Logistics sophistication, manufacturing segments and the choice of logistics providers

Purpose - To investigate the relationship between the choice of integrated or functional logistics providers by Brazilian shippers and: the type of their manufacturing process structure, and the level of sophistication of their logistics function, as well as the impact on that choice of possible interactions between these two characteristics of the shippers. Design/methodology/approach - Data were collected in a comprehensive survey on the use of 3PL service providers in Brazil using a sample of 93 large Brazilian shippers; The analysis tests three research questions on the individual and combined relationships of logistics sophistication, measured on a logistics sophistication index (LSI), and process type (according to Goldratt's V-A-T classification for materials flow analysis) with the choice of type of 3PL provider; the methods of analysis were cluster and logistics regression analysis. Findings - The paper finds: support for an association of sophisticated logistics functions and a preference for integrated 3PLs; support for an association between the A-type production process structure and preference for integrated 3PLs; and of V and T types for functional 3PLs. However, it also finds that shippers with type T process structure and more sophisticated logistics tend to favor integrated 3PLs. Research limitations/implications - One limitation is that logistics performance is not considered; future studies may further refine the proposed framework for segmentation. Practical implications - The paper advocates the use of models by providers to segment their customers, and better understanding by shippers of prevailing trends in logistics outsourcing according to their process structure and characteristics of their logistics function. Originality/value - The paper unveils significant relationships between shipper sophistication of logistics function, manufacturing process structures, and the choice of type of 3PL. It also proposes a new framework for segmenting the 3PL service provider market in terms of sophistication of the logistics function and the logistics task implied by the type of operation.