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Chapter

A Framework for Detecting

the Proper Multi-Criteria
Decision-Making Method Taking
into Account the Characteristics
of Third-Party Logistics, the
Requirements of Managers,
and the Type of Input Data
Patricija Bajec and Danijela Tuljak-Suban

Abstract

The aim of the paper is to propose a framework for improving the process of
choosing an appropriate multi-criteria decision-making (MCDM) method in the
selection of a third-party logistics provider (3PLP). A systematic combining process
was used, along with two literature reviews, one empirical survey and a case study.
A four-step framework was proposed, starting with identifying common criteria
that are harmonised to the 3PLP selection process, followed by analysing all aspects
of the 3PLP selection problem and the selected MCDM methods in view of common
criteria, finishing with a decision tree, divided into seven branches that orient the
decision-maker towards his decisions. The paper also contributes to the theory by
identifying and evaluating criteria that characterise 3PLP decision-making and by
suggesting a suitable order of criteria. A numerical example was implemented to
evaluate a proposed framework.

Keywords: third-party logistics provider (3PLP), multi-criteria decision-making

(MCDM) methods, selection process, supply chain

1. Introduction and background

Competitive supply chain management is largely dependent on the efficient

management of the logistics chain [1]. Since companies (shippers) spend more and
more time focusing on core competencies, they increasingly outsource logistics in
parts or in their entirety to 3PLPs, which assist them in gaining competitive advan-
tage [2–4]. However, logistics outsourcing can fail if not done properly, which can
be very costly, even fatal.
There are many reasons for outsourcing failures. Of the most frequently is
relationship failure between the buyer and the provider of logistics outsourcing

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Application of Decision Science in Business and Management

[5, 6], caused by ‘possible defects in a partner, perception of opportunistic behav-

iour, lack of understanding between partners, conflict risk, lack of competence, loss
of core proprietary capabilities and encroachment risk’ [7, 8], lack of expertise of a
partner, lack of information, etc. [9].
Some features of 3PLP come to light when performing outsourcing and are
therefore difficult to predict in advance. But many risks related to 3PLP can be
predicted and eliminated, reduced or elided in the early build-up stage of 3PL
relationship development. This is the stage during which potential 3PLP are selected
by the buyer to negotiate and develop a contract. This study is only focused on the
3PLP selection process, which covers the selection of criteria, of the appropriate
decision-making method or methods to evaluate the criteria, and final selection of
potential 3PLP [10–14]. Negotiations and development of a contract were not
considered in this article.
Identification of selection criteria, representing the first phase of the selection
process, was outlined in two the authors’ previous papers [15, 16]. Four groups of
criteria (C1, C2, C3 and C4) were proposed. The C1 group covers vitally important
criteria for the success of the supply chain, C2 are very important criteria, C3 group
are important criteria and C4 are less important elements and therefore completely
left to the discretion of the decision-maker.
The second phase of the 3PLP decision-making problem relates to the selection
of the appropriate method. There is a wide range of MCDM methods, but not every
method can be used for solving every decision-making problem. The characteristics
as well as the advantages and disadvantages of each method are very different. The
use of different methods can therefore result in different solutions to the same
problem [17]. The approach for selecting the appropriate method should be tailored
to each single decision-making process and not vice-versa [18]. Thus, the selection
of the appropriate method is one of the most difficult problems in the selection
process [19–22].
A very extensive and deep review of the literature on the most frequently used
MCDM for selecting the 3PLP (108 scientific papers, published from 1999 (when
the first articles in this field began to appear) to 2016, were systematically
reviewed) revealed that many MCDM methods and combinations of methods have
been used. The most frequently used method was the analytic hierarchy process
(AHP), followed by the technique for order of preference by similarity to ideal
solution (TOPSIS), analytic network process (ANP), Linear programming, data
envelopment analysis (DEA), VIKOR, DELPHI, quality function deployment
(QFD), decision-making trial and evaluation laboratory (DEMATEL), the prefer-
ence ranking organisation method for enrichment of evaluations (PROMETHEE),
elimination and choice expressing reality (ELECTRE) and interpretive structural
modelling (ISM). Other methods were used once or never.
A vast array of MCDM methods has been applied. The applied methods have
very different characteristics, which raises doubts over whether the method is
harmonised with the characteristics of the 3PL industry, the single selection process
and its objective. Discussions regarding the harmonisation of the applied MCDM
with the 3PL characteristics or even single selection process have been very sparse.
Explorations of the concrete use of MCDM methods, from the point of view of the
decision-makers, have been very limited as well. Authors [23] in one of their studies
assume that the MCDM method is still selected arbitrarily (the method is popular).
Authors [18] share very similar opinion, arguing that decision-makers have an
affinity for the chosen MCDM method, or they apply it, because it is easy to use.
However, no research has yet been launched into the real circumstances of the
reasons for choosing a particular method, problems associated with the use of
different methods, plus challenges and needs of decision-makers.

