Conceptual Analytic Network Model

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Running Head: SELECTING OF 3PL SERVICE PROVIDER
3PL service providers in Aerospace Company
Student
Date

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Running Head: SELECTING OF 3PL SERVICE PROVIDER
Table of contents
1. Introduction……………………………………………………………………….3
2. Literature review…………………………………………………………………4
3. The analytical hierarchy process…………………………………………………5
4. The aerospace company…………………………………………………………..6
4.1The selection of the 3PL services providers in aerospace company……………….7
4.2Implementation of AHP in the aerospace company………………………………8
5. Recommendations …………………………………………………………….…10
6. Conclusion…………………………………………………………………………10
7. Bibliographies…………………………………………………………………..……11

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Running Head: SELECTING OF 3PL SERVICE PROVIDER
1. Introduction
Globally, businesses are competitive, and therefore companies outsource their supply chain
processes to gain a competitive advantage over other proficient companies. Indeed, various
companies outsource logistics in their supply chain processes, and they manage the logistics
activities. Notably, outsourcing logistics has to lead to efficiencies in multiple businesses,
making it popular worldwide. The recent study shows that there has been an increase in
outsourced logistics and third-party logistics services (3PL). Therefore the 3PL refers to an
organization that manages different logistics modules under a contract of a customer from a
specified industry Sahu, Datta, and Mahapatr (2015 P.354-392). Globally, companies are turning
into the 3PL service providers since it has become an essential part of the company's supply
chain. Furthermore, 3PL providers offer many and different services worldwide, including;
distribution, customs, labeling, returns, freight forwarding, etc. consequently, the 3PL service
providers enable the organizations to improve in customer services and operational efficiency;
thus, cost reduction in logistics and expenditures. Due to the increment use of the 3PL services
by shippers, it has become a critical issue in selecting the appropriate 3PL services providers.
Therefore, the selection difficulties need to be addressed via the Multiple Criteria Decision
making (MCDM) approach Raut et al. (2018 p.76-97). Additionally, the analytical hierarchy
process (AHP) is among the applicable procedures in the (MCDM approach. Notably, (AHP)
plays an important role in qualitative and quantitative methodology whereby; it used by the
analytical decision-makers. Besides, it is inclusive of Expert choice and Decision lens, which are
professional software and are applicable during the practical. Recently, there has been a
deployment of 3PL service selection criteria, which is a combination of Technique for Oder

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Preference by similarity to Ideal Solution (TOPSIS) approach and AHP, thus; helpful in
reversing the logistics in an organization Ginting et al. (2017 p.58-64). Indeed, this report
analyses a criterion for selecting logistics services providers and decision making.
2. Literature review
3PL service providers are important in logistic thus, selecting the appropriate 3PL services has
been the primary challenge over the years. Therefore, companies ought to consider some factors
while selecting 3PL service providers Chocholáč, Sommerauerová, and Polák (2018). Various
studies have been conducted in identifying the appropriate 3PL selection criteria, though the
bottom line lies at defining and evaluating the probable logistics service provider Alkhatib,
Darlington, and Nguyen (2015 p.102-134). According to Tavana et al. (2016 p. 1705-1701),
some factors should be considered in the 3PL service providers selecting criteria including;
speed, top management, deliveries, the information system, financial stability, performance
metrics quality requirements, cost, and deliveries. Notably, there include some other factors
when selecting the potential 3PLproviders, including; flexibility, financial stability, size,
capability, reputation, quality of assets, long term relationship, and geographical range service.
Besides, quantitative methodologies are also applicable in choosing the 3PLservice providers
whereby, through qualitative and quantitative procedures, Fuzzy and AHP models were
developed. In the study, fuzzy is determined using different methodologies of selecting the 3PL
service providers, including; the triangular approach, the hybrid procedure, and analytical
network procedure ( ANP) Ergu et al. (2014 p.58p-74). The ANP performance in 3PL service
providers is determined from the supply chain perspective. In addition, a recent study shows the
suitable and preferred method of selecting the 3PL service providers whereby; TOPSIS and

