What drives the choice of a third-party logistics provider?

It is generally believed that companies choose supply chain partners on the basis of their distinctive value propositions - a fact one would also expect holds true when companies choose a logistics service provider. However, faced with the complexities of varied customer demands, it can be difficult for logistics service companies to obtain an effective understanding of how customers differentially value the service components they offer. In this paper, we address this issue by identifying the factors that are important in a customer's choice of a logistics service provider. Using stated choice methods we explore the relative importance of seven service attributes using a sample of 309 managers with a central role in purchasing logistics services across a range of industries and countries. The results reveal that three distinct decision models populate our data where the preferences for different logistics service attributes - such as price and delivery performance - vary greatly between customer groups represented by these models. Strategically, our findings provide the management of a third-party logistics provider with a logical starting point from which to determine the goals that are set for their operations, particularly in choosing the customer segments to service. © 2011 Institute for Supply Management, Inc.™