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Growing Trends in Third Party Logistics: A Case Study of
Rajasthan
Ms. Shilpi Chakravarty Research scholar, IIS University, Jaipur
Dr. Chhavi Jain
Sr.Assistant Professor, Dept of Management Studies, IIS University, Jaipur
Abstract:
Third party logistics is the growing topic throughout the world. In India it is at very budding stage but still
most of the multinational and global firms are trying to establish it. This paper study the current trend of
3PL in Rajasthan, and identify the important factors on which there will work needed. A survey is conducted
to identify the perception of exporter and importer while selecting 3PL service providers. As a result top
five factors are revealed which play an important role while choosing outsourcing service providers which
includes, on time delivery, quality of transport and trade, ability to tack and trace the consignment etc.
Introduction
Ever since the liberalization of the economy of India, there has been a path to become one of the
top economic powers in the world. New areas for progress and development have opened up;
manufacturing and retail sectors earned popularity because of the changes in China’s export policy
of not exporting their manufactured items, by which Indian manufacturing firms have benefitted.
Hence this 3PL sector will contribute to GDP significantly in the long term. The growth and
competitiveness in these sectors largely depend on the efficiency of the logistics functioning that
facilitate the companies’ ability to reach out to their customers on time and at the desired location.
Realizing this, many manufacturers and exporters are now restructuring their logistics processes
in a manner to incorporate partnerships with expert logistics service providers and outsourcing
such activities as domestic transportation, international transportation, customs clearance,
warehousing, forwarding, cross-docking, product labelling, packing, assembly, reverse logistics,
freight bill auditing and payment, IT services, fleet management, logistics consultancy services
provided by 3PLs, order entry, processing and fulfilment and limited liability partnership
(LLP)/4PL service.
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3PL Market Structure in India
The 3PL market in India is consist of two segments: the first one is asset based in which assets
like trucks, distribution centres and warehouses are utilized in logistics supply, and the second
one is non-asset based. There is a vast difference between the nature of Indian 3PL and its
counterpart elsewhere, especially in the U.S., Table 2.
Table 2: Comparative Analysis of 3PL in India and the U.S.
Parameter USA India
Usage of 3PL 73% 57%
Common activities
outsourced
Warehousing (73.6%) Outbound Transportation (57%)
Outbound Transportation
(68.2%)
Inbound Transportation (53%)
Freight bill payment (66.4%) Custom clearing and forwarding
(53%)
Inbound warehousing (57.1%)
Reasons for not
outsourcing
Control would diminish (73%) Poor infrastructure of provider (87%)
Costs would not be reduced
(64%)
Inability to respond to changing
needs (89%)
Service commitment would not
be met (47%)
Unreliable promised from providers
(82%)
Logistics is a core competency
(44%)
Concerns about capability of
providers (77%)
Necessity of e-
commerce
62% 66%
Collaborative
relationship
84% 13%
Gain sharing is
important for
relationship
87% 6.5%
Source: 3PL Practices in India, Sahay. B. S., www.cscmpindia.com/Events/20112003/3.PDF
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Literature Review on third party logistics
Liu & Lyon (2014) described in this paper is to evaluate the relationship between the service
capabilities and performance of UK and Taiwanese third-party logistics (3PL) providers. A study
presented is based on a recent survey. The results identify the most important services offered by
3PLs (Third party logistics) and the most important aspects of 3PL operational performance. In
Taiwan the most important service capabilities were tracking and tracing followed by outbound
distribution and logistics information system. For UK outbound distribution was viewed most
important followed by order fulfilment and rate negotiation.
ProTrans(2001) explained that 3PL is the company performs the logistics activity on behalf of
the shipper, these all are the integrated activity not a standalone one. There will be continuous
relation between the shipper and the service provider.
Harlldorsson and Skjott Larcen(2004) postulate that cost reduction, customer satisfaction and
higher level of services are the reason to choose 3PL, while the negative factor associated with this
loss of employee morale due to shift of control and power.
Golop and Regan (2001) conclude that 3PL service provider were interested in developing
information system and inventory and order fulfilment management.
Bardhan et al (2007) stated that investing in IT by logistics firms are fruitful decision to gain
competitive edge and lead in global supply chain network. Few studies indicates better quality and
increase in profitability for logistics firm. (Menon et al 2007).
Sink and Lengley(1997) suggested to emphasis on the issues like development of selection criteria
service implementation , formation of cross functional buying team, top management commitment
etc.
Bergland et al(1999) identified the factors which give rise to 3PL market which includes reduction
of labour cost, reduction in asset intensity, restructuring of distribution, while on supply side,
industry deregulation and profit margin decline in services were the reason of growth.
