The Role of Sustainability for Enhancing Third-Party Logistics Management Performance

Technological development and globalization made the supply chain more complex in today’s business environment. In competitive market conditions, shippers tend to outsource most of their logistical activities to Third-Party Logistics (3PL) service providers. These activities have drawn attention of decision makers regarding sustainability concerns. This study examines sustainability initiatives which have been implemented particularly for the 3PL functions namely; transportation, warehousing and packaging services and their influence on performances. Empirical data have been collected through a worldwide online survey which has been sent to industrial experts working in logistics and supply chain management fields. The results were analyzed through the Structural Equation Modelling (SEM). The analysis indicated that, the 3PL functions significantly affect environmental, economic, social and operational performance, except packaging which had no significant impact on economic, operational and social performance, in addition to transportation which had no significant impact on social performance. Regarding the performance outcome and its impact on logistics efficiency, logistics effectiveness and competitiveness, empirical results indicated that there is no significant impact between the variables except, social performance which had a significant impact on logistics efficiency and competitiveness, operational performance which had a significant impact on logistics efficiency, logistics effectiveness and competitiveness. The proposed model and hypotheses developed give further understanding regarding 3PL industries thereby help decision makers in solving the problems related to 3PL sustainability initiatives.


Introduction
Sustainability is a concept that has been derived to fill the gap between the development and environment.World Commission on Environment and Development (WCED) has defined sustainable development as, "It is not fixed state of harmony, but rather a process of change in which, exploitation of resources, the direction of investments, the orientation of technological development, and the institutional change are made consistent with future as well as present needs."(Brundtland, 1987).Third-party logistics is outsourcing philosophy in logistics and supply chain industry.3PLs has become worldwide industry that fulfills customer needs through a host of primary and value-added services (Gardner, 2004).
Sustainability causes various impact in all the logistics function of 3PL, it has become a challenging area for 3PL for a highly competitive market.Sustainability is a Holistic approach towards developing solution against challenges and created direct or indirect impact on the logistical performances.The selection of sustainability initiatives is already taken into practice; however there are many aspects that should be considered based on the effects on performance in 3PL.Furthermore, the available information does not give a clear image about the impact of sustainability in various management performances.This requires a further study to understand better insights.Therefore, sustainability in 3PL has become more interesting area for further research.Performance related sustainability initiatives should be considered when the major strategic decisions are made in 3PL industries (Evangelista, Huge-Brodin, Issaksson, & Sweeney, 2013).
The main logistics functions in 3PL are transportation, warehousing, packaging which is mainly focused in this part of the research.This research will further contribute the advance knowledge in literature.It will provide an idea to develop strategic solution within the 3PL industry.The impact of sustainability initiatives will be explained.This research could be helpful to create make decisions for logistics service providers to select sustainability initiatives in future.

Role of 3PL in Logistics and Supply Chains
3PL has very broad meaning in supply chain and it can be applicable to any contract that includes the storing or shipping of goods.Therefore, 3PL is also known as "contract logistics" (Rouse, 2010), "logistics provider", "third party logistics supplier", "logistics outsourcing" and "logistics alliances" (Selviaridis & Spring, 2007).Sometimes a single service like transportation, warehousing or many multiple services can be managed by 3PL in the entire supply chain (Rouse, 2010).
Today's global supply chains are facing multiple challenges which includes coordination of supplies in inbound and outbound, storage of goods, inventory management, distribution of finished products through various modes of transport across the countries.Therefore, these types of challenges could become more difficult due to delays, mistakes, miscommunications, human error and accidents (Plunkett, 2009).
Logistics services could be outsourced to satisfy customer demand at low cost and risk.Outsourcing of logistical services have become critical for big industries due to the reason that industries can focus their energies on their core operations which are very important to survive in global competition and give the rest of the responsibility to 3PL providers.The overall scenario about buying logistics service has been increased by following two reasons (Bhatnagar, Sohal, & Millen, 1999): • Increase in the number of service provided by 3PL.
• The number of customers of 3PL services has been increased.3PL act as intermediator between manufacturer or supplier (the party which purchase the service known as shipper) and the end user is customer (consumes the product or service).In this way, 3PL will have to focus on both side and should face challenges which are unique to its operations (Cheong, 2004).
In today's business, it has become difficult to concentrate on methods to increase customer service along with cost controlling.3PL has become essential to outsource such type of activities and that provides wide range of benefits which are (Evans, 2015):

