Enhancing Worldwide Supply Chain Effectiveness: An Integrated Decision-Making Method for Choosing Strategic Third-Party Logistics (3PL) Sites

Mrunal Hemantbhai Panwala

Authors

Mrunal Hemantbhai Panwala

Keywords:

Infrastructure quality, geopolitical stability, cost analysis, market accessibility, logistics optimization, third-party logistics (3PL), supply chain efficiency, Analytic Hierarchy Process (AHP), multicriteria decision-making (MCDM), and global supply networks

Abstract

This paper presents a comprehensivse study on the strategic selection of Third-Party Logistics (3PL) locations, leveraging a multicriteria decision-making (MCDM) framework. As global supply chains become increasingly complex, the choice of 3PL providers and their locations has a significant impact on operational efficiency and service quality. Through an extensive literature review, this research identifies the key criteria influencing 3PL location selection, including cost, infrastructure quality, geopolitical stability, and market accessibility. Employing a case study approach, the paper applies an Analytic Hierarchy Process (AHP) to evaluate and prioritize these factors, providing a quantifiable decision-making tool for businesses. The findings offer a nuanced understanding of the trade-offs involved in 3PL location decisions, and the paper concludes with actionable recommendations for supply chain managers and directions for future research.

References

Ecer, F. 2015. Performance evaluation of internet banking branches via a hybrid MCDM model under fuzzy environment, Economic Computation and Economic Cybernetics Studies and Research 49(2): 211–230

. Efendigil, T.; Önüt, S.; Kongar, E. 2008. A holistic approach for selecting a third-party reverse logistics provider in the presence of vagueness, Computers and Industrial Engineering 54(2): 269–287. https://doi.org/10.1016/j.cie.2007.07.009

Falsini, D.; Fondi, F.; Schiraldi, M. M. 2012. A logistics provider evaluation and selection methodology based on AHP, DEA and linear programming integration, International Journal of Production Research 50(17): 4822–4829. https://doi.org/10.1080/00207543.2012.657969

Gao, L.; Hailu, A. 2013. Identifying preferred management options: an integrated agent-based recreational fishing simulation model with an AHP-TOPSIS evaluation method, Ecological Modelling 249: 75–83. https://doi.org/10.1016/j.ecolmodel.2012.07.002

Kiatkulthorn, P. and Sathapornwanit, T. (2012) Corporate Social Responsibility (CSR) Impacts as Selection Criteria when Buying Services from Third Party Logistics (TPL) Providers: A Case Study of ITAB Scanflow, Unpublished Master thesis, Digitala Vetenskapliga Arkivet, Jönköping International Business School.

Lee, J.S. and Dai, L.J. (2015) ‘Developing supply chain security design of logistics service Industry’, International Journal of Physical Distribution & Logistics Management, Vol. 40, No. 7, pp.524–533.

León, R. and Juan, A.A. (2014) ‘Promoting corporate social responsibility in logistics throughout horizontal cooperation’, Managing Global Transitions, Vol. 12, No. 1, pp.79–93.

Lieb, K.J. and Lieb, R.C. (2010) ‘Environmental sustainability in the third-party logistics (3PL) industry’, International Journal of Physical Distribution & Logistics Management, Vol. 40, No. 7, pp.524–533.

Lin, C.Y. and Ho, Y.H. (2011) ‘Determinants of green practice adoption for logistics companies in China’, Journal of Business Ethics, Vol. 98, No. 1, pp.67–83. Evaluation and selection of third party logistics services providers 451

Liou, J.J. and Chuang, Y.T. (2010) ‘Developing a hybrid multi-criteria model for selection of outsourcing providers’, Expert Systems with Applications, Vol. 37, No. 5, pp.3755–3761.

National Skills Development Corporation (NSDC). Human Resource and Skill Requirements Repor (2017-22): https://www.voced.edu.au/content/ngv%3A78369, (2018).

Aguezzoul, A. and Pires, S., “3PL performance evaluation and selection: A MCDM method”, Suppl. Ch. Forum Int. J., 17(2): 87-94, (2016).

Ahıskalı, M., “A Goal Programming Model Supported with Multi-Criteria Decision Making Approachs for Third Party Logistics Service Provider Selection Problem”, M.Sc.Thesis, Kırıkkale University, Kırıkkale, 10-15, (2018).

Ho, Y.H. and Lin, C.Y. (2012) ‘An empirical study on Taiwanese logistics companies’ attitudes toward environmental management practices’, Advances in Management & Applied Economics, Vol. 2, No. 4, pp.223–241.

