Rationale for utilizing 3PL in supply chain management: A shippers' economic perspective

In this paper we first propose a conceptual framework for evaluating 3PL (third-party logistics) utilization in SCM (supply chain management), in which it is assumed that shippers may enjoy advantages derived from four contributory sources of 3PL specialization: scale, know-how, searching ability, and IT skills. It is also supposed that shippers may particularly benefit from 3PL when facing uncertain business environments. We also apply principal–agent relationships to shippers and 3PL providers. Further, we see enhancing “agency efficiency” as important to obtaining the benefits of 3PL utilization. We also look at the role of 3PL provider selection, the “hold-up” problem under incomplete contracts, and asset ownership. After that we briefly discuss the utilization of 3PL and environmental concerns. These are the main points that we consider related to 3PL utilization. The main contribution of this study is to identify discussion points from models and theories, such as contract theory, that relate to the utilization of 3PL in SCM.

► We identify discussion points from models and theories that relate to the utilization of 3PL in SCM.
► We apply principal-agent relationships to shippers and 3PL providers, and see enhancing “agency efficiency” as important to obtaining the benefits of 3PL utilization.
► We also focus on the problems regarding incomplete contracts and asset ownership.
► In addition, environmental concerns under 3PL utilization are briefly discussed.