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International Journal of Logistics Management, Vol. 17, n. 1, 2006
TECHNOLOGY USAGE IN THE SUPPLY CHAIN: THE CASE OF SMALL 3PLs
Pietro Evangelista
Institute for Service Industry Research (IRAT)
National Research Council (CNR)
Via M. Schipa, 115 - 80122 Naples, Italy
E-mail: p.evangelista@irat.cnr.it, Tel. +39 081 2470920, Fax +39 081 2470933
Brief biography
Pietro Evangelista is researcher in logistics and transportation at the Institute for Service Industry
Research (IRAT) of the Italian National Research Council (CNR) based in Naples. His research
interests include shipping logistics and supply chain management. This is reflected in several papers
and articles published in national and international journals as well as chapters in books. Currently,
his scientific activity is focused on the impact of information and communication technology on
transport and logistics service industry. He is member of the editorial board of two international
journals and acts as peer reviewer for a number of international journals. He lecturers at the Faculty
of Engineering of the Naples’ University Federico II.
Edward Sweeney
National Institute for Transport and Logistics (NITL)
Dublin Institute of Technology (DIT)
17 Herbert St., Dublin 2, Ireland
E-mail: edward.sweeney@nitl.ie, Tel. +353 1 6445700, Fax +353 1 6611943
Brief biography
Edward Sweeney is Director of Learning at the National Institute for Transport and Logistics
(NITL) in Dublin, Ireland. NITL, based at the Dublin Institute of Technology, is Ireland’s centre of
excellence in logistics and supply chain management. His research interests are in supply chain
strategy development and implementation. He has published over 80 books, papers and reviews and
has worked and lectured in over 20 countries in Europe, North America and Asia. A mechanical
engineer by background, he has held academic appointments at Trinity College Dublin, the
University of Warwick and the University of Technology, Malaysia.
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TECHNOLOGY USAGE IN THE SUPPLY CHAIN: THE CASE OF SMALL 3PLs
Abstract
Purpose - In today’s supply chain management (SCM) practices, a successful strategy depends
increasingly on the performance of Third Party Logistics (3PL) providers as they play a key
integrative role linking the different supply chain elements more effectively. Information and
Communications Technology (ICT) has become an important element of 3PL competitive
capability as it enables higher levels of supply chain integration. Recent industry developments
have widened the technological gap between large and small 3PLs. This is critical particularly for
those markets populated by a large number of small 3PLs such as the Italian logistics industry. The
purpose of this paper is to provide an overview of ICT adoption in small logistics service providers.
The focus of the study is the Italian 3PL market.
Design/methodology/approach - The methodology adopted in this paper is based on the action
research framework and it is a combination of theoretical analysis and empirical findings (focus
groups and surveys). Firstly, a literature review on ICT dissemination in the international and Italian
3PL industry has been carried out. Then, a field survey has been developed preceded by two focus
groups. The empirical investigation examined a sample of 153 small Italian 3PLs on the base of a
definition and taxonomy proposed by the authors.
Findings - The results provide a useful technological profile of the surveyed companies, as well as
an analysis of the role of ICT in customising services and of the factors influencing ICT adoption.
Research limitations/implications - To give a more robust scientific justification of the survey
results it would be useful to carry out an additional large scale analysis including other countries
with a high presence of small logistics service companies. Furthermore, a complementary case
study analysis would be of help in defining the role of specific factors in different types of 3PL.
Given the importance of small logistics providers in contemporary supply chain configurations, the
main implication from a research point of view is that further investigations in this field are needed
to better understand innovation paths, and how ICT can improve the competitive capabilities of
3PLs and of the wider supply chain.
Practical implications - The practical implications deriving from this paper are twofold. Firstly,
managers of small 3PLs can use findings to set up guidelines for improving a company’s
technology innovation. Technology vendors can use findings to better market their service/product
into the small logistics service provider segment.
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Originality/value - Despite the fact that much has been written about the dissemination of ICT,
there is still a shortage of research in the field of small 3PLs with little empirical investigation into
the usage of ICT by small 3PLs. This paper provides a contribution to the filling this void and
suggests some possible research directions.
Key Words
ICT usage, Supply chain, Competitive advantage, Small logistics service providers,
Italian logistics service market, Empirical survey
Paper type Research paper
Introduction
In recent years, a growing number of manufacturers and retailers have adopted the SCM concept in
the management of their businesses. For these companies the delivery system has become an
integral part of their product, to the extent that transportation and logistics are as important as the
product itself (Sheffi, 1990). The application of the SCM concept leads manufacturers and retailers
to outsource significant parts of their logistics (McKinnon, 1999), as well as to select and reduce the
number of logistics providers with which to establish long-term relationships for the supply of
“tailor-made” transportation and logistics services (Razzaque and Sheng, 1998).
Logistics companies play a more important role than in the past as they coordinate and
accelerate physical and information flows along multiple levels of the supply chain (Cooper,
Lambert and Pagh, 1998). Indeed, in keeping pace with rapid market changes the whole logistics
system has become more efficient and flexible. This has forced 3PLs to look for accurate and real-
time information on the status of the entire shipment process to increase their planning capacity and
to improve customer service levels (Stough, 2001).
