The growing healthy relation among shippers and Third-Party Logistics (3PL) services providers boosts logistics services expansion. About 20% growth has been witnessed in logistics outsourcing globally. Seeing the market potential, many 3PL services providers are eager to venture their massive expansion plan to widen their service spectrum and geographic reach. Expansion of services in the new domain requires huge investment, which needs a strategic approach. 3PL services providers need to foresee the Returns on Investments (ROI) by forecasting customers’ needs. Assessment of customers’ needs offers a great challenge and hence a systematic methodology must be followed. 3PL services providers also need systematic performance evaluation in order to improve their weaknesses. This paper presents an Analytic Hierarchy Process (AHP) and fuzzy synthetic evaluation model for the systematic performance evaluation of 3PL services providers. Based on the detailed performance analysis, 3PL services providers may reveal their competitive position in the market. The paper also presents a case study of LOGINET, a 3PL service provider. Based on its detailed performance analysis, a fuzzy QFD methodology for future expansion is described.

Logistics outsourcing is becoming indispensable for shippers (manufacturer/assembler opting for Third-Party Logistics (3PL) services providers) as it helps them in achieving their strategic objectives. Logistics outsourcing has been playing a vital role in providing value-added services to the customers. The enhanced customer service level and customer satisfaction help shippers in product differentiation. Logistics outsourcing has been preferred by shippers to achieve strategic advantages to increase their market share. The study by Sahay and Mohan (2006) confirms that 3PL services provide substantial growth in various financial indicators; for instance, it offers improvements in sales revenue by 13.5%, in working capital by 12.3%, and in return on assets by 10.0%. The 3PL services also provide reduction in capital assets by 10%, production cost by 10.5%, labor cost by 10% and logistics cost by 15%. 3PL services providers play an important role in effective supply chain management by providing inbound logistics and outbound logistics services. Many shippers nowadays concentrate on their own core competency and prefer the 3PL services providers to take up their logistics activities. Thus, shippers depend on 3PL services providers to secure capacity and agility (Hannon, 2005).

Looking at the vital role of 3PL services providers, performance measurement becomes indispensable to both shippers as well as the 3PL services providers for their future growth. Performance measurement systems are used for a wide range of objectives within business including monitoring internal systems, monitoring external performance, tracking the implementation of change, stimulating continuous improvement in the system and personnel levels, and tracking the overall performance of the enterprise (Dixion et al., 1991). Performance measures are established to achieve goals and are provided with the intent to monitor, guide and improve all the business functions and the organization as a whole (Sharma and Bhagwat, 2006). Potential 3PL services providers can only fulfill the strategic objectives of the shippers, and hence a right-potential 3PL services provider is always preferred by a shipper. Thus, as a general practice, the shippers always carry out performance analysis before awarding a contract to the 3PL services providers. Performance analysis is also vital from the services provider’s point of view as it reveals the strengths and weaknesses of the provider. The rigorous analysis may help 3PL services provider in its strategic planning and future expansion as well.

Supply Chain Management Journal, Developing New Services, Third-Party Logistics (3PL), Returns on Investments (ROI), Analytic Hierarchy Process (AHP), 3PL Services Providers, Fuzzy QFD,