FOREIGN TRADE UNIVERSITY HO CHI MINH CITY CAMPUS ---------***--------- GRADUATION THESIS Major: International Business Economics FACTORS INFLUENCING CHOICES OF USING THIRD-PARTY LOGISTICS SERVICE PROVIDERS OF MANUFACTURING COMPANIES IN HO CHI MINH CITY Author: Nguyễn Việt Hưng Student ID: 1501015192 Class: K54CLC3 Supervisor: Nguyễn Thị Thu Hà (Assoc.) Ho Chi Minh City, May 2019 TABLE OF CONTENTS LIST OF ABBREVIATIONS LIST OF FIGURES LIST OF TABLES PREFACE 1 CHAPTER 1: INTRODUCTION TO FACTORS INFLUENCING CHOICES OF USING THIRD-PARTY LOGISTICS SERVICE PROVIDERS OF MANUFACTURING COMPANIES IN HO CHI MINH 2 1. The necessity of the research 2 1. Subject and scopes of the research 8 1. New contribution of the research 9 1.
Research structure 10 CHAPTER 2: THEORETICAL BASIS AND RESEARCH MODELS OF FACTORS INFLUENCING CHOICES OF USING THIRD-PARTY LOGISTICS SERVICE PROVIDERS OF MANUFACTURING COMPANIES IN HO CHI MINH CITY 11 2. Overview of third-party logistics service provider 11 2. Definition of third-party logistics 11 2. The role of third-party logistics in supply chain of manufacturing companies 12 2.
Types of services offered by third-party logistics service provider 14 2. Theoretical basis for factors influencing choices of using third-party logistics services of manufacturing companies in Ho Chi Minh city 17 2. Transaction-cost economics by Oliver E. A model for strategic supplier selection by Joseph Sarkis and Srinivas Talluri (2002) 18 2.
The five-stage model of third-party logistics buying process by Harry Sink and John Langley Jr. Previous empirical researches on factors influencing choices of using third-party logistics of manufacturing companies 22 2. Selection of Third-Party Logistics (3PL): A hybrid approach using interpretive structural modeling (ISM) and analytic network process (ANP) by Jitesh Thakkar and associates (2005) 22 2. A framework for evaluating third-party logistics by Ganesh Vaidyanathan (2005) 25 2.
Applying analytic network process (ANP) in logistics service provider selection – a case study of the industry investing in Southeast Asia by Kai-Ying Chen and Wan-Ting Wu (2011) 29 2. 3PL selection criteria in integrated circuit manufacturing industry in Taiwan by Bang-Ning Hwang, Tsai-Ti Chen, and James T. Summary of factors in related empirical research 33 CHAPTER 3: RESEARCH MODELS ON FACTORS INFLUENCING CHOICES OF USING THIRD-PARTY LOGISTICS SERVICE PROVIDERS OF MANUFACTURING COMPANIES IN HO CHI MINH CITY 35 3. Preliminary research methodology 36 3.
Proposed research model and research hypotheses 36 3. Official research methodology 40 3. Method of collecting information and determining sample size 40 3. Method of data analysis 41 3.
Scale of measurement for each variable 44 3. The measurement scale for performance factor 44 3. The measurement scale for service factor 45 3. The measurement scale for cost factor 45 3.
The measurement scale for quality assurance factor 45 3. The measurement scale for IT factor 46 3. The measurement scale for intangibles factor 46 3. The measurement scale for dependent variables 47 CHAPTER 4: RESEARCH OUTCOMES AND DISCUSSION ON FACTORS INFLUENCING CHOICES OF USING THIRD-PARTY LOGISTICS SERVICE PROVIDERS OF MANUFACTURING COMPANIES IN HO CHI MINH CITY 48 4.
Research outcomes description 48 4. Official sample description 48 4. Cronbach’s Alpha coefficient of reliability analysis 50 4. Exploratory factor analysis 54 4.
Adjusted model after factor analysis 56 4. Multiple linear regression analysis 56 4. Detecting violations of regression assumptions 60 4. Testing model hypotheses 62 4.
ANOVA result analysis 63 4. Research outcomes discussion 64 4. Quality assurance factor 65 4. IT factor 66 CHAPTER 5: RECOMMENDATIONS FOR THIRD PARY LOGISTICS SERVICE PROVIDERS OPERATING IN HO CHI MINH CITY 68 5.