•
Utilization of resources: 3PL can help to save time and cost and make the business efficient in all manners.3PL reduce the cost of investment in warehouse space, transportation and skilled manpower to execute the logistics process.
• Expertise: 3PLs are very much familiar about the latest developments in logistics, technology and other related fields.They have updated knowledge about the best practices in industry which is useful for the users.Much software used for monitoring entire logistics process, advance reporting, and inventory management improves visibility and makes the process transparent.
• Flexibility and scalability: With the use of 3PL, organizations become more flexible because that made it easier to scale transportation, staff and other resources according to inventory demand.3PL provider takes all burdens, which make you take seasonal advantages and handle all the transactions smoothly.
• Continuous improvement: Logistics service providers are highly flexible with fluctuations.3PLs have ability to make the adjustments according to the different circumstances faced in supply chain so that the customer need can be fulfilled as fast as possible in an efficient and in effective manner.In short, 3PL can help to reduce lead time, maximize the profit and improves the quality.
• Use of latest technology: for a complex supply chain process, 3PL offers latest software and technology.Therefore, user should not have to invest in latest developments.
• Improves growth rate: 3PL allows you to develop your market not only up to state or county, but also to the world.Therefore, business can be expanded with minimal cost which directly affects to growth rate of business.
• Safety: An experienced 3PL provider ensures security by preventing from making huge mistake in decision-making process and assures higher return on investments.
• Customer satisfaction: advanced technology, skilled manpower and multiple asset in 3PL assure that all logistical international level will be satisfied.Therefore, the business can mainly focus on the customer services.
Hence, logistics functions become clearer and faster due to the benefits of using 3PLs.

Sustainability Initiatives in 3PL
3.1 Sustainable Transport Initiatives 3PLs provide transportation services locally and globally to small, medium and large-scale industries and these services have been carried out using a variety of sustainable approaches (Evangelista et al., 2013).See Table 1.(Martinsen & Björklund, 2012).

Sustainable Warehousing Initiatives
Storage is a key function of warehouses.Sustainability in warehousing can be focused on several aspects.From designing of the warehouse to its management and maintenance, sustainability criteria can be considered at various stages.Several sustainability initiatives can be classified based on warehouse design, warehouse management and handling of goods.Initiatives and their examples are listed in Table 2. Use of solar or photovoltaic panels or other renewable energy sources.

Waste management system
Waste water recycling plants, water storage system, solid waste management system.

Handling of goods Material handling
Installation of equipment-Automated guided vehicles (AGV) and automated storage and retrieval system (ASRS).

Sustainable Packaging
Packaging plays an important role in storing, handling and transportation of goods, for the individual who is concerned about efficiency and effectiveness of logistical activities.When it comes to sustainable packaging, it must be beneficial from the environmental, economic and social point of view.The major sustainable initiatives in packaging are; recycle and reuse of packaging, eco-friendly packaging design, biodegradable packaging materials and customer cooperation (Perotti et al., 2012).

Research Methodology
A quantitative method is used to investigate relationships between variables through developing a research questions or hypotheses and analyze collected data to test this hypothesis or questions (Creswell, 2014).Since this research is trying to investigate the relationship between two variables, quantitative method will be adapted, through formulated questionnaires in the survey to collect data from the participants.However, before carrying out with the empirical analysis research hypotheses must be developed by examining the theories, the relationships between the sustainability criteria and performance.

