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6. Chapter 6–CONCLUSION

6.1 Introduction

This chapter summarizes the research findings, draws conclusions from those findings and indicates some of the implications of the findings. Also mentioned Limitations of the study and recommendations for further research in this field are considered.

6.2 Conclusions

Due to Increasing competition and the pressure to cut down the costs of business operations have pressed businesses to outsource logistics functions. The purpose of this research is to examine the use of third party logistics companies from the users’ perspective toward the improvement of 3PL in the Indian environment. It has been carried out by the following six objectives.

• Objective 1: To investigate the reasons for outsourcing logistics activities and also the                                             

                Reasons for not outsourcing logistics activities in Indian companies.

• Objective 2: To find out the extent of use of third party logistics services in India and the   

               Impact of firm size and various industry on different practices.

• Objective 3: To find out critical success factors and attributes of 3PL service providers

               Which are measured most important for employing, evaluating and selecting     

               3PL by users of 3PL in India.

• Objective 4: To find the impact of usage of 3PL providers on Indian companies.

• Objective 5: To assess the customer satisfaction level of Indian 3PL services.

• Objective 6: To bring out the future plans of current 3PL users in India.

The conclusions of the current situation of 3PL in Indian Retail Sector are presented based on

the six research objectives. The findings and highlighted aspects of the survey are provided

as following

6.2.1 Objective 1: To investigate the reasons for not outsourcing logistics activities and also the reasons for outsourcing logistics activities in Indian companies.

• The majority of the respondents that do not outsource logistics gave as their reasons the following, ranked from most frequently provided reason to least:

Company has adequate skills and resources

Fear of loss of control over the logistics function

Losing touch with significant information

Uncertainty in service levels provided

Most survey respondents did not see the lack of shared goals and difficulty in obtaining organizational support as important factors not to undertake outsourcing. In summary, of the factors that result in companies deciding not to outsource their logistics activities, the most significant was that companies indicated that they had adequate in-house expertise and resources. Also, of the respondents selected this reason, about two-third were large companies. This is reasonable because those large companies are usually big enough to have their own logistics departments and resources.

• The majority of respondents that do outsource logistics activities are under pressure to cut costs for logistics and capital investments and focus on core competence. Logistics cost reduction is on the topmost same as the countries like USA, Australia, Western Europe, Singapore, Saudi Arabia, Malaysia and India (Lieb & Randell, 1994; Millen et al., 1997; Bhatnagar et al., 1999; Sohail & Sohal, 2003; Sohail & Al-Abdali, 2005; Sahay & Mohan, 2006). Other main reasons are improving the customer service and the logistics process. Unlike previous studies, improving customer service is not very high on the list in this survey. Furthermore, there is a clear link between the success of outsourcing and the identification of these reasons for outsourcing. It seems that large companies tend to recognize more about logistics cost reduction and small companies more experienced with improving customer services. Moreover, companies no longer outsource only for cost reasons. It is important for companies to understand the many and varied needs and purposes, advantages and disadvantages of outsourcing before making such a decision.

6.2.2 Objective 2: To find out the extent of use of third party logistics services in India and the impact of firm size and different industries on different aspects of 3PL practices.

It is apparent from the study that 3PL has been accepted by Indian organizations, with more than half of the respondents using 3PL. Most of the current users have been utilizing third party logistics for more than 1 year. The majority of respondents outsource to between two and five providers.

India is an export and import oriented country, the services utilized are broad in terms of the ranges and the geographical coverage includes both domestic and international services. The study provided evidence that the most frequently used services are domestic transportation, freight forwarding, warehousing, international transportation, and customs clearance and brokerage. In contract, LLP/4PL services, customer service, consulting service etc. are the least popular services for Indian firms.

Furthermore, current users accepted that 3PL allows them to gain many benefits and believe that 3PL has more positive impacts than negative. With a high level of satisfaction, a large number of user firms are likely to maintain and moderately increase the use of 3PL in the near future.