Hsu, Y., Li, W. and Chen, K. (2010) ‘Structuring critical success factors of airline safety management system using a hybrid model’, Transportation Research Part E, Vol. 46, No. 2, pp.222–235.

Jharkharia, S. and Shankar, R. (2007) ‘Selection of logistics service provider: an analytic network process (ANP) approach’, Omega, Vol. 35, No. 3, pp.274–289. Jonsson, P. (2008) Logistics and Supply Chain Management, McGraw-Hill, Berkshire, UK.

Jumadi, H. and Zailani, S. (2010) ‘Integrating green innovations in logistics services towards logistics service sustainability: a conceptual paper’, Environmental Research Journal, Vol. 4, No. 4, pp.261–271.

Karagul, H. and Albayrakoglu, M.M. (2007) ‘Selecting a third party logistics provider for an automotive company: an analytic hierarchy process model’, The International Symposium on The Analytic Hierarchy Process (ISAHP), Viña Del Mar, Chile, pp.3–6.

Kayakutlu, G. and Buyukozkan, G. (2011) ‘Assessing performance factors for a 3PL in a value chain’, International Journal of Production Economics, Vol. 131, No. 2, pp.441–452.

Kaynak, R. and Avci, S.B. (2014) ‘Logistics service accountabilities and their effects on service buyer’s trust’, Procedia – Social and Behavioral Sciences, Vol. 111, No. 1, pp.731–740.

Hong, H. and Xu, D. (2015) ‘Performance evaluation of logistics firms based on DEA model’, International Journal of Shipping and Transport Logistics, Vol. 21, Nos. 4–6, pp.199–213.

Hsu, C.C., Liou, J.J. and Chuang, Y.C. (2013) ‘Integrating DANP and modified grey relation theory for the selection of an outsourcing provider’, Expert Systems with Applications, Vol. 40, No. 6, pp.2297–2304.

Hsu, C.H., Wang, F.K. and Tzeng, G.H. (2012) ‘The best vendor selection for conducting the recycled material based on a hybrid MCDM model combining DANP with VIKOR’, Resources, Conservation and Recycling, Vol. 66, No. 1, pp.95–111.

Balezentis, A.; Balezentis, T.; Misiunas, A. 2012. An integrated assessment of Lithuanian economic sectors based on financial ratios and fuzzy MCDM methods, Technological and Economic Development of Economy 18(1): 34–53. https://doi.org/10.3846/20294913.2012.656151

Balin, A.; Baraçli, H. 2015. A fuzzy multi-criteria decision making methodology based upon the interval type-2 fuzzy sets for evaluating renewable energy alternatives in Turkey, Technological and Economic Development of Economy (in press). https://doi.org/10.3846/20294913.2015.1056276

Banomyong, R.; Supatn, N. 2011. Selecting logistics providers in Thailand: a shippers’ perspective, European Journal of Marketing 45(3): 419–437. https://doi.org/10.1108/03090561111107258

Bottani, E.; Rizzi, A. 2006. A fuzzy TOPSIS methodology to support outsourcing of logistics services, Supply Chain Management: an International Journal 11(4): 294–308. https://doi.org/10.1108/13598540610671743

Büyüközkan, G.; Feyzioğlu, O.; Nebol, E. 2008. Selection of the strategic alliance partner in logistics value chain, International Journal of Production Economics 113(1): 148–158. https://doi.org/10.1016/j.ijpe.2007.01.016

Cheng, A. C. 2013. A fuzzy multiple criteria comparison of technology valuation methods for the new materials development, Technological and Economic Development of Economy 19(3): 397–408. https://doi.org/10.3846/20294913.2013.821687

Chou, W. C.; Cheng, Y. P. 2012. A hybrid fuzzy MCDM approach for evaluating website quality of professional accounting firms, Expert Systems with Applications 39(3): 2783–2793. https://doi.org/10.1016/j.eswa.2011.08.138

Chow, H. K.; Choy, K. L.; Lee, W. B.; Chan, F. T. 2005. Design of a knowledge–based logistics strategy system, Expert Systems with Applications 29(2): 272–290. https://doi.org/10.1016/j.eswa.2005.04.001

Choy, K. L.; Chow, H. K.; Tan, K. H.; Chan, C. K.; Mok, E. C.; Wang, Q. 2008. Leveraging the supply chain flexibility of third party logistics-hybrid knowledge-based system approach, Expert Systems with Applications 35(4): 1998–2016. https://doi.org/10.1016/j.eswa.2007.08.084