Hypotheses and Model Development
Sustainability initiatives in 3PL have an influence on performance outcomes.Environmental performance, economic performance, social performance, operational performances are determined as the four performance measures which have direct relations to the 3PL sustainable initiatives (Gunasekaran, Patel, & McGaughey, 2004).Indicators of all performance measures are derived.Performance indicators reflect the influence of 3PL function on a specific performance measure.Their relationship is established with each 3PL function.It is also assumed that Logistics efficiency, logistics effectiveness and competitiveness are the other measures on which there is an influence of performances.
Environmental Performance reflects the consequences of 3PL sustainable initiatives on the environment.These initiatives are influencing internally as well as externally to the company.To measure environmental performance following indicators are derived (Ageron, Gunasekaran, & Spalanzani, 2012;Perotti et al., 2012); The above indicators describe the changes that occur in the environment due to incorporating sustainability initiatives into 3PL.To check their influence on environment following hypotheses are considered.
H1: Environmental performance improves with the adoption of 3PL sustainable transport initiatives.
H2: Environmental performance improves with the adoption of 3PL sustainable warehousing initiatives.
H3: Environmental performance improves with the adoption of 3PL sustainable packaging initiatives.
Economic performance is defined as the financial achievements that a company gains after adopting sustainable initiatives.To measure economic performance following indicators are derived (Geng, Mansouri, & Aktas, 2017;Perotti et al., 2012); Companies recognize economic improvement through company's current situation in the market.Sustainability initiatives could give profits.Therefore, following hypotheses are assumed: H4: Economic performance improves with the adoption of 3PL sustainable transport initiatives.
H5: Economic performance improves with the adoption of 3PL sustainable warehousing initiatives.
H6: Economic performance improves with the adoption of 3PL sustainable packaging initiatives.
Social performance: Following social performance indicators are selected to measure impact of sustainability in 3PL (Ashby, Leat, & Hudson, 2012;Geng et al., 2017;Zailani, Eltayeb, Hsu, & Tan, 2012) The above factors describe many big organizations are seeking continuously to convince people through adopting sustainable initiatives.Sustainable outcomes could influence on relationships and a company image in their market.To identify the relationship with social performance, following hypotheses are proposed: H7: Social performance improves with the adoption of 3PL sustainable transport initiatives.
H8: Social performance improves with the adoption of 3PL sustainable warehousing initiatives.
H9: Social performance improves with the adoption of 3PL sustainable packaging initiatives.
Operational performance: "…defined as operational level measures, which include the ability in day-to-day technical representation, adherence to developed schedule, ability to avoid complaints and achievement of defect free deliveries."(Gunasekaran et al., 2004).Following operational performance indicators are selected to measure impact of sustainability in 3PL (Geng et al., 2017;Perotti et al.,  The definition suggests that daily operations are affected through adopting green initiatives.Various operations like storing, maintaining and delivery are affected through sustainability initiatives.Lots of waste can be eliminated through which processes are optimized.Better utilization of resources results in smoother operations in the logistics functions.Therefore, following hypotheses are created to check the influence of 3PL sustainability initiatives on operational performance.
H10: Operational performance improves with the adoption of 3PL sustainable transport initiatives.
H11: Operational performance improves with the adoption of 3PL sustainable warehousing initiatives.
H12: Operational performance improves with the adoption of 3PL sustainable packaging initiatives.
Logistics efficiency: Efficiency describes that how well the resources are utilized economically.The companies are expecting maximum output from the system they are using.Therefore, sustainable initiatives should prove efficient results (Pazirandeh & Jafari, 2013); Companies are expecting high logistics efficiency by improving environmental, economic, social and operational performances.The focus on such performance requires huge amount of investment in terms of times and costs.Sometimes, operation costs are reduced when we are focusing on such performances.On the other side, some disadvantages may create the extra costs.Therefore, it is questionable that how this performance affects the logistics efficiency.Hence, the following hypotheses are assumed: Figure 1.Proposed model-Self-illustrated

Formulation of Questionnaires
Questionnaires are formulated in the survey to collect the data from the participants.Questionnaire is mainly formed in the English language.To contact local respondents, a separate link of questionnaire was generated in the German language.
In all there are 17 number of questions formulated.Questionnaire contains open-ended question in which a participant can easily respond to the maximum number of questions (Creswell, 2014).Those are by using the marking of a radio button or in one-two words or with checklist.The questions 1 to 7 focus on the demographic findings.These questions will collect basic information of the respondent.Questions 8 to 17 represent main part of survey and which are mandatory to be answered.Questions 8 to 10 are formulated to collect the opinions to estimate which sustainability initiative is more effective in a 3PL function.The indicator is represented as a sustainable initiative in a particular logistics function.Questions 11 to 17 collect the opinion about influence of sustainability on various performances.The sub questions are performance indicators.These questions are asked to collect ratings.For this purpose, 5-point Likert scale is used (Brace, 2008).In this method of research, ratings are varied with options "highly effective" to "very less effective" and "very high degree" to "very low degree".However, there was also "no opinion" option available for the respondent.It can be select if they have no specific idea of the question.This form of questions is easy to answer and interpret the data during the analysis.

Survey
Several target groups were searched through keywords like "3PL", "3PL providers", "Contract logistics" and contacts were formed on social professional networks prior to conduct the survey.Participants were also searched according to region or name of some famous logistics service providers or according to the type of industry e.g.Supply chain, Manufacturing, Automotive etc.Most of the requested persons were from logistics, transportation, industrial engineering, material management, packaging, procurement.
Survey questionnaire had been created on Google forms, which offers great flexibility by providing updated data and the use of this service is totally free of cost.The questionnaire was sent to various persons who are associated with 3PL field and have high experience.

