Doctoral Dissertations

Date of Award

8-1995

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Major Professor

C. John Langley Jr.

Committee Members

Arun Chatterjee, Mary Holcomb, Ray Mundy

Abstract

A new market for distribution related service has recently been created in the United States. Industrial buyers are increasingly replacing proprietary logistical support with the external acquisition of integrated services. These services are often provided and managed by a single supplier under a long-term contract. The rapid growth of this new market has spurred considerable interest in the buying and selling of third party logistics services. This research represents an effort to empirically examine the process used by organizational buyers to select third party logistics providers and the feasibility of benefit based customer segmentation in this market.

A triangulated research methodology was employed to investigate the purchasing process used by private sector manufacturers, distributors and retailers to select third party logistics suppliers. The study was also designed to determine the third party logistics benefits desired by organizational buyers. Data was gathered via a focus group, field case studies and a nationwide mail study. It was statistically analyzed using factor analysis and Ward's minimum-variance method of cluster analysis. The data was examined to:

  • Develop a descriptive framework of the third party logistics purchasing process.
  • Provide a methodology for customer segmentation from the buyer's perspective, i.e., based on service attributes rather than demographic indices.

The findings reveal that supplier selection is the result of a multiple-step process beginning with need recognition and culminating in ongoing supplier assessment.Evaluation of the process indicates that solution development represents the most complex phase of the decision and secondary information sources are highly valued by potential purchasers.

Factor analysis of supplier selection data revealed third party logistics buyers desire benefits resulting from economy, reliability, and service synergy. Cluster analysis of industrial buyers identified two major and two minor market segments. Both of the major segments were noted to highly value economy and reliability; however, buyers were differentiated by the degree to which they required synergistic benefits from logistics outsourcing. The two minor customer segments were found to be sub-segments of the major group requiring synergistic benefits. They were noted to base supplier choice on a limited number of highly specific criteria.

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