Title: A loss function based decision support model for 3PL selection by 4PLs

Authors: Rajbir Singh Bhatti, Pradeep Kumar, Dinesh Kumar

Addresses: Department of Mechanical & Industrial Engineering, Indian Institute of Technology Roorkee, Roorkee, Uttrakhand, India. ' Department of Mechanical & Industrial Engineering, Indian Institute of Technology Roorkee, Roorkee, Uttrakhand, India. ' Department of Mechanical & Industrial Engineering, Indian Institute of Technology Roorkee, Roorkee, Uttrakhand, India

Abstract: Supply chains are increasingly turning global with the advent of information technology based support systems and competitive business opportunities being available at various points across the globe. The manner in which we see Third Party Logistics| service providers (3PLs) is also changing with the advent of Fourth Party Logistics providers (4PLs), a term prescribed and copyright by Accenture, on the global scene. This study focuses on roping in intangible variables into 3PL choice and evaluation by 4PL players. A risk-based index is used to define the risks associated with any particular choice made by the 4PL. The risk levels (and indices) serve to rate the 3PL extensions. Taguchi|s loss function analysis has been carried out to ascertain how risky a choice can be. A corresponding index is generated. Single-sided loss functions have been deployed for analysing the risks and benefits of 3PL outsourcing. Trust, flexibility and innovativeness are the prime movers of this study. A case study is presented to substantiate the postulates of the analytical model proposed herein.

Keywords: loss function; supply chain management; SCM; 4PL service providers; 3PL service providers; third party logistics; fourth party logistics; intangible variables; risk; Taguchi methods; outsourcing; trust; flexibility; innovation; innovativeness.

DOI: 10.1504/IJISM.2010.035643

International Journal of Integrated Supply Management, 2010 Vol.5 No.4, pp.365 - 375

Received: 03 Oct 2009
Accepted: 08 Jun 2010
Published online: 01 Oct 2010 *

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