Efficiency Evaluation and Performance Comparison of Third-Party Logistics Providers: AHP-DEA Approach

Abstract

This research employs a novel approach for the systematic selection of third-party logistics (3PLs) providers in Zimbabwe by applying an integrated DEA/AHP methodology. The aim is to establish a framework for selection and analysis of 3PL providers so as to optimise efficiency and profitability of logistics companies. DEA is a non-parametric method that measures the efficiency of 3PLs by examining multiple inputs and outputs variables while AHP is a hierarchy structured decision-making tool that employs pairwise comparisons for evaluating third-party logistics providers (3PLs). This method enables the organised assessment and weighting of relevant factors and alternatives to facilitate informed decision-making. The results of the study indicate that 8 out of the 12 3PLs operate at full efficiency, while the remaining 4 have potential for improvement. Performance and logistics emanated as the most influential criteria in 3PL selection. This research addresses the increasing trend of 3PL evaluation and selection for outsourcing, as companies concentrate on core activities while benefitting from the advantages of professional distribution, cost savings and improved customer satisfaction provided by 3PLs. The study concludes that by using DEA/AHP methodology there is significant improvement in the analysis and selection of 3PLs, thereby improving profitability and efficiency by providing valuable insights to logistics companies.

Keywords

• third-party logistics (3pl)
• data envelopment analysis (dea)
• analytical hierarchy approach (ahp)
• and outsourcing