LOGISTICS OUTSOURCING AND SELECTION OF THIRD PARTY

130 Pages·2009·0.74 MB·English

T.C

BAHÇEŞEHİR UNIVERSITY

LOGISTICS OUTSOURCING AND SELECTION OF
THIRD PARTY LOGISTICS SERVICE PROVIDER
(3PL) VIA FUZZY AHP

Master Thesis

ERDAL ÇAKIR

İSTANBUL, 2009
T.C

BAHÇEŞEHİR UNIVERSITY

INSTITUTE OF SCIENCE

INDUSTRIAL ENGINEERING

LOGISTICS OUTSOURCING AND SELECTION OF
THIRD PARTY LOGISTICS SERVICE PROVIDER
(3PL) VIA FUZZY AHP

Master Thesis

ERDAL ÇAKIR

Thesis Supervisor: ASST. PROF. DR. ÖZALP VAYVAY

İSTANBUL, 2009
T.C
BAHÇEŞEHİR UNIVERSITY
INSTITUTE OF SCIENCE
INDUSTRIAL ENGINEERING

Name of the thesis: Logistics outsourcing and Selection of third party logistics service
provider (3PL) via fuzzy AHP.
Name/Last Name of the Student: Erdal ÇAKIR
Date of Thesis Defense: June 9, 2009

The thesis has been approved by the Institute of Science.

Prof. Dr. A. Bülent ÖZGÜLER
Director

----------------------

I certify that this thesis meets all the requirements as a thesis for the degree of Master of
Science.

Prof. Dr. A. Bülent ÖZGÜLER
Program Coordinator

----------------------

This is to certify that we have read this thesis and that we find it fully adequate in scope,
quality and content, as a thesis for the degree of Master of Science.

Examining Comittee Members Signature
Title Name and Surname

Asst. Prof. Dr. Özalp VAYVAY
Thesis Supervisor ----------------------

Prof. Dr. Cengiz KAHRAMAN
Member ----------------------

Asst. Prof. Dr. Tunç BOZBURA
Member ----------------------
ACKNOWLEDGMENTS
I would like to thank Assistant Professor Özalp Vayvay, my thesis supervisor, for his
guidance, help, comments and revisions in improving this thesis. Without his instruction
and guidance, this thesis could not be accomplished. I would also thank Prof. Dr.
Cengiz Kahraman and Asst. Prof. Dr. Tunç Bozbura for their valuable comments.
I would like to express my sincere gratitude towards questionnaire repliers for their
valuable responses and helpful comments, which helped much to improve the quality of
the paper.
Thanks also go to TUBİTAK which supported me financially to complete my thesis.
Lastly, to Sibel: Thank you for your patience, support and love…

İSTANBUL, 2009 Erdal ÇAKIR
ABSTRACT
LOGISTICS OUTSOURCING and SELECTION of THIRD PARTY
LOGISTICS SERVICE PROVIDER (3PL) VIA FUZZY AHP

Çakır, Erdal

Industrial Engineering

Supervisor: Asst. Prof. Dr. Özalp Vayvay

June, 2009, 118 pages

In today’s competitive business world, it is extremely important for decision makers to
have access to decision support tools in order to make quick, right and accurate
decisions. One of these decision making areas is logistics service provider selection.
Logistics service provider selection is a multi – criteria decision making process that
deals with the optimization of conflicting objectives such as quality, cost, and delivery
time. If it is not supported by a system, this would be a complex and time consuming
process.
In spite of the fact that the term “logistics service provider selection” is commonly used
in the literature, and many methods and models have been designed to help decision
makers, few efforts have been dedicated to develop a system based on any of these
methods.
In this thesis, logistics service provider selection decision support system based on the
analytic hierarchy process (AHP) method which has been commonly used for multi –
criteria decision making problems is proposed. Inasmuch as it is believed that fuzzy
concepts and usage of empirical data extend the capability of any modeling approach,
integrating them into model will lead to a more powerful system. To validate choice of
the Fuzzy AHP model and also to validate the conceptual design of logistics service
provider selection decision support system, it is conducted a case study in an example
company.
Keywords: logistics service provider selection, fuzzy AHP, 3PL
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ÖZET
LOJİSTİK DIŞ KAYNAK KULLANIMI ve ÜÇÜNCÜ PARTİ LOJİSTİK
ŞİRKETİNİN (3PL) BULANIK AHP YAKLAŞIMIYLA SEÇİLMESİ