Pilot Study
In the first phase of the survey, questionnaire was sent to the two hundred industry experts and the first 21 responses were selected to perform the pilot test.Figure 2 and 3 and Table 3 and 4 shows the results of the pilot study regarding composite reliability, average variance extracted (AVE), Fornell-Larcker criterion, and outer loading respectively.The results of the pilot study insures the validity of the model as composite reliability is above 0.7, AVE is above 0.5, Fornell-Larcker criterion is fulfilled as the square root of AVE of a construct is greater than the correlations between the construct and other constructs in model, finally outer loadings criterion is also fulfilled as constructs is always greater than any other loadings of the other constructs (Hair, Hult, Ringle, & Sarstedt, 2017).

Survey Results
The survey questionnaire was sent to 1080 participants on social professional network.Total 155 persons had participated by filling up this questionnaire.Two of these participants are eliminated because of their positions were unidentified.Total 153 responses were considered for the further tests of the data.Overall response rate was 14.17%.Figure 4 shows classification of respondents according to the type of industry.Table 5 shows the respondents position in their company, company size and characteristics and whether companies has activities on a global level.

Model Evaluation
Research model can be analyzed in two phases.First, there are several tests followed in the measurement model validation, which includes internal consistency reliability, indicator reliability, convergent validity and discriminate validity tests are conducted to validate the measurement model.In the second phase, the model is validated by determining path coefficients and coefficient of determinations through which hypotheses is tested to determine whether it will be accepted or rejected.Table 6 shows the tests performed for the measurement and structural model and their guidelines.Ranges between 0 and 1 Note: Significance level 0.05 Note.Adapted from (Hair et al., 2017).
Structural equation modeling (SEM) is used in SmartPLS software which allows a researcher to analyze variables which are not directly measurable (Hair et al., 2017).
First step of research analysis is to prepare a path model; a path model is a graphical representation of variables based on theory and logic that visually describes the hypotheses to be examined.It has two elements namely a structural model and a measurement model (Hair et al., 2017).
Figure 5 shows the structural model which shows the sequence of research model from left to right and three types of variables.It has independent variables on the left side which are predictor.These are the constructs which are termed as exogeneous latent variables.These variables have arrows pointing out of them.Dependent variables are the outcomes constructed at the right side and they have arrows pointing into them.Mediator variables always appear in the middle as they have dual relationship.They have arrows coming in from the one side and coming out from the other side.In this research model, all the 3PL functions are independent variables as they are predicting influence on performances and the mediator variables are performances.was conducted with variety of industries around the world.Therefore, it can be further extended by analyzing sustainability impacts into a specific industrial sector and for some specific regions through which some other specific potentials can be identified.This research is based on general perceptions of the industry experts from the survey questionnaire.The performance variables are only beneficial if the organizations have implemented sustainability initiatives which are investigated in this research, but the performance impacts founded in this study will give an overview of the influence of specific initiatives.Therefore, the detailed research is needed for a company before investing in investment in such sustainability programs.The study was exploratory in nature and the analysis was conducted with sample size of 153.Large number of answers will provide more accurate results

H13:
Logistics efficiency improves with environmental performance H14: Logistics efficiency improves with economic performance H15: Logistics efficiency improves with social performance H16: Logistics efficiency improves with operational performance Logistics effectiveness: It is described as how much extent our objective is accomplished.Following are the indicators selected to measure 3PL effectiveness of various performances(Pazirandeh & Jafari, 2013their effect on delivery and its timings.They have a direct or indirect effect on 3PL process.Furthermore, performances could have their influence on reliability too.Therefore, following hypotheses are assumed: H17: Logistics effectiveness improves with environmental performance H18: Logistics effectiveness improves with economic performance H19: Logistics effectiveness improves with social performance H20: Logistics effectiveness improves with operational performance Competitiveness: Many companies are using performance outcomes as a marketing tool to attract new customers.Improvement is the main tool to achieve competitiveness.Many other indicators can be described as(Ageron et al., 2012;Pazirandeh & Jafari, 2013recognized that their competitiveness is improved by improving performances(Ageron et al., 2012) To identify which performance influencing competitiveness, following hypotheses are assumed: H21: Competitiveness improves with environmental performance H22: Competitiveness improves with economic performance H23: Competitiveness improves with social performance H24: Competitiveness improves with operational performance Based on the above developed hypotheses the proposed model is constructed in Figure 1. Figu

Figure 4 .
Figure 4. Industry specifics of respondents

Figure
Figure 5. Structural model

Table 1 .
Sustainable transportation initiatives

Table 7
model has been validated.The final values and average variance of all constructs are displayed in Table8 and 9 respectively.

Table 8 .
Model validation