Potentials of the market for third-party logistics in Ho Chi Minh city 68 5. Recommendations for third-party logistics operating in Ho Chi Minh City 71 5. Control cost and offer competitive price 71 5. Improve performance capability 74 5.
Expand IT capability 76 5. Limitations of the research and directions for future research 78 CONCLUSION 80 LIST OF REFERENCES 81 APPENDIX 89 LIST OF ABBREVIATIONS Abbreviation Meaning 3PL Third-party logistics 4PL Fourth-party logistics 5PL Fifth-party logistics AHP Analytical Hierarchy Process ANP Analytical network process ANOVA Analysis of variance ASEAN Association of Southeast Asian Nations CAGR Compound annual growth rate CMR Customer relationship management DEMATEL Decision making trial and evaluation laboratory DTT Delivery turnaround time EBPS Electronic bill payment solution EDI Electronic data interchange EFA Exploratory factor analysis FAA Federal aviation administration FAHP Fuzzy analytical hierarchy process FDA Food and drug administration FTP File transfer protocol GDP Gross domestic products IC Integrated circuit ISM Interpretive structural modeling ISO International organization for standardization KMO Kaiser-Meyer-Olkin KPI Key performance indicator IT Information technology LPI Logistics performance index MNCs Multinational corporations SCM Supply chain management TEU Twenty-foot equivalent unit TOPSIS Technique for Order of Preference by Similarity to Ideal Solution USD United States dollar VND Vietnam dong VIF Variance inflation factor VPN Virtual private network XML Extensible markup language LIST OF FIGURES Figure 1.1: LPI overperformers and underperformers 2 Figure 2.1: Relationship of 3PL provider in the supply chain of manufacturer 12 Figure 2.2: Summary of logistics activities in the supply chain 13 Figure 2.3: Detailed graphical representation for strategic supplier selection 18 Figure 2.4: The five stages of third-party logistics buying process 20 Figure 2.5: 3PL evaluation process 25 Figure 3.1: Research procedure 35 Figure 3.2: Proposed research model for the thesis 37 Figure 4.1: Scatterplot of standardized residuals 61 Figure 4.2: Histogram of residual frequency 61 LIST OF TABLES Table 2.1: Classification of 3PL service providers based on type of activity 11 Table 2.2: Types of services offered by 3PL service providers 14 Table 2.3: Shipper views of needed IT-based capabilities by 3PLs 16 Table 2.4: 3PL service providers selection criteria 23 Table 2.5: Summary of classification of variables 24 Table 2.6: Performance, service and quality assurance criteria details 27 Table 2.7: Information technology, costs and intangibles criteria details 28 Table 2.8: Dimensions and criteria for 3PL selection by Chen and Wu 29 Table 2.9: Summary of factors in previous empirical research 33 Table 3.1: Five-point Likert Scale 36 Table 3.2: Measurement scale for performance factor 44 Table 3.3: The measurement scale for service factor 45 Table 3.4: The measurement scale for cost factor 45 Table 3.5: The measurement scale for quality assurance factor 46 Table 3.6: The measurement scale for IT factor 46 Table 3.7: The measurement scale for intangibles factor 47 Table 3.8: The measurement scale for dependent variables 47 Table 4.1: Data collection results 48 Table 4.2: Demographic characteristics of the respondents 49 Table 4.3: Cronbach’s Alpha for Performance factor 51 Table 4.4: Cronbach’s Alpha for remaining factors 52 Table 4.5: Cronbach’s Alpha for dependent variables 53 Table 4.6: Rotated component matrix 55 Table 4.7: Exploratory factor analysis for dependent variable 56 Table 4.8: Pearson correlations matrix 57 Table 4.9: Model summary 58 Table 4.10: ANOVA testing results 59 Table 4.11: Regression result 59 Table 4.12: Hypotheses testing results 62 1 PREFACE First and foremost, the author would like to send his utmost regards to the lecturers of Foreign Trade University, Ho Chi Minh campus, who have been accompanying the author on his 4 years here. The author is grateful for all the experiences and guidance received at Foreign Trade University in Ho Chi Minh city. Secondly, the writer would like to give his sincere gratitude to his supervisor, Mrs.
