Benchmarking criteria for evaluating third-party logistics providers in South Africa

Abstract

Background: In South Africa, deemed the ‘gateway to Africa’, there is limited evidence of the existence of a survey ranking third-party logistics providers (3PLs). This lack of comparative information of the major 3PLs based on key outsourcing and ranking criteria complicates the selection process for companies that intend to contract 3PLs.

Objective: The purpose of this article was to determine the critical selection and ranking criteria for the creation of an index to evaluate 3PLs in South Africa for developing a 3PL benchmarking index.

Method: Survey data were collected from 103 of the Top 500 Companies in Africa that use 3PLs and operate within the sectors that mostly outsource logistics services in South Africa. A factor analysis method was employed.

Results: Three factors for 3PLs selection converged: service quality, information management and compliance, and collaboration. The top three ranked categories for 3PLs selection are cost and price structure, service delivery and the relationship with the 3PL provider. Most respondents (90%) confirmed a need for a 3PLs index in South Africa.

Conclusion: The results help managers with the strategic selection of 3PLs as these critical logistics outsourcing selection criteria can be used to evaluate and rank 3PLs prior to contracting. Based on the selection criteria for logistics outsourcing identified and ranked in this article, a ranking index for 3PLs in South Africa can be developed.