.3 Moderately increase 48.3 Substantially increase 8.3 4.9 Summary The results gathered from the survey are analyzed through the way of SPSS, chi-square tests and ANOVA. The main results are shown as the following: ? Sixty percent of respondents are from small companies. These companies are mainly located at the eastern part of China and northern part of China. Forty percent of these companies? sales revenues in 2009 were more than 100 million Chinese Yuan ? Sixty-nine percent of companies outsource 3PL services in China. The main reasons for these companies to outsource are ?cost reduction?, ?focus on core strengths? and ?improve efficiency?. In-depth investigation shows that there is a relationship between ?more logistics expert/equipment? and company employee numbers. Large companies are more rely on ?reducing inventory?. The main reasons for those companies do to outsource 3PL services are ?core competency?, ?loss of control of logistics? and ?have more expertise than 3PL companies?. ? More than half of the companies allocate more than 40 percent of total logistics CHAPTER FOUR RESULTS & DISCUSSIONS 98 budget to their 3PL services, and more than half of the companies outsource 3PL services for both domestic and international purpose. ? The frequently outsourced services in China are ?transportation?, ?warehouse management?, ?custom clearance & brokerage? and ?shipment consolidation?. Companies are overall satisfied with these 3PL services that they are using. ? Most companies use two to five 3PL providers, and most companies have had the experience of using 3PL services for more than five years. By using ANOVA test, researcher find out there is a relationship between ?warehouse management? and the length of service used. There is also a relationship between ?product assembly and installation? and the length of service used. Researcher also find out the history for large companies using 3PL services is longer than the small companies. Of these outsourced companies, 60 percent of them signed 1-3 years contracts with their 3PL services providers. ? ?Quality of service?, ?price?, ?reputation? and ?experience? are the main selection criteria for choosing 3PL services providers. ?On-time shipment?, ?shipment errors?, ?fill rates? and ?customer complaints? are the commonly used criteria for evaluating provider?s performance. ? ?on-time delivery? imposes the most positive impact on the respondents? companies; ?employee moral? does the most negative impact on the respondents? companies. More than half of the companies did not eliminate any logistics related positions, and more than half of companies did not think retraining was necessary. ? Most of companies (80percent) are ?satisfied? and ?very satisfied? with their 3PL services providers. More than half of companies would ?increase? or ?moderately increase? the use of 3PL services. CHAPTER FIVE CONCLUSION 98 CHAPTER FIVE: CONCLUSION 5.1 Introduction This chapter reviews research objectives, summarizes the overall conclusions from the survey results and discussions, and then followed by the limitations of this study and recommendations for the future research. 5.2 Research Objectives The aim of this study is to identify the current status of third party logistics industry in China, and to investigate the current situation of using of 3PL services in China. The study is carried out to determine these following six supporting objectives. ? The extent of using of the third party logistics services in China ? Reasons for Chinese firms outsourcing logistics activities ? Reasons for Chinese firms not outsourcing logistics activities ? The level of satisfaction for their 3PL providers ? Selection criteria of choosing 3PL providers ? Organization impact of logistics outsourcing ? Future trend of Chinese logistics services. 5.3 Conclusions The key findings of this survey are summarized as following: CHAPTER FIVE CONCLUSION 99 5.3.1 Objective 1: The Extent of Use of the Third Party Logistics Services in China ? Outsourcing 3PL services has became more and more popular in China. The use of 3PL services has been increasing. Sixty-nine percent of Chinese firms are currently using 3PL services. The majority of these outsourced companies were small and medium sized, with the total employees less than 1000. The sales revenues of most of companies that outsource 3PL in 2009 were more than 100 million Chinese Yuan. The most of logistics outsourcing firms in China are concentrated in eastern part of China and Northern part of China. ? Similar to the survey findings from the survey