Çakır, Erdal

Endüstri Mühendisliği

Tez Danışmanı: Yrd. Doç. Dr. Özalp Vayvay

Haziran, 2009, 118 sayfa

Günümüz rekabetçi iş dünyasında, hızlı, doğru ve kesin kararlar verebilmek için karar
destek araçlarına sahip olabilmek karar vericiler açısından oldukça önemlidir. Karar
vericilerin karar vermekte zorlandığı alanlardan biri de lojistik dış kaynak kullanımında
üçüncü parti lojistik şirketinin seçilmesidir. Üçüncü parti lojistik şirketinin seçimi karar
vermede düşünülen ölçütler (kalite, maliyet, dağıtım zamanı) ele alındığında, zor ve
zaman alıcı bir süreçtir. Aynı zamanda bu ölçütlerin birbirleriyle çelişen amaçlarının
optimize edilmesi ve ortak amaca hizmet etme düzeyleri belirlenmesi ile karar verme
süreci oluşturulmalıdır. Bu etkenler ve zorluklar düşünüldüğünde bu sürecin bir sistem
tarafından desteklenmeden yönetilemeyeceği aşikârdır.
“Tedarikçi seçimi” literatürde çokça kullanılmasına ve karar vericilere yardım etmek
için birçok model ve metot geliştirilmesine rağmen, bu metotları kullanarak sistemsel
bir yaklaşım getiren çalışma çok az bulunmaktadır.
Bu tez ile birlikte, üçüncü parti lojistik şirketinin seçimi için analitik hiyerarşi sürecine
(AHP) dayalı karar destek sistemi önerilecektir. Karar vermede etkili olacak kriterlerin
aralarındaki ilişkilerin kesin ifadelerle belirtilemeyeceği düşünüldüğünde karar destek
aşamasına bulanık mantık yaklaşımının dâhil edilmesi modelin daha güçlü olmasını
doğuracak, sonuç olarak daha akılcı ve doğru çözümler üretmesine yardımcı olacaktır.
Bulanık analitik hiyerarşi süreci ile kurulacak olan modeli test etmek için örnek bir
şirkette uygulama yapılacaktır.
Anahtar kelimeler: Üçüncü parti lojistik şirket seçimi, Bulanık AHP, 3PL
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TABLE OF CONTENTS
LIST OF TABLES...................................................................................................................................vii
LIST OF FIGURES..................................................................................................................................ix
ABBREVIATIONS....................................................................................................................................x
1. INTRODUCTION............................................................................................................................1
1.1 MOTIVATION OF THE RESEARCH.............................................................................................1
1.2 RESEARCH OBJECTIVES...........................................................................................................3
1.3 THESIS ORGANIZATION...........................................................................................................3
2. LITERATURE REVIEW................................................................................................................5
2.1 LOGISTICS................................................................................................................................5
2.1.1 Phases of logistics................................................................................................................5
2.1.1.1 Logistics as a functional specialization...................................................................................7
2.1.1.2 Logistics as a coordinative function........................................................................................8
2.1.1.3 Logistics as enabler of process orientation within the firm..................................................9
2.1.1.4 Logistics as a supply chain management.............................................................................10
2.1.2 Performance effects of logistics development.................................................................12
2.2 OUTSOURCING........................................................................................................................14
2.2.1 What is outsourcing..........................................................................................................14
2.2.2 Why organizations outsource..........................................................................................16
2.2.3 Critical success factors of outsourcing............................................................................20
2.3 LOGISTICS OUTSOURCING.....................................................................................................22
2.3.1 Origin and definition........................................................................................................22
2.3.2 Benefits and risks of logistics outsourcing......................................................................24
2.3.2.1 Advantages of logistics outsourcing......................................................................................24
2.3.2.2 Disadvantages of logistics outsourcing.................................................................................26
2.3.3 Balance Sheet Impact of Logistics Outsourcing............................................................27
2.3.4 The role of logistics service providers in logistics outsourcing.....................................29
2.3.5 General logistics outsourcing perspective in Turkish firms.........................................31
2.3.6 Logistics outsourcing researches.....................................................................................32
2.4 SELECTION OF LOGISTICS OUTSOURCING COMPANY (3PL)................................................39
2.4.1 Selection Methods.............................................................................................................41
2.4.2 Specific problems related to the selection of a provider................................................44
2.4.3 Criteria for the selection of a provider...........................................................................45
3. DATA AND METHODOLOGY...................................................................................................50
3.1 METHODOLOGY.....................................................................................................................50
3.1.1 Analytical Hierarchy Process..........................................................................................50
3.1.2 Fuzzy Set Theory..............................................................................................................52
3.1.3 Fuzzy Numbers.................................................................................................................52
3.1.4 Algebraic Operations on TFNs........................................................................................54
3.1.5 Fuzzy Analytical Hierarchy Process (FAHP).................................................................54
3.1.6 Algorithm of FAHP Method............................................................................................55
3.1.7 Applications of Fuzzy AHP methodology in literature.................................................58
3.2 APPLICATION OF FAHP METHODOLOGY..............................................................................61
3.2.1 A Case Company..............................................................................................................61
3.2.2 Structuring Selection Model............................................................................................61
3.2.3 Potential Providers...........................................................................................................64
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3.2.4 Pair wise comparisons matrices......................................................................................65
3.2.4.1 Questionnaire Design and Data Collection..........................................................................65
3.2.4.2 Integration the Opinions of Decision Makers......................................................................66
3.2.5 Data Input and Analysis using Fuzzy AHP....................................................................67
3.2.5.1 The Fuzzy Evaluation Matrix with Respect to Goal...........................................................67
3.2.5.2 Evaluation of the sub-attributes with respect to “Cost of Service”...................................72
3.2.5.3 Evaluation of the sub-attributes with respect to “Financial Performance”......................72
3.2.5.4 Evaluation of the sub-attributes with respect to “Operational Performance”.................73
3.2.5.5 Evaluation of the sub-attributes with respect to “Reputation of the 3PL”.......................74
3.2.5.6 Evaluation of the sub-attributes with respect to “Long-term Relationships”...................74
3.2.5.7 Pair wise comparison of alternatives....................................................................................75
4. RESULTS........................................................................................................................................82
5. DISCUSSION..................................................................................................................................85
6. CONCLUSION...............................................................................................................................88
REFERENCES.........................................................................................................................................92
APPENDICES........................................................................................................................................106
APPENDİX A.1 KEY LOGİSTİCS OUTSOURCİNG RELATED FİNDİNGS SİNCE 1999 TO
PRESENT...................................................................................................................107
APPENDİX A.2 QUESTİONNAİRE FORMS USED TO FACİLİTATE COMPARİSONS OF
MAİN AND SUB-ATTRİBUTES.............................................................................112