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fuzzy set theory are determined through the evaluation and selection system. Indeed, fuzzy
AHP is used to determine the significance of the selection procedure and to choose the
appropriate 3PL service providers. Consequently, various researchers have been integrating AHP
and TOPSIS to measure the final result of selecting 3PL services providers, thus, leading to
decision making.
3. Analytical hierarchy process
Over the years, AHP has been developing and has become a sophisticated, used decision-making
approach. Indeed, the process is a framework designed to withstand inherent and logical in
making various decisions with and without alternatives. Notably, the approach is ranked among
the appropriate application method to use in decision making. Additionally, AHP is a multi-
criteria decision-making approach; thus, it can incorporate both qualitative and quantitative
decision procedures. Indeed, AHP, the procedure is arranged in a hierarchy order whereby;
issues are divided, and solutions to the problems are subjected to a conclusion. Besides, AHP
makes it possible to organize views, feeling, memories, and judgment that might impact the
decisions. Additionally, the AHP is the methodology used in evaluating, making choices,
allocating and quality management, the healthcare centers, and the strategic planning decision.
Indeed, companies have been implementing AHP in various decision-making situations,
including; suppliers’ selection, evaluating technologies, hiring allocation, etc. Besides, AHP
methodology is known for easily making decisions in empirical data and subjecting judgments of
the decision-makers. In addition, the AHP methodology provides the decision-makers with a
structure to arrange and evaluate the significance of several objectives and fondness of the
possible solutions to a decision. Therefore, AHP is the preferred methodology for selection

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criteria since it gives a room for easy and efficiency criteria. The AHP approach starts with
breaking up the critical issue into a hierarchy whereby problems are being identified efficiently
with no complications. In addition, the identified problems are inclusive of the sub-factors,
which are subdivided into multiple levels according to the decision maker’s desire. Notably, the
sub-factors enable in dealing with the complicated situations in decision making and other
factors which might influence the possible solutions decisions. Indeed, factors are identified, and
the prioritization process follows whereby; factors and sub-factors are compared according to
their respective significance concerning the unbiased issue. Besides, each pair of possible
decisions is compared in consideration of each factor in the lowest hierarchy level. Notably, one
to nine measure scales is used in every pair of comparisons. After the analysis, numerical or
verbal measures are used in decision making and are arranged respectively, according to their
performance. Indeed, the judgments made in the method are human inborn, though, the persons
conducting the analysis are knowledgeable and in coordinating the practice and in the decision
making the process. Besides, the Expertise choice and Decision Lens are helpful for decision-
makers in the decision-making process, whereby they improve any inconsistency that might
impact the decisions. Indeed, while finalizing the procedure synthesis priorities are considered at
the lowest level of the hierarchy. Considerably, sensitivity should be incorporated into the AHP
approach while evaluating the judgment.
3. The aerospace company
The aerospace company is located in western Washington, where the application of the APH is
conducted. Indeed, the company is familiar with the 3PL service provider approach though it is
more articulated to multi-criteria decision making, which is the combination of the qualitative

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and quantitative in methodologies. Since the aerospace company is familiar with the 3PL service
providers, it is, therefore, suitable for the AHP approach. However, the practitioners need to
explain the methodology to the aerospace company for comparisons whereby, if no similarities
are detected, the analysis is performed. Therefore, a few steps were structured while evaluating
the 3PL service provider and the selection criteria. Indeed, the aerospace company begins the
methodology with a certain statement of work ( SOW), which includes 30% of the company's
information and is also used to request statements from the qualified companies. Indeed, the
company ought to come up with major criteria that can filter and narrow 30% of the company’s
logistics information from a large number of potential providers to few and controllable
candidates. Thus, few factors are considered in the criteria, including; capacity and capacity; this
involves much on the company's requirements, the merit performance concerning SOW, which is
inclusive of the performance dimensions, inventory, and accuracy on time. Notably, there also
involves other critical factors known as financial health; thus, it determines the adequacy of
resources in the company. Indeed in the sourcing process, the aerospace company uses the 3PL
service provider as its filtering process before the deployment of SOW. Notably, the company
evaluates the criteria selection irrespective of SOW. Although, the company has both criteria and
sub-criteria approaches, which include; technical competence, cost, and time.
4.1The selection of the 3PL services providers in an aerospace company
After the analysis, the practitioners identified several issues that are addressed. Indeed, the
aerospace company requires services such as picking, receiving, placing, and forwarding
services, and the company is also in search of warehousing and suppler services. Additionally,
the company is sometimes in need of the delivery scope, but not always. Consequently, due to