made in Sweden (Sj?holm & Wang, 2007), India (Sahay & Mohan, 2006) and USA (Lieb & Randell, 1996, 1997).The purpose of using 3PL services is mostly for both domestic and international purpose. The study also find that Chinese companies allocate higher percentage of their budget to 3PL services than Australian firms (Sohal, et al, 2002), European firms (Wilding & Juriado, 2004), New Zealand firms and Singaporean firms do (Sohail, et al., 2006). ? The top ranked services used in China are transportation, warehouse management, custom clearance & brokerage and shipment consolidation. The 3PL service providers in China are well performing these traditional logistics services. Outsourcing firms are overall satisfied with these services provided by the 3PL providers. However, the satisfaction for the performance of those value-added services is lower than the traditional logistics services due to most of 3PL providers in China are small and medium sizes. They might lack of financial resources, employees with those abilities and operation scale to expand the scope of their services. Moreover, there is inefficient demand for the services such as ?product assembly and installation? and ?rate negotiation?. CHAPTER FIVE CONCLUSION 100 ? Similar to the findings from the study made in Australia (Sohal, et al., 2002), USA (Lieb & Bentz, 2005), Singapore (Sohail et al., 2006) and New Zealand (Zhang, 2009), more than half of the outsourced companies use two to five 3PL providers, and most of outsourcing companies have signed the contract with their 3PL providers. However, most of the companies only signed the contract for 1-3 years that is also similar to the situation from with other studies. The study also finds out that Chinese companies have a long history of using 3PL services (experience for more than five years) which is similar to it in USA, Australia and New Zealand). Moreover, companies with different time of using 3PL services have different choices for using warehouse management service. The history of large companies for using 3PL services is longer than the small companies. 5.3.2 Objective 2: Reasons for Chinese Firms Outsourcing Logistics Activities More than half of the companies outsource 3PL services because they want to reduce the cost, focus on their own core strengths and improve customer services. The results are similar to the other studies conducted in Australia (Daprian, et al, 1996), USA (Lieb & Randell, 1996), Western Europe (Millen et al., 1997), Singapore (Bhatnagar et al., 1999), India (Sohail &Albdali,2005) and New Zealand (Zhang, 2009). It also shows that inventory reduction is more important to the large companies (more than 1000 employees) rather than to small companies (less than 1000 employees). 5.3.3 Objective 3: Reasons for Chinese Firms Not Outsourcing Logistics Activities Of the companies which do not outsource 3PL services, the three top ranked reasons CHAPTER FIVE CONCLUSION 101 are as following: ?logistics being the core competency of the companies?, ?companies worrying about loss of control of logistics activities? and ?the companies having more expertise than logistics companies having?. For the large companies to control the logistics activities is more important than for small companies to do. 5.3.4 Objective 4: Selection Criteria of Choosing 3PL Providers Quality of services, price, reputation and experience are regarded as the most important criteria to select 3PL service providers. Almost all of outsourced companies believed that on-time delivery is the important criteria to evaluate 3PL provider?s performance. The other frequently used criteria include shipment errors, fill rates and customer complaints. 5.3.5 Objective 5: Organization Impact of Logistics Outsourcing More than half of respondents believed that after implementing third party logistics, ?on-time delivery?, ?expending geographic reach?, ?logistics system performance?, ?customer satisfaction?, ?reducing inventory levels? and ?sales revenue? had positive impacts on the organizations. However, the companies should pay attention on the negative impacts of customer satisfaction and employee morale and should try to minimize these negative impacts. There is another impact of implementing 3PL. Thirty three percent of user firms eliminate logistics related positions. The most of companies eliminate less than 100 logistics related positions. In additional, most of companies did not think retraining logistics employees was necessary after implementing 3PL. The respondents who believed the retraining was necessary, thought