ICT is also of critical importance in developing logistics services in a customised supply
chain context. In this regard, Sauvage (2003) noted that in a highly competitive business
characterised by time compression, technological effort becomes a critical variable and a significant
tool for differentiation of logistics services. Van Hoek (2002) assigned a specific role to ICT for
3PLs aiming to perform customising operations for service users. The author pointed out that the
use of specific technological capabilities may leverage transport and logistics services and facilitate
more effective integration across companies in the supply chain. For 3PLs, ICT capabilities can
assure the rapid customisation of products and maintain competitive lead-times. The result is that
competitive advantage in the 3PL industry will be based increasingly on creating value for
customers as many value added activities are directly or indirectly dependent on ICT applications
(Crowley, 1998).
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Nevertheless, the use of ICT in the 3PL sector is unevenly distributed between large and
small-medium sized logistics service providers [1]. Large firms have heavily invested in ICT and
have actively developed information systems. Furthermore they have been using in-house
information systems to support their operations for a long time. Small logistics service providers, on
the other hand, have more difficulties in setting up ICT applications due to reluctance to change and
insufficient human and financial resources. This has further complicated the competitive position of
small logistics service providers - it seems that they have underestimated the potential of ICT as an
enabler for increasing cost-efficiency and improving customer service. The real risk is that small
3PLs could either be marginalised in the marketplace as “tier suppliers” of large logistics
companies, or even forced out of the market completely. The scenario that might arise could present
small 3PLs with two different alternatives: survive in a low-cost world of transportation carriers
(commodity providers), or pursue the expensive and problematic path of becoming value adding
providers through innovation in technology and in other aspects of their operation (advanced
logistics providers). This situation appears particularly critical in those markets characterised by a
large number of small 3PLs and where multinational logistics companies hold a substantial market
share as in the case of the Italian 3PL industry.
From a research point of view, while information technology in large 3PLs has been widely
investigated (Larson and Gammelgaard, 2001; van Hoek, 2000; Berglund, van Laarhoven,
Sharman and Wandel, 1999; Peters, Cooper, Lieb, and Randall, 1998) there is still a shortage of
research in the field of small 3PLs with little empirical investigation analysing the adoption of ICT
by these companies. Considering the limited quantitative evidence about the usage of ICT in small
logistics service providers, the study described in this paper attempts to fill this void through an
empirical investigation developed on a sample of small Italian logistics service providers. The
survey is aimed at analysing ICT usage in the sector and at identifying the main factors affecting the
adoption of technology.
Following this introduction, an overview of the Italian logistics service market is provided.
The subsequent section analyses the recent trends associated with the dissemination of ICT in the
international transport and logistics service industry, followed by an analysis of information
technology usage in the Italian 3PL sector. The research approach used to investigate ICT usage in
a sample of 153 small Italian logistics companies through a mail survey is described. The main
research findings are then presented. The concluding section discusses the managerial and research
implications of the survey.
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Background to the Italian logistics service industry
Several sources estimate that in 2001, the Italian 3PL market was the fifth largest European market
(after Germany, UK, France and Benelux) with the highest expected growth rate in Europe in
coming years (Harvey, 2003). Nevertheless, it is approximately four times smaller than the German
market (€13.9bn against €2.9bn). In the same year, the total value of logistics outsourcing was
approximately €12bn (3.6% of the Italian GNP). It should be noted that the difference between the
above figures is because the first (i.e. €2.9bn) does not include transportation, while the second
(€12bn) includes transportation services as part of the total value of logistics outsourcing.
The most recent data estimate the number of firms in the sector at between 145,000
(Confetra [2]) and 205,000 (Unioncamere [3]). These data indicate that one of the main
characteristics of the Italian market is its high fragmentation. For example, Albo Nazionale
Autotrasportatori [4] estimates that in the road freight transport sector there are about 180,000
haulage companies with about 85% of them owning no more than 3 vehicles. Other European
markets are characterised by fewer firms and a higher number of vehicles per company. For
example in Germany there are 42,430 road haulage companies, 42,866 in France and 9,430 in The
Netherlands (KPMG, 2003).
Furthermore, a recent analysis carried out by an Italian logistics magazine, Il Giornale della
Logistica (June/July 2004, p. 48), on a sample of 1,000 Italian 3PLs ranked by turnover shows that:
a) the first 100 companies produce 64% of the total sample turnover, and b) for the first 200
companies the percentage is 75%. The fragmentation of the market is also evident considering
employee data. Confetra estimates the total number of employees in the sector at around 420,000
people in 2004. According to KPMG (2003) about 50% of Italian logistics providers employ less
than 50 people, and that 35% of them employ less than 9 people. The fragmentation of the Italian
logistics service industry emerging from the above picture has facilitated the entry of large foreign
logistics groups, including TNT, Deutche Post, Eurogate, ABX and British Post Office in recent
years. Many of the most advanced and attractive Italian providers of larger size with consolidated
business experience were acquired by multinational logistics groups in the period 1998-2001. It is
worth noting that, excluding the Grimaldi Group based in Naples, no international acquisitions have
made by Italian companies on international markets in the same period (Federtrasporto, 2003). This
is a further sign of their financial and competitive weakness in comparison to foreign companies.
