Abstract
M.Com. (Business Management)
There is a lack of comparative information on the major third party logistics (3PL) service providers in South Africa in terms of key outsourcing criteria. This may hinder the selection process for companies that intend to contract to 3PL service providers. The main objective of this research study was to determine the most important selection and ranking criteria for a 3PL service provider’s index in South Africa.
This study used a quantitative research methodology, with deductive reasoning. The database used for sample selection was the report Top 500 Companies in Africa. A step in the sampling process included identifying, through interviews with existing 3PL service providers, the industries that mostly contract to 3PL service providers in South Africa. Only South African companies that formed part of the industry sectors identified by the 3PL service providers comprised the sample population. This was to ensure relevance of the sample population. Using probability sampling, a structured survey questionnaire was issued to 225 companies and 103 valid responses were received.
The results indicated that respondents were mainly from the following industry sectors: mining (27.2%), wholesale and retail (24.3%), manufacturing (21.4%), diversified (19%), construction (15.5%), telecoms and communication (7.8%), technology (6.8%) and other (6.8%). In order to determine the most important selection criteria used when contracting to a 3PL service provider, respondents had to rate various selection criteria using a Likert scale. A factor and reliabilities analysis was conducted on the data collected. The three main factors identified in this study were Service Quality, Information Management and Compliance and Collaboration. Each factor contained the main selection criteria used when selecting a 3PL service provider, which is detailed in the study. The following selection criteria categories were ranked as the top three by users of 3PL service providers: Cost and Price Structure, Service Delivery and the Relationship with the 3PL Service Provider. Based on the response rate received in the survey results, 90 percent of the participants indicated that there was a need for a 3PL index in South Africa.
The study contributed to the existing body of knowledge regarding logistics outsourcing as the results can be used as a guideline by companies when they evaluate 3PL service providers. The study also established that a 3PL service provider’s ranking index based on a set of key outsourcing selection criteria will be useful to South African companies when selecting service providers in the outsourcing of logistics activities. The implication of this is study is that a ranking index for 3PL service providers can be developed, based on the selection criteria identified and ranked in this study.