that their employees should be familiar with different rules/management. In other countries, the main reason for retraining the logistics employees is to focus on upgrading skills related to use of computerized systems. CHAPTER FIVE CONCLUSION 102 5.3.6 Objective 6: Future Trend of Chinese Logistics Services The majority of companies are satisfied with their current 3PL providers. However, the satisfaction rates from other previous studies are higher. There is a need for more and better available 3PL providers in the market and a need for 3PL services providers to improve. It believes that the use of 3PL services would be continually increasing as the majority of companies in China are increasing their use of 3PL services. 5.4 Limitations The current study tries to provide the useful reference for the logistics companies in the logistics industry in China. However, there are still some limitations in this study. First of all, the research is limited by the time and budget which lead to the small samples. Time is needed to find out more contact information of people who is at the manager level or above manager level in the Chinese firms. The researcher also needs more funds to contact each of them in order to increase the response rate. As mentioned earlier, China is a large country, different parts of China may reflect very different situation of using 3PL services. In order to provide precise results about the Chinese logistics industry, the sample size should be increased. 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Access of parties to the latest technology - allows the service buyer to use the latest technology and equipment of the provider without the burden of financial investment. 2. Change orientation (innovative) - the provider can easily adapt to a changing business environment and develop contingencies to minimize system breakdowns. 3. Channel perspective - all parties (i.e., both the provider and the buyer) view the relationship from the system perspective of the overall channel or supply chain. 4. Control and performance appraisal - there is agreement between the provider and buyer on performance measurement standards. 5. Convenience - the provider is readily available, cooperative, and easy to conduct business with. 6. Cost savings - the provider can perform the outsourced tasks at the same, or lower, cost. 7. Customer orientation (responsive to customer needs) - a philosophy that customer service is a process that results in value added to the service exchanged. This includes the provider's ability to customize or tailor its services to the buyer's needs. 8. Dependability - services are provided in a consistent and reliable manner. APPENDICES 117 9. Emphasis on long-term relationships - relationships between the provider and buyer that are characterized as contractual rather than transactional in nature. 10. Exit provisions exist - stability of the relationship must be balanced with the buyer's and provider's freedom to exit when, and if, it is in their long term-interest. 11. Financial strength - ensures that the provider's and buyer's financial position warrants a commitment of resources and that each party has the staying power to withstand economic conditions. 12. Focus on core competency - allows the provider and buyer to specialize in their primary business operation. 13. Guidelines exist to resolve issues or disputes - procedures have been established to identify and discuss matters, or issues, of interest to both parties (i.e., provider and buyer). 14. Improved service - providers can perform the outsourced tasks at the same, or higher, service levels. 15. Management expertise - the provider employs experienced professionals to manage all aspects of the supply chain. 16. Mutual consideration and trust - all operating objectives and motives are known by the provider and buyer. 17. Number of services offered - the provider offers a comprehensive set of value-added services to meet client needs. 18. Provider's knowledge of customer operations and vice versa - each party has a APPENDICES 118 clear understanding of the capabilities and limitations of those involved. 19. Provider's knowledge of the external or competitive environment - the provider has knowledge of competitors, industry regulations, political and market conditions. 20. Sharing of benefits and risks - an incentive program is established which involves the sharing of benefits and risks between the provider and buyer for any cooperative efforts. 21. Sharing of common goals (value consistency) - matching of the provider's and buyer's corporate cultures and philosophies. 