Mathor and Sagar(2015) stated that the composition of India’s Foreign Trade has been changed
specially after liberalization and globalization, our major export now includes engineering goods
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, petroleum products, gems and jwellary, electronic goods etc. It was an achievement to transform
our self from a primary goods exporting company to manufactured goods exporting company.
Research Methodology
To determine the preference of exporters while choosing third party logistics. A survey
questionnaire is designed to identify the most important reason for choosing 3PL.
Reason of choosing 3PL
Perception while selecting service provider
Important factors that influence the decision
Efficiency of services provider
The respondents are asked to fill the questionnaire according to their point of view regarding third
party logistics. Personal visits are also arranged to meet the department taking decision regarding
outsourcing.
The sample size is 100 respondents of Rajasthan who are exporter importer and freight forwarders.
They are directly or indirectly dealing with #pl service provides.
Out of 100, 6 respondents filled there questionnaire incompletely. Hence the results are based on
only 96 respondents.
Results:
Descriptive analysis of Demography of the exporters/Importer /forwarders.
Here few questions was asked to the respondents to find out the profile of the customer by
identifying their commodity in which they are dealing, their years of experience and the
designation in the existing company.
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Tab 4.1
Parameter Category Frequency Percentage
Commodity Handicraft 110 30.7
Stone 56 15.6
Gems & Jewelry 97 27.0
Others 95 26.5
Total 358 100.00
Years of Experience More than 20 yrs 9 2.5
15-20 yrs 35 9.77
10-15 yrs 73 26.5
5-10yrs 95 26.5
Less than 5yrs 146 40.7
Total 358 100.00
Designation
Exporter/Importer 98 27.37
Forwarder 114 31.8
Marketing manager 57 15.92
Export Executives 89 24.8
Total 358 100.00
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Chart 4.1
Inferences: The table 4.1 shows the commodities exported by the respondents. It shows
that 30.7 % are dealing with Handicrafts who is the major player from Rajasthan. Next is
Gems & Jewelry with 27% followed by stones with 15.6% and 26.5 % are other
commodities.
Chart 4.1.2
Inferences: The table deals with work experience of the respondents in same industry. It
shows that major respondent i.e.40.7% are in the industry from last five years.26.5 %
Commodities that are Exported
Handicraft
Stones
Gems & jwellary
Others
Years of Experience in Industry
more than 20 yrs
15-20 yrs
10-15yrs
5-10yrs
Less than 5 yrs
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respondents are here from more than 5 yrs. 20.3 % are in this sector from last 15 yrs. 9.77%
are there from more than 15yrs while only 2.5 % are from more than 20yrs.
Chart 4.1.3
Inferences: This table indicates the designations of the respondents in the company most
of them are forwarders i.e. 31.8% than next are exporter or importer themselves i.e. 27.375
followed by export executives 24..8 and then marketing manager 15.
4.3 Graphical Analysis of Mode of logistics service channels:
Here respondents asked about the channel of logistics they are using.
Desingnation of respondents
Exporter/Importer
Forwarder
Marketing Manager
Export Executive
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Chart 4.3.1
Inferences:From the above table it has been observed that 9.8% respondents said they are using
direct logistic services whereas 90.2% respondents said they are not using direct logistic services
in the shipping industry.
Table 4.3.2
By Third Party Logistics (Freight Forwarders)
Frequency Percent
Yes 50 14.0
No 308 86.0
Total 358 100.0
9.8
90.2
Direct
Yes No
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Chart 4.3.2
Inferences:From the above table it has been observed that 14% respondents said they are using
by third party logistic services whereas 86% respondents said they are not using by third party
logistic services in the shipping industry
Table 4.3.3
Both Channels
Frequency Percent
Yes 315 88.0
No 43 12.0
Total 358 100.0
14.0
86.0
By Third Party Logistics (Freight Forwarders)
Yes No
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Chart 4.3.3
Inferences:From the above table it has been observed that 88% respondents said they are using
both channel for logistic services whereas 86% respondents said they are not using both channel
for logistic services in the shipping industry.
4.4 Graphical analysis of reasons of choosing Third Party Logistics:
Here respondents are asked to rank the reasons to use third party logistics services
Table 4.4.1
Efficiency of the customs clearance process.
Frequency Percent
Slightly Important
16 5.1
Important 170 54.0
Fairly Important 76 24.1
Very Important 53 16.8
Total 315 100.0
88.0
12.0
Both Channels
Yes No
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Chart 4.4.1
Inferences:Above table shows that the third party logistics has efficient custom clearness process
in shipping industry. Various opinions from diverse respondents exhibit that 5.1% respondents
rate slightly important, 54% respondents important, 24.1% respondents rate fairly important while
16.8% respondents rate very important with the same
Table 4.4.2
Quality of trade and transport-related infrastructure.