Degraeve, Z.; Labro, E.; Roodhooft, F. 2004. Total cost of ownership purchasing of a service: the case of airline selection at Alcatel Bell, European Journal of Operational Research 156(1): 23–40. https://doi.org/10.1016/j.ejor.2003.08.002

Ecer, F. 2014. A hybrid banking websites quality evaluation model using AHP and COPRAS-G, Technological and Economic Development of Economy 20(4): 758–782. https://doi.org/10.3846/20294913.2014.915596

Kovács, G. (2008) ‘Corporate environmental responsibility in the supply chain’, Journal of Cleaner Production, Vol. 16, No. 15, pp.1571–1578.

Lam, J.S.L. and Dai, J. (2015) ‘Environmental sustainability of logistics service provider: an ANP-QFD approach’, The International Journal of Logistics Management, Vol. 26, No. 2, pp.313–333.

Luthra, S., Garg, D. and Haleem, A. (2015) ‘an analysis of interactions among critical success factors to implement green supply chain management towards sustainability: an Indian perspective’, Resources Policy, Vol. 46, No. 1, pp.37–50.

Maas, S., Schuster, T. and Hartmann, E. (2014) ‘Pollution prevention and service stewardship strategies in the third-party logistics industry: effects on firm differentiation and the moderating role of environmental communication’, Business Strategy and the Environment, Vol. 23, No. 1, pp.38–55.

Marchant, C. (2010) ‘Reducing the environmental impact of warehousing’, in McKinnon, A.C., Cullinane, S.L., Browne, M. and Whiteing, A. (Eds.): Green Logistics: Improving the Environmental Sustainability of Logistics, pp.167–192,

Kogan Page, London. McKinnon, A.C. (2010) ‘Product-level carbon auditing of supply chains (environmental imperative or wasteful distraction?)’, International Journal of Physical Distribution & Logistics Management, Vol. 40, Nos. 1–2, pp.42–60.

Ravi, V. (2012) ‘Selection of third-party reverse logistics providers for end-of-life computers using TOPSIS-AHP based approach’, International Journal of Logistics Systems and Management, Vol. 11, No. 1, pp.24–37.

Saen, R.F. (2010) ‘A new model for ranking 3PL providers’, Australian Journal of Basic and Applied Sciences, Vol. 4, No. 8, pp.3762–3769.

Göl, H. and Çatay, B., “Third-party logistics provider selection: insights from a Turkish automotive company”, Suppl. Ch. Manage. Int. J., 12(6): 379-384, (2007). 425 Evrencan OZCAN, Merve AHISKALI/ GU J Sci, 33(2): 413-427 (2020)

Barker, T.J. and Zabinsky, Z.B., “A multicriteria decision making model for reverse logistics using analytical hierarchy process”, Omega, 39(5): 558-573, (2011).

Daim, T.U., Udbye, A. and Balasubramanian, A., “Use of analytic hierarchy process (AHP) for selection of 3PL providers”, J. Manuf. Techn. Manage. 24(1): 28-51, (2012).

Hwang, B., Chen, T. and Lin, J., “3PL selection criteria in integrated circuit manufacturing industry in Taiwan”, Suppl. Ch. Manage. Int. J., 21(1): 103-124, (2016).

Gürcan, Ö.F., Yazıcı, İ., Beyca, Ö.F., Arslan, Ç.Y. and Eldemir, F., “Third party logistics (3PL) provider selection with AHP application”, Proc. Soc. Behav. Sci., 235(1): 226-234, (2016).

Yuen, K.K.F., “Towards Logistics Service Provider Selection Strategy Using Primitive Cognitive Network Process”, 10th International Conference on Service Systems and Service Management, Hong Kong, 416-418, (2013).

Özbek, A. and Eren, T., “Selection of third-party logistics (3PL) firms with analytical network process approach”, Atatürk Üni. J. Econ. Admin. Sci., 27(1): 95-113, (2013).

Govindan, K., Khodaverdi, R. and Vafadarnikjoo, A., “A grey DEMATEL approach to develop thirdparty logistics provider selection criteria”, Ind. Manage. Data. Sys. 116(4): 690-722, (2015).

Çakır, E., Tozan, H. and Vayvay, O., “A method for selecting third party logistic service provider using fuzzy AHP”, J. Nav. Sci. Eng., 5(3): 38-54, (2009).