22. Sharing of facilities and human resources - the provider and buyer agree to share physical facilities and employees. 23. Sharing of relevant information - establishing information systems, procedures, and meetings that involve the sharing of information between the buyer and provider. 24. Timeliness - services and information are provided to the buyer in a prompt and timely fashion. 25. Total organizational involvement - there are multiple levels of commitment by both the provider and buyer (including the commitment of top management). APPENDICES 119 APPENDIX B: Invitation Letter ?????: Dear: ?????????? ???????????????????????? ??????????????????????????????????? ?????????????????????????????????? ??????????????????????????????????? ??????????????????? ??????????????? ?????????????????????????????? My name is Jie Chen. I am a master?s student at Massey University in New Zealand. I am currently conducting a research study of the use of third party logistics services in China. The purpose of this study is to investigate the current usage of Third Party Logistics services in Chinese firms. Your opinion is very important to the success of my research. Please be kind enough to spare five minutes of your valuable time to complete the questionnaire. Research findings will be used for the purpose of this study. Your response will be treated with the strictest confidence-only aggregate results will be used. ???????????????? Please click the link below to start out survey http://www.surveymonkey.com/s/3PL_in_China ?????????????,????????????????????? ?????????????????????????????? If you wish to receive a copy of my results, please leave your name and email address at the end of survey. I will reply you as soon as possible. Thank you for your valuable assistance to this research effort. ???? Kind Regards ?? Jie Chen Massey University College of Logistics and Supply Chain Management Private Bag 102904, North Shore, Auckland, New Zealand ?? Supervisor: Dr. Norman E. Marr ?? Student: Jie Chen ,??: (0064)212326877 ?? E-mail: chenjie0709@hotmail.com APPENDICES 120 APPENDIX C: Questionnaire-Survey on the Use of 3PL in China ????????? Part One: General information of the company 1. ??????? The total number employees of your company: 2. ????Main Business Category: ??? Retail ??? IT ???Manufacturing ?? Food industry ??? High Tech ??? Healthcare ????? Textiles ?? Logistics ?? Electronic ??????) Other (please specify) 3. ?????????????????Which part of China is your company located? (You may select more than one). ?? Eastern part of China ?? Southern part of China ?? North-western part of China ?? North-eastern part of China APPENDICES 121 ?? Northern part of China ?? Central part of China ?? South-western part of China 4. ??? 2009?????????????What is the annual sales revenues of your company (?millions) in 2009? <1 1.1-5 5.1-10 10.1-20 20.1-50 50.1-100 100+ ?????????????????????? Part two: Reasons for outsourcing/not outsourcing logistics activities 5. ??????????????????Does your company use third party logistics (3PL) services currently? ?? Yes ?? No 6. ????????????????????????.What are the main reasons for using 3PL services? (You may select more than one) ???? Cost reduction ???????????? Focus on core strengths ???????? Improve customer service ??????????????Provides flexibility APPENDICES 122 ????????????More logistics expert/equipment ???? Reducing inventory ?????? Access to new markets ???? Improve efficiency ???????????? Improve utilization (budget or staff) ???????Other (please specify) 7. ????????????????????. What are the main reasons for not using 3PL services? (You may select more than one). ?????????? Loss of control of logistics ???????????? Logistics is one of our core competencies ????????? Ascertaining the true cost ????????????????? A negative impact on employee morale ??? Price of outsourcing activities ??????????????? Difficulty in obtaining organizational support ??????????? Have more experts than 3PL company ???????Other (please specify) APPENDICES 123 ??????????????? Part Three: Extent of use of the third party logistics services 8. ?????????????????????????What is the approximate percentage of total logistics budget allocated to the main 3PL providers? <20% 20-39% 40-59% 60-79% >80% 9. ???????????????????????????? Is your company using 3PL services for domestic purposes or international purposes? ?????? Domestic only ?????? International only ?? Both 10. ??????????????????????????????? N/A????????????????How do you evaluate the following third