Evaluating the comparative managerial efficiency of leading third party logistics providers in North America

Abstract

Purpose

This paper aims to measure the comparative managerial efficiency of 24 leading third‐party logistics providers (3PLs) in North America and identify best‐practice firms among these 3PLs.

Design/methodology/approach

This paper proposes data envelopment analysis to measure the slack‐based efficiency, pure technical efficiency, and mixed efficiency of 24 leading 3PLs in North America, relative to their rivals in world‐wide 3PL markets. In particular, this paper develops both the Charnes, Cooper and Rhodes (CCR) model under constant returns to scale and the Banker, Charnes, and Cooper (BCC) model under varying returns to scale that are designed to derive weights without being fixed in advance.

Findings

With respect to managerial efficiency, this study did not find any significant performance differences between asset based 3PLs and non‐asset based 3PLs. Defying the common sense, relatively small but niche‐oriented 3PLs with limited service offerings tended to perform better than their larger counterparts with a wide variety of service offerings to customers all across the world. A majority of leading 3PLs in North America suffer from overcapacity and the subsequent underutilization of their physical and human resources.

Practical implications

This paper provides practical guidelines as to how 3PLs can find right niche markets, manage slack/idle resources, and cope with increasing competition.

Originality/value

This paper is one of the first to develop a variety of efficiency measures for 3PL operational performances including pure technical (managerial) efficiency, slack‐based efficiency, scale efficiency, and mix efficiency under both constant and varying returns to scale. This paper also considers the much larger number of 3PLs than those considered by prior benchmarking studies for performance evaluation; thus, it captures the “true” managerial efficiency of 3PLs relative to their competitors in the more crowded North American 3PL industry.

Citation

Min, H., DeMond, S. and Joo, S. (2013), "Evaluating the comparative managerial efficiency of leading third party logistics providers in North America", Benchmarking: An International Journal, Vol. 20 No. 1, pp. 62-78. https://doi.org/10.1108/14635771311299498