Quality Management as Driver of Vertical Integration in Service Chain: A Study of 3rd Party Logistics Industry

Third Party Logistics (3PL) is one of the fastest growing service industry but still the impact of the application of Quality Management Practices (QMPs) particularly on the integration capability of 3PL service providers in the supply chain is not a well-researched topic. Especially in the context of Pakistan, very little empirical work is found dealing with this very important service competency of 3PL. This research is carried out to determine how QMPs help 3PL Service Providers achieving integration competency in the service chain. The quality management dimensions of internationally recognized Malcolm Baldrige National Quality (MBNQ) model are used as independent variable to assess their impact on the integration competency of 3PLs in Pakistan. Considering the typical business culture and industry environment in Pakistan, the effect of Social Capital and Companies’ Internal Strength as moderating variables was also observed. Using questionnaire as a tool, the quantitative data on various items for latent constructs was collected from more than 176 logistics firms of Pakistan. Results clearly identified the Strategic Planning, HR Management Focus and Process Management as the factors highly impacting Integration Competency of 3PL service providers in Pakistan. Interestingly, but surprisingly, the role of Leadership and Knowledge Management was insignificant in this particular setting. The moderating variable also showed a significant impact on integration competency. This study highlighted the areas where logistics firms in their individual capacity and logistics industry as a whole should immediately concentrate to enhance this important competency.