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the identified considering factors of selecting 3PL service providers’ criteria in the aerospace
company, the practitioners developed a strategy. In addition, the company considers 3PL service
providers criteria as a possibility for the decision making process after the filtering of the
potential candidates. Therefore, the results showed that out of the three service providers, one of
the 3PL service providers offers the warehousing services and optimized customer’s supply
chain processes. Additionally, another solution demonstrated a lead globally, in warehouse
experiences, and operating the distribution centers technologically. The final results in 3PL
service providers are more linking to the customers whereby; customers are prioritized, and they
respond to the market, thus reinforcing the customer staff relationship. Besides, the practitioners
provided the company with handouts to record the comparisons between the pairs.
4.2 Implementation of the AHP strategy in the Aerospace Company
When implementing the AHP model in the aerospace company, the first steps are to structure the
issues of the company as a hierarchy inclusive of the success, the methodology, and the
possibilities. Indeed, in the first level, the company should reconsider the appropriate 3PL
service provider as the main major dream of the company. Secondly, the company ought to be on
the lookout in determining the primary criteria that lead to accomplishing the goal. Thirdly level
lies in the sub-criteria, and the fourth level of the company develops the ideal 3PL service
providers. Consequently, the selected 3PL service providers are evaluated and concerning the
first and the second level. When strategizing an issue based on AHP, the primary goal is racked
at the highest level of the hierarchy. Additionally, criteria and sub-criteria follow in the next
level, and while finalizing, the possibilities ate racked at the lowest level of the hierarchy.

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Running Head: SELECTING OF 3PL SERVICE PROVIDER
In the second step, the company should focus on the pairs between the comparisons, which leads
to judgment. Thus, the aerospace company compared each factor to its moderate significance,
according to the parent factor, which is close to the high level. Indeed, the AHP comparisons of
the company are carried out accordingly using the nine scale Franek and Kresta (2014 p. 164-
173). Thus, the company chooses to use the verbal mode over the numerical in the decision-
making process. However, the decision-maker uses the oral method, which is equivalent to the
nine-point view scale.
Additionally, the decision-maker ought to seek some guidance while selecting the comparison
mode whereby; the practitioners guided the company on choosing the verbal method since it is
more accurate, and it dominates the numerical method Goepel and Performance (2019 p.445-
463). In a comparison of the primary factors, the company had to be more specific in
determining the appropriate and the essential criteria in the selection of the 3PL service
providers; thus, cost and technical competence are to be judged. Besides, the decision-maker
made the judgments as; price has the maximum insignificance of 63.7% while the competence
factor has a minimum of 10.5% significance priority. Additionally, during the evaluation of the
3PL services providers, the decision-maker added that the study shows less significance in
proximity, followed by flexibility. In addition, information technology and capacity had a
minimum relevance concerning technical competence.
Indeed, the AHP approach provides the company with a theory for checking the inconsistency
throughout the matrix, and it also allows particular and level of inconsistency though some of it
Franek and Kresta (2014 p.164-173). Therefore, the company measures the comparison ratio
(C.R) by considering the consistency of factors. Indeed, according to the study of the aerospace

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company in AHP, model, the consistency ratios (C.Rs) are less than the critical value; thus,
indicating the over judgment in decision making. Consequently, the company ought to compare
each pair of the possibilities concerning each factor; thus, the three levels of alternatives were
also compared with respect in every element in levels two and three, respectively. According to
the overall analysis, 3PL service providers' criteria are considered as the appropriate
methodology in the aerospace company.
5. Recommendations
Indeed, the selection of the 3PL service providers in hectic, therefore it requires accuracy in
measurements, thus providing the correct results. The implementation of AHP in aerospace
company perfect since the analysis compares various pairs in determining the appropriate 3L
service providers. However, the study has encountered the decision making challenge during the
judgments. Therefore, sensitivity analysis can be applied to detect such and many more mistakes
in the future. Indeed, the sensitivity analysis is an essential tool in the decision-making process
whereby decision-makers use the study to compare scenarios and alternatives by differentiating
the priorities of the factors and monitoring the change in the elements. Notably, the sensitivity
analysis is also evaluated to check its effectiveness in making the final judgments over the
priorities, and the report is ranked as the leading and ultimate priority in decision making.
Thus, in this case, the first analysis is conducted, and the significance rating of the three primary
factors is changed. However, the importance of increase and decrease in the priorities ratings of
the primary factors does not change the ranks of possibilities. The study shows that the options
are active against the essential changes in the primary considerations. Additionally, the 3PL
service providers have become controllers as the significance in the three significant factors