party logistics services provided in your company? Select N/A if the service has not been used. APPENDICES 124 11. ???????????????????How many 3PL services providers does your company currently use? 12. ???????????????????How long has 3PL service been used in your company? < 1 ? year 1-3? years 4-5 ? years >5 ? years 13. ????????????????????????????????? ? ????????? N/A?What is the length of your current primary/main third party contracts? ?If no contracts is in place, please choose N/A) N/A < 1? year 1-3? years 4-5 years >5? years APPENDICES 125 ????: ?????????????? Part Four: Decision making process (selection criteria of choosing 3PL providers) 14. ??????????????????????? ?????????? ????. Which of the following factors are the main selection criteria of choosing 3PL providers in your company and how would you rate these factors? 15. ???????????????????????? (???)What are the criteria for evaluating the performance of your company?s contract providers? ?You may select more than one? ??????? Shipment errors ?????? Stock outs APPENDICES 126 ?????? On-time shipment ?????? Customer complaints ????? Fill rates ?????? Cycle time 16. ???????????????????????????????? ????????What has the impact on your company been after using 3PL services? And how would you rate the level of the impact? 17. ???????????????????????????????? ???????Other (please specify) APPENDICES 127 ?????????????Did your company eliminate any positions through changing to use of a 3PL service? If yes? how many? ?? No ?? Yes ??? ?please specify) 18. ????????????????????????????????? ?????????????Has there been any retaining of logistics employees after implementing of 3PL services? if yes?what were the main reasons for retraining? If no, please choose N/A ??? N/A ???? Upgrading skills ????????? Familiar with new technologies ?????? Improve communication skills ?????????? Familiar with different rules/management ?????????? Improve the ability to adjust to new environment ?? Other (please specify) ???????????????????? Part Six: Future trend of logistics services in China 19. ?????????????????????????????How would you rate the overall level of satisfaction with your main 3PL providers? ????? Very dissatisfied ?? Satisfied APPENDICES 128 ???? Dissatisfied ???? Very satisfied 20. ????????????????????????????Would you like to have any 3PL services that are not available in the market yet? ?? No ??????Yes, please specify 21. ???????????????????????????? How would you modify the use of 3PL services in the future? ???? Substantially decrease ???? Moderately decrease ???? No change ????? Moderately Increase ????? substantially increase ?????????????? Thank you for your time! ?????????????????????????????? If you would like to have a copy of survey results, please leave your name and email address here: APPENDICES 129 APPENDIX D: ANOVA: 3PL Services & Length of Service Used 1 3PL services Sum of Squares df Mean Square F Sig. Warehouse Management Between Groups 32.550 4 8.138 3.319 .017 Within Groups 132.399 54 2.452 Total 164.949 58 Shipment Consolidation Between Groups 6.413 4 1.603 .389 .816 Within Groups 222.570 54 4.122 Total 228.983 58 Fleet Management Between Groups 12.543 4 3.136 1.372 .256 Within Groups 123.457 54 2.286 Total 136.000 58 Order Fulfillment Between Groups 16.487 4 4.122 1.685 .167 Within Groups 132.089 54 2.446 Total 148.576 58 Label and Packing Between Groups 20.796 4 5.199 1.257 .298 Within Groups 223.374 54 4.137 Total 244.169 58 Carrier selection Between Groups 11.906 4 2.976 1.319 .275 Within Groups 119.612 53 2.257 Total 131.517 57 Rate negotiation Between Groups 5.765 4 1.441 1.168 .335 Within Groups 66.642 54 1.234 Total 72.407 58 Product Assembly and Installation Between Groups 15.275 4 3.819 2.745 .038 Within Groups 75.132 54 1.391 APPENDICES 130 APPENDIX E: ANOVA: 3PL Services & Length of Service Used 2 3PL services Sum of Squares df Mean Square F Sig. Transportation Between Groups 5.277 4 1.319 1.007 .412 Within Groups 70.757 54 1.310 Total 76.034 58 Inventory Replenishment Between Groups 8.240 4 2.060 .901 .470 Within Groups 123.489 54 2.287 Total 131.729 58 Custom clearance and brokerage Between Groups 20.203 4 5.051 1.679 .168 Within Groups 162.475 54 3.009 Total 182.678 58 Freight bill auditing/payment Between Groups 3.911 4 .978 .589 .672 Within Groups 89.614 54 1.660 Total 93.525 58 Logistics Information System Between Groups 5.240 4 1.310 .511 .728 Within Groups 138.489 54 2.565 Total 143.729 58 Other (please specify) Between Groups 1.612 4 .403 .327 .858 Within Groups 66.489 54 1.231 Total 68.102 58 APPENDICES 131