The influence of contractual and relational factors on the effectiveness of third party logistics relationships

Outsourcing has become popular in both management literature and practice, but few studies have examined the effects of two important and potentially complementary elements – contractual and relational elements – on the effectiveness of logistics outsourcing relationships. It is theorized that contract formality, the thoroughness of contract negotiations, trust and commitment increase the effectiveness of 3PL provider–client relationships. For empirical validation a survey was carried out in the 3PL industry among both 3PL providers and clients. Using PLS path modelling, we observed that for both LSPs and clients, contract formality, trust and commitment are all positively related to relationship effectiveness. The results for negotiation thoroughness are mixed. The model explains 59% (LSPs) and 60% (clients) of the variance in relationship effectiveness. It is concluded that both ‘hard’ contractual aspects and ‘soft’ relationship aspects are important for effective supply chain collaboration. Theoretical and managerial implications are provided.

► We examine relationship effectiveness from both the LSP and client perspective. ► Contract formality, trust and commitment increase relationship effectiveness. ► The results for negotiation thoroughness are mixed. ► The model explains 59% (LSPs) and 60% (clients) of relationship effectiveness. ► Both ‘hard’ contractual and ‘soft’ relational aspects impact collaboration.