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increases. Indeed the experiment continues through changing the moderate importance of
proximity subfactors. Thus, the 3PL service provider becomes a more preferred possibility.
6. Conclusion
In completion, the primary objective of this study is to support a company in selecting the
appropriate 3PL services providers, whereby; the implementation of the methodology helps
make company decisions. Thereby, the method is flexible and articulates both the qualitative and
quantitative methods. Additionally, the sensitivity analysis is also necessary for the decision-
making process whereby the change is detected in comparing and paring of the primary factors.
Indeed, if the review is more sensitive such that; if the preferred outcome does not change in the
significance of the criteria, sub-criteria, and other alternatives, then the preferred possibility is
vigorous enough to consider other factors. Indeed, APH methodology has implemented multiple
procedures in 3PL service provider selections whereby, the procedures are analyzed in decision
making and thus, making the final judgment. In the study, another method is identified while
analyzing the appropriate 3PL service provider criterion that is formed through a combination of
the APH and TOPSIS. However, this report stresses much on the implementation of the
authentic AHP method in the aerospace company, whereby the information provided is
numerical and verbally based in the decision-making process. Additionally, the decision-making
process is determined by consistency ratios in three of the major significance factors.
7. Bibliographies

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Running Head: SELECTING OF 3PL SERVICE PROVIDER
Alkhatib, S.F., Darlington, R. and Nguyen, T.T., 2015. Logistics Service Providers (LSPs) evaluation and
selection: Literature review and framework development. Strategic Outsourcing: An International
Journal, 8(1), pp.102-134.
Chocholáč, J., Sommerauerová, D. and Polák, M., 2018. The process of selecting a logistics service
provider from the perspective of sustainable supply chain management. In The 12th International Days of
Statistics and Economics: conference proceedings. Melandrium.
Ergu, D., Kou, G., Shi, Y. and Shi, Y., 2014. Analytic network process in risk assessment and decision
analysis. Computers & Operations Research, 42, pp.58-74.
Franek, J. and Kresta, A., 2014. Judgment scales and consistency measure in AHP. Procedia Economics
and Finance, 12, pp.164-173.
Franek, J. and Kresta, A., 2014. Judgment scales and consistency measure in AHP. Procedia Economics
and Finance, 12, pp.164-173.
Ginting, G., Fadlina, M., Siahaan, A.P.U. and Rahim, R., 2017. Technical approach of TOPSIS in decision
making. Int. J. Recent Trends Eng. Res, 3(8), pp.58-64.
Goepel, K.D. and Performance, B., 2019. Comparison of Judgment Scales of the Analytical Hierarchy
Process-A New Approach. International Journal of Information Technology and Decision Making, 18(2),
pp.445-463.
Raut, R., Kharat, M., Kamble, S. and Kumar, C.S., 2018. Sustainable evaluation and selection of potential
third-party logistics (3PL) providers: An integrated MCDM approach. Benchmarking: An International
Journal, 25(1), pp.76-97.
Sahu, N.K., Datta, S. and Mahapatra, S.S., 2015. Fuzzy based appraisement module for 3PL evaluation
and selection. Benchmarking: An International Journal, 22(3), pp.354-392.
Tavana, M., Zareinejad, M., Santos-Arteaga, F.J. and Kaviani, M.A., 2016. A conceptual analytic network
model for evaluating and selecting third-party reverse logistics providers. The International Journal of
Advanced Manufacturing Technology, 86(5-8), pp.1705-1721.