The experience of the firms in this study also provides insights as to how to plan for implementation. Providers should be aware of the potential trend, and develop their capabilities accordingly in terms of these future requirements.

6.2.3 Objective 3: To find out critical success factors and attributes of 3PL service providers are considered most important for employing, evaluating and selecting 3PL by users of 3PL in India.

With respect to the factors used when selecting logistics service providers, the majority of respondents indicated that the most important factors were as follows:

• Speed of delivery

• Quality of logistics services

• Price

• Flexibility to meet customer needs

• Skilled logistics provider

• Investment in information system

The least important factors (rated as important by under 65 % of the respondents) were focus on specific industries, investment in quality assets, length and depth of 3PL relationships, and the size of logistics providers.

The high level ratings of providers’ performance in India were as follows:

• The speed of delivery

• Experience as a 3PL provider

• Price

• Quality of logistics services

• Skilled Logistics professionals

• Flexibility to meet unanticipated customer needs

In general, factor importance is higher than company ratings except the size of logistics Providers and length and depth of 3PL relationships. This may imply the areas need to be improved by 3PL providers if negative gap occurs. In addition, the knowledge on the ranking

of the factor importance is vital because it can direct 3PL provider’s future investment &

management strategy.

6.2.4 Objective 4: To find the impact of usage of 3PL providers on Indian companies.

Current users reported a number of benefits from using 3PL. They believe that 3PL has More

Positive impacts than negative.  The most significant impact appears to be that using 3PL enabled the respondents to achieve better delivery and to cut down logistics costs. The

user   

 firms also believed that using 3PL improved logistics system performance and

customer service satisfaction level, expanded geographic reach and gained year-on-year

growth in profits. However, relative few respondents indicated that they believe using 3PL

services had a very high impact on these categories. This may reflect the typical user desire .

for continuous improvements along each of these dimensions

6.2.5 Objective 5: To assess the satisfaction level of Indian 3PL services.

With respect to satisfaction regarding specific logistics activities currently outsourced, respondents indicated that their highest level of satisfaction is with respect to international transportation, freight forwarding, customs clearance and brokerage. The least satisfaction was experienced with reverse logistics, inventory management, operation of IT systems, and fleet management. With respect to the level of satisfaction achieved with logistics outsourcing overall, the majority of respondents are satisfied with their current 3PL providers. However, only 17% of were very satisfied with outsourcing. This may indicate some reservations about outsourcing results and satisfaction level.

6.2.6 Objective 6: To find out the future plans of current 3PL users India.

3PL industry has a potential for further development in India. With a high satisfaction level of the services, a large number of firms are more likely to maintain and moderately increase their usage of 3PL services. Similarly, most users of 3PL services in India are satisfied with their current 3PL providers and believe that this has led to positive developments within their organization, the same as users in other countries.

 All in all, the objectives of the thesis were met. The results showed that there was a relative high level of usage of 3PL services. The respondents have shown their satisfaction with them to the point that they will continue to use the service.

6.3 Recommendations

According to the discussions and conclusions of the study, the following recommendations can be made for both current/potential 3PL users and providers.

6.3.1 For logistics service users

Companies need to realize the important role of logistics. Logistics can assist companies to   become more successful and efficient organizations. It enables a company to achieve better cost savings, increase productivity, increase shareholder value and better customer level of satisfaction.

 Companies need to identify their core competencies, non-core activities and the reasons why

They outsource logistics services. Companies can identify those logistics activities which are

most suitable for outsourcing by understanding its core business and non-core activities.

Companies need to pay attention to the factors important in their decision making process. Optimal service providers can then be identified to provide the best products and services. Companies should have clear objectives for outsourcing that can be used to establish

   their own criteria for the selection of 3PL providers.

6.3.2 Recommendations for logistics service providers

• It is important for providers to understand the practices, trends and issues involved in the industry in order to gain the trust of companies.