Nguyen Thi Thu Ha (Ph.), for all her support and precious guidance, as well as other lecturers who have assisted and instructed the author in this research work. Without her support and dedicated involvement throughout the process, this thesis would not be completed. The author would also like to bestow his gratitude to all corporations who provided him with the opportunities to contact and gain realistic information from their employees and managers. Especially, without the dedication of respondents in spending time and effort answering the questionnaire, the writer would not have gained the most relevant assessment regarding the situation of the industry, as well as perceptions and market analysis of industry insiders.
Finally, despite the time and effort invested in researching and completing the paper, there remains inevitable errors due to the limitation in specialized knowledge and experience. The author, thus, heartily welcomes all comments and contributions for future improvements of the topic. Ho Chi Minh City, May 2019 The author Nguyễn Việt Hưng 2 CHAPTER 1: INTRODUCTION TO FACTORS INFLUENCING CHOICES OF USING THIRD-PARTY LOGISTICS SERVICE PROVIDERS OF MANUFACTURING COMPANIES IN HO CHI MINH 1. The necessity of the research In-house or outsource for the supply chain has always been a critical strategy of the key decision makers of an organization.
Each side has its advantages and incurred risks associated. At the same time, the state of the market has pushed the relevancy of supply chain to the forefront more than ever, thanks to the growth of buying power, e-commerce, booming customer demands and the technology rate of development. Especially for third-party logistics (3PL) service providers, the competition has never been fiercer. As manufacturers shift focus to their own core competencies, such as market share, product development, marketing, 3PLs outsourcing is an inevitable choice for securing a strong supply chain to the business.
Global 3PL market size analysis comments that the global market size is estimated at USD 865 billion in 2018, with a CAGR of 9%. Asia Pacific is expected to lead the global 3PL market not only in terms of value but also growth rate. The growth in the region will be driven by huge amount of trade flow in China and South East Asia. In tune with the trend of outsourcing logistics activities among manufacturers, many Vietnamese enterprises agree that selecting the appropriate third-party logistics service provider is becoming an increasing undisputed practice.1: LPI overperformers and underperformers Source: World Bank, 2018 Logistics activities in Vietnam is on the rise with the acceleration of import and export activity.
According to the bi-annual report from World Bank, Vietnam places at 39 globally on the LPI (Logistics performance index), a 25 position increase from 2016.1 illustrates the performance of countries of similar income. The data suggests that Vietnam is an overperformer of this quartile. Compared to countries from the same geological position, Vietnam places at number 3 in ASEAN, preceded only by Singapore and Thailand. The 2019 Agility emerging markets logistics index place Vietnam at the 10th most promising logistics market, one spot higher than Thailand.
The contract logistics and domestic express markets of Vietnam are around 750 million USD in value, accompanied by healthy growth rates. Port capacity of Vietnam stands at an annual rate of 11 million TEU, and the sea freight market is estimated to grow at a 15.3% CAGR over the five years to 2022. About 90% of imports and exports into Vietnam transport via sea with about 500-600 million tons / year. It is expected that by 2020, goods through seaports will reach 1,1 billion tons.
Vietnam also places 4th in the international logistics opportunities sub-category. With the ongoing tension between the U.S and China, a 56,1% of respondents say that South East Asia will reap benefit. 4 In Vietnam, in 2018, logistics industry saw a 12-14% growth, due to the rise of the entire economy as well as special attention and appropriate policies from the Government. The industry reality shows that the world's highest revenue logistics corporations are also the leading units in providing comprehensive package logistics contracts.
In Vietnam, this trend is similar, with foreign 3PL logistics providers (currently the highest logistics business model in Vietnam) such as DHL Logistics, Damco, FedEx, APL … being market-leading businesses thanks to the advantages of equipment, management technology and additional value-added services. On the other hand, Vietnam's exports are mainly processed goods, so the services related to logistics provided to these export-producing enterprises are mainly undertaken by foreign companies due to their concerns of domestics 3PLs. Some Vietnamese logistics enterprises such as Tân Cảng Sài Gòn, Gemadept, Vinafco and Transimex are actively developing 3PL service models and are strong enterprises in terms of ownership of fixed assets and providing mechanical services.