Frequency Percent
Slightly Important
31 9.8
Important 97 30.8
Fairly Important
108 34.3
Very Important
79 25.1
Total 315 100.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
SlightlyImportant
Important FairlyImportant
VeryImportant
5.1
54.0
24.116.8
Efficiency of the customs clearance process.
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Chart 4.4.2
Inferences:Data of above mentioned table accordingly renders about the third party logistics has
well-organizedquality of trade and transport- related infrastructure. Various opinions from diverse
respondents exhibit that 9.8% respondents rate slightly important, 30.8% respondents important,
34.3% respondents rate fairly important while 25.1% respondents rate very important with the
same
Table 4.4.3
Ease of arranging competitively priced shipments.
Frequency Percent
Slightly Important
22 7.0
Important 85 27.0
Fairly Important
95 30.2
Very Important
113 35.9
Total 315 100.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
SlightlyImportant
Important FairlyImportant
Very Important
9.8
30.834.3
25.1
Quality of trade and transport-related infrastructure.
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Chart 4.4.3
Inferences:Above table analysed that the third party logistics is ease of arranging price shipment.
Various opinions from diverse respondents exhibit that 7% respondents rate slightly important,
27% respondents important, 30.2% respondents rate fairly important while 35.9% respondents
rate very important with the same.
Table 4.4.4
Ability to track and trace consignments.
Frequency Percent
Slightly Important
24 7.6
Important 119 37.8
Fairly Important 104 33.0
Very Important 68 21.6
Total 315 100.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
SlightlyImportant
Important FairlyImportant
Very Important
7.0
27.0 30.235.9
Ease of arranging competitively priced shipments.
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Chat 4.4.4
Inferences: Above table examined that the third party logistics has ability to tract and trace
consignments. Various opinions from diverse respondents exhibit that 7.6% respondents rate
slightly important, 37.8% respondents important, 33% respondents rate fairly important while
21.6% respondents rate very important with the same.
Table 4.4.5
Frequency with which shipments reach consignee within the scheduled or expected time.
Frequency Percent
Slightly Important 30 9.5
Important 37 11.7
Fairly Important 104 33.0
Very Important 144 45.7
Total 315 100.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
SlightlyImportant
Important FairlyImportant
VeryImportant
7.6
37.833.0
21.6
Ability to track and trace consignments.
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Chart 4.4.5
Inferences:Above table advocates the number of respondents who think that the third party
logistics is always reach on scheduled or expected time. Various opinions from diverse
respondents exhibit that 9.5% respondents rate slightly important, 11.7% respondents important,
33% respondents rate fairly important while 45.7% respondents rate very important with the same.
Rank Analysis
Rank Analysis refers to the data transformation in which numerical or ordinal values are replaced
by their rank when the data are sorted.
0.0
10.0
20.0
30.0
40.0
50.0
SlightlyImportant
Important FairlyImportant
VeryImportant
9.5 11.7
33.045.7
Frequency with which shipments reach consignee within the scheduled or expected time.
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Table 5.2: Rank Analysis of Third Party Logistic Service Provider
Factors Influencing while Choosing Third Party Logistics
S. No. Name of the factor Weighted
Total Weighted
Mean Rank
1 Efficiency of the customs clearance process.
1111 74.07 4
2 Quality of trade and transport-related infrastructure.
1180 78.67 2
3 Ease of arranging competitively priced shipments.
884 58.93 5
4 Ability to track and trace consignments. 1161 77.4 3
5 Frequency with which shipments reach consignee within the scheduled or expected time.
1307 87.13 1
Source: Primary Data Collected through Questionnaires
Inference: As we can see in above mentioned table that according to the perception of customers
regarding frequency with which shipments reach consignee within the scheduled or expected
time is the major factor in third party logistic service provider in Rajasthan and it is ranked first
by respondents. The next major factor is quality of trade and transport-related infrastructure
and it is ranked second by the respondents. The factor which is ranked third by the respondents
is ability to track and trace consignments. The next factor which is ranked fourth by the
respondents is efficiency of the customs clearance process. The ease of arranging competitively
priced shipments is ranked as fifth by the respondents.
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Conclusion:
Hence by the means of this study we can identify that third party logistics is growing with time
throughout the world and its impact is also affecting Rajasthan who is amont the top states for
export from India. Therefore being a 3PL service providers following arear are being focused to
improve the services and grab more and more customers.
Customers need fast shipment, as the delivery of the good should be timely managed.
Quality of trade and transport related infrastructure should be improved.
Customers are now days techno friendly and they need to track their consignment by their
own, hence the tracking system should be updated.
Custom clearance is a tedious process so 3PL service providers should try to manage it
by their own without giving headache to exporter.
Last but not the least competitive prices is the important aspect to capture the market and
is a big reason to choose outsourcing of logistics.
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