• The logistics service providers should understand the reasons why companies may or may not require certain logistics outsourcing services.

• The logistics providers should identify the different services employed by either large or small companies. Likewise different services may be of different importance in different industries. Identification of these factors and reasons can assist 3PL providers to target specific markets and provide specific services according to the needs of the users.

• 3PL providers also need to assess the evaluation by companies who required their services. This information can assist the providers to meet the needs of the companies in a more efficient way.

• Providers should have contract agreements and build good relationships with their clients. This is critical because outsourcing companies are increasingly looking to use a smaller number of service providers for easier management.

 6.4 Limitations

It is important to identify the limitations of the research and to keep these in mind with regard to the results reflected in this thesis.

Firstly, this research focuses only on the third party logistics services from the users’ perspective. This study has not taken into consideration the perspective of 3PL services providers.

Secondly, this study is limited by only assessing current 3PL users. This research did not have the capacity for companies that do not employ 3PL services.

Thirdly, this research study uses a convenience sample. It is prone to the various biases and is not a generalized study. This study therefore is not a representative of the true population due to the limitation of funds and timeframe.

6.5 Future research

There is a need to have more research done to understand the relationships between 3PL users and service providers in India.

There is also a need for more studies comparing various 3PL users and their providers. Studies should focus on the decision making processes for selecting 3PL providers. Future research could be a comparison between 3PL users and service providers in terms of their expectations and fulfilments simultaneously in India.

There is also a need to have studies to compare specific services utilised by different industrial groups. A comparison among these diverse industry groups would provide useful insights toward differences and similarities of the services offered. Future research could also focus on identifying the differences in the significant dependency relationships among the important factors and the performance metrics for the different segments of the 3PL industry.

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• Companies need to pay attention to the factors important in their decision making process. Optimal service providers can then be identified to provide the best products and services. Companies should have clear objectives for outsourcing that can be used to establish their own criteria for the selection of 3PL providers.

6.3.2 Recommendations for logistics service providers

• It is important for providers to understand the practices, trends and issues involved in the industry in order to gain the trust of companies.

• The logistics service providers should understand the reasons why companies may or may not require certain logistics outsourcing services.

• The logistics providers should identify the different services employed by either large or small companies. Likewise different services may be of different importance in different industries. Identification of these factors and reasons can assist 3PL providers to target specific markets and provide specific services according to the needs of the users.

• 3PL providers also need to assess the evaluation by companies who required their services. This information can assist the providers to meet the needs of the companies in a more efficient way.

• Providers should have contract agreements and build good relationships with their clients. This is critical because outsourcing companies are increasingly looking to use a smaller number of service providers for easier management.

Chapter 6 CONCLUSIONS AND RECOMMENDATIONS 104

6.4 Limitations

It is important to identify the limitations of the research and to keep these in mind with regard to the results reflected in this thesis.

Firstly, this research focuses only on the third party logistics services from the users’ perspective. This study has not taken into consideration the perspective of 3PL services providers.

Secondly, this study is limited by only assessing current 3PL users. This research did not have the capacity for companies that do not employ 3PL services.

Thirdly, this research study uses a convenience sample. It is prone to the various biases and is not a generalised study. This study therefore is not a representative of the true population due to the limitation of funds and timeframe.

6.5 Future research

There is a need to have more research done to understand the relationships between 3PL users and service providers in New Zealand.

There is also a need for more studies comparing various 3PL users and their providers.

Studies should focus on the decision making processes for selecting 3PL providers. Future research could be a comparison between 3PL users and service providers in terms of their expectations and fulfilments simultaneously in New Zealand.

There is also a need to have studies to compare specific services utilised by different industrial groups. A comparison among these diverse industry groups would provide useful insights toward differences and similarities of the services offered. Chapter 6 CONCLUSIONS AND RECOMMENDATIONS 105

Future research could also focus on identifying the differences in the significant dependency relationships among the important factors and the performance metrics for the different segments of the 3PL industry.

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