Understanding value-added service offering by 3PL providers : VAS as a source of competitive advantage for the provider and the customer

Abstract: Background: Outsourcing logistics operations to third-party logistics providers (3PL) is a growing trend for customer companies in all stages of supply chains. Among the services offered by providers, value-added services (VAS) play a special role for the provider as a differentiation opportunity and a source of higher margins, and for the customer as a way to increase the efficiency of their logistics flow beyond what standard solutions allow. Purpose: The purpose of the study is to create an understanding of how a 3PL determines which value-added services or service customizations can be profitable, and which customer-supplier relationships and service development strategies should be pursued, depending on the logistics scenario at hand. Methodology: The study was based on a theoretical framework including outsourcing and service offering principles, 3PL and VAS categorization, and logistics relationships, innovation, and business strategies. It followed a qualitative abductive research strategy. Online surveys were processed from 38 3PL providers and 48 logistics user companies were conducted and semi-structured interviews with seven 3PL companies were held to gather information about the providers’ 3PL roles and VAS offerings towards different customer categories. Conclusion: We have developed improved understanding of how the VAS offering is linked to the customer relationship and its importance for the provider’s 3PL role evolution. We also outline the VAS offering decision process and the factors involved. The study further illustrates the strategic and operational importance of appropriate VAS offering for both the customer and the provider and presents a framework for appreciating the relevant elements and their relationships. 3PL companies can use these findings to strategically choose target areas for VAS offering to a customer, depending on the logistics scenario of that customer.