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LIST OF TABLES
Table 2.1: Reasons for outsourcing – summary of surveys.......................................18
Table 2.2: Balance Sheet Impact of Logistics Outsourcing.......................................28
Table 2.3: Summary of literature on the criteria for the selection of a provider....46
Table 3.1: The fundamental scale................................................................................51
Table 3.2: Triangular fuzzy numbers..........................................................................53
Table 3.3: Qualifications of potential providers.........................................................64
Table 3.4: Pair – wise comparison matrix for main attributes.................................68
Table 3.5: Summary of priority weights of main criteria with respect to goal.......69
Table 3.6: Pair – wise comparison matrix for the sub-attributes of “Cost of
Service”.......................................................................................................72
Table 3.7: Summary of priority weights for the sub attributes of the “Cost of
Service”.......................................................................................................72
Table 3.8: Pair – wise comparison matrix for the sub-attributes of “Financial
Performance”..............................................................................................72
Table 3.9: Summary of priority weights for the sub attributes of the “Financial
Performance”..............................................................................................73
Table 3.10: Pair – wise comparison matrix for the sub-attributes of “Operational
Performance”..............................................................................................73
Table 3.11: Summary of priority weights for the sub attributes of the “Operational
Performance”..............................................................................................73
Table 3.12: Pair – wise comparison matrix for the sub-attributes of “Reputation of
the 3PL”......................................................................................................74
Table 3.13: Summary of priority weights for the sub attributes of the “Reputation
of the 3PL”..................................................................................................74
Table 3.14: Pair – wise comparison matrix for the sub-attributes of “Long-term
Relationships”.............................................................................................74
Table 3.15: Summary of priority weights for the sub attributes of the “Long-Term
Relationships”.............................................................................................75
Table 3.16: Reading table of qualifications of potential providers...........................75
Table 3.17: An Example matrix of reading table......................................................76
Table 3.18: Pair-wise comparison for the alternatives regarding to sub-attributes
of “cost of service”......................................................................................77
Table 3.19: Summary of priority weights for the alternatives regarding to “cost of
service”........................................................................................................77
Table 3.20: Pair-wise comparison for the alternatives regarding to sub-attributes
of “financial performance”........................................................................78
Table 3.21: Summary of priority weights for the alternatives regarding to
“financial performance”............................................................................78
Table 3.22: Pair-wise comparison for the alternatives regarding to sub-attributes
of “operational performance”...................................................................78
Table 3.23: Summary of priority weights for the alternatives regarding to
“operational performance”.......................................................................79
Table 3.24: Pair-wise comparison for the alternatives regarding to sub-attributes
of “reputation of the 3PL”.........................................................................79
Table 3.25: Summary of priority weights for the alternatives regarding to
“reputation of the 3PL”.............................................................................80
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Table 3.26: Pair-wise comparison for the alternatives regarding to sub-attributes
of “long-term relationships”......................................................................80
Table 3.27: Summary of priority weights for the alternatives regarding to “long-
term relationships”.....................................................................................81
Table 4.1: Priority weights of main and sub-attributes, and alternatives...............83
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