Chiang, Z. and Tzeng, G.H., “A third party logistics provider for the best selection in fuzzy dynamic decision environments”, Int. J. Fuzz. Sys. 11(1): 1-9, (2009). 426 Evrencan OZCAN, Merve AHISKALI/ GU J Sci, 33(2): 413-427 (2020)

Yayla, A.Y., Öztekin, A., Gümüş, A.T. and Gunasekaran, A.A., “Hybrid data analytic methodology for 3PL ransportation provider evaluation using fuzzy multi-criteria decision making”, Int. J. Prod. Res., 53(20): 6097-6113, (2015).

Luk, C.C., Choy, K.L. and Lam, H.Y., “Design of an Enhanced Logistics Service Provider Selection Model for e-Commerce Application”, Portland International Conference on Management of Engineering and Technology (PICMET), Honolulu, 1-7, (2018).

Sharma, S.K. and Kumar, V., “Optimal selection of third-party logistics service providers using quality function deployment and Taguchi loss function”, Benchmarking Int. J., 22(7): 1281-1300, (2014).

Araz, C., Özfırat, P.M. and Özkarahan, I., “An integrated multicriteria decision-making methodology for outsourcing management”, Compt. Opera. Res., 34(12): 3738-3756, (2007).

Perçin, S., “Evaluation of third-party logistics (3PL) providers by using a two-phase AHP and TOPSIS methodology”, Benchmarking Int. J., 16(5): 588-604, (2009).

Raut, R., Kharat, M., Kamble, S. and Kumar, C.S., “Sustainable evaluation and selection of potential third-party logistics (3PL) provides an integrated MCDM approach”, Benchmarking Int. J., 25(1): 76-97, (2018).

Bianchini, A., “3PL provider selection by AHP and TOPSIS methodology”, Benchmarking Int. J., 25(1): 235-252, (2018).

Çelik, E., Erdoğan, M. and Gümüş, A.T., “An extended fuzzy TOPSIS–GRA method based on different separation measures for green logistics service provider selection”, Int. J. Environ. Sci. Technol., 13: 1377-1396, (2016).

Jain, V. and Khan, S.A., “Reverse Logistics Service Provider Selection: A TOPSIS-QFD Approach”, IEEE International Conference on Industrial Engineering and Engineering Management, Bali, 803- 806, (2016).

Chen, K., Yu, X. and Yang, L., “GI-TOPSIS based on combinational weight determination and its application to selection of reverse logistics service providers”, J. Grey. Sys. 25(3): 16-33, (2013).

Singh, R.K., Gunasekaran, A. and Kumar, P., “Third party logistics (3PL) selection for cold chain management: a fuzzy AHP and fuzzy TOPSIS approach”, Ann. Oper. Res., 267(1-2): 531-553, (2017).

Velasquez, M. and Hester, P.T., “An analysis of multi-criteria decision making methods”, Int.J. Opera. Res., 10(2): 56–66, (2013).

Özcan, E.C., Ünlüsoy, S. and Eren, T., “A combined goal programming – AHP approach supported with TOPSIS for maintenance strategy selection in hydroelectric power plants”, Renew. Sustain. Energy Rev., 78: 1410-1423, (2017).

Saaty, T.L., “Decision making with the analytic hierarchy process”, Int. J. Serv. Sci., 1(1): 83-98, (2008). 427 Evrencan OZCAN, Merve AHISKALI/ GU J Sci, 33(2): 413-427 (2020)

Mitra, S. and Datta, P.P. (2014) ‘Adoption of green supply chain management practices and their impact on performance: an exploratory study of Indian manufacturing firms’, International Journal of Production Research, Vol. 52, No. 7, pp.2085–2107.

Momeni, E., Azadi, M. and Saen, R.F. (2015) ‘Measuring the efficiency of third party reverse logistics provider in supply chain by multi objective additive network DEA model’, International Journal of Shipping and Transport Logistics, Vol. 7, No. 1, pp.21–41.

Mortensen, O. and Lemoine, O.W. (2008) ‘Integration between manufacturers and third party logistics providers?’, International Journal of Operations & Production Management, Vol. 28, No. 4, pp.331–359.

Perçin, S. and Min, H. (2013) ‘A hybrid quality function deployment and fuzzy decision-making methodology for the optimal selection of third-party logistics service providers’, International Journal of Logistics Research and Applications, Vol. 16, No. 5, pp.380–397.