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To solve these issues an e-survey was used. A preliminary survey questionnaire

was firstly developed and distributed to three researchers from three different
logistics faculties, and to three decision-makers, familiar with the subject topic area,
to ensure the survey was thorough and understandable. Following several modifi-
cations from this first review, the web-based survey was developed and then sent to
producers, retailers, and suppliers located in Slovenia. Only companies that have
had experiences with logistics outsourcing and only employees familiar with the
selection process were contacted. Of the 50 e-mails 2 were not delivered and 25
were fully answered. The survey examined three main topics: the first was general
(number of participants in the selection process, insourcing or outsourcing of
selection process; the second relates to those that outsource the selection process
and the third to those that insource selection process. Close-ended and open-ended
questions were used. The following results were outlined:
The 3PLP selection process is mainly done by the buyers of outsourcing (16 of 25
companies). They are used to it and they are familiar with the used methodology.
However, they are not satisfied with the method’s ability or with its results. It seems
that they are familiar with the method they are using but not with other methods
that exist (Table 1).
Those that outsource the selection process either because it is time and staff
consuming or because of lack of knowledge and experience request tailor made
solutions regarding the type of results and methods used, but are disappointed with

Table 1.
Correlation between reasons for not outsourcing the selection process and reasons for dissatisfaction with the
results of the performed selection process.

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Application of Decision Science in Business and Management

Table 2.
Correlation between reasons for outsourcing and reasons for dissatisfaction with the selection process.

the performance of the external provider (Table 2). It seems they are very well
aware of the abilities the process of selection can offer, but have a lack of knowledge
and experience.
Both those that insource and those that outsource the selection process are not
satisfied. The selection process is dissatisfactorally performed. Moreover, the final
result of the selection process may not be appropriate. This increases the risk of
relationship failure. Again, more than half of logistics partnerships end within three
to 5 years [24]. Decision-makers therefore need a reliable means for choosing the
right method or combination of methods.
In summary, the extensive literature review found: (1) a lack of critical analysis
of the published knowledge on the MCDM methods which would help to reveal the
appropriate methods or group of methods for the logistics industry and (2) a dearth
of studies determining the specific context of the 3PL industry and 3PLP decision-
making. The empirical survey furthermore indicated that companies are setting up
more tailor made requirements.
The main research questions (RQ) of this research are therefore three:
RQ1. What are the characteristics of the 3PLP decision-making?
RQ2. What are the most appropriate criteria for selecting MCDM method in the
3PLP decision-making?

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RQ3. How can decision-makers combine the characteristics of the 3PLP

decision-making with criteria and their individual requirements to help them
choose the most appropriate MCDM method?
In line with the above thinking and research questions, the purpose of this paper
is to propose a framework to help detect the appropriate MCDM method or
methods in the selection of 3PLP within the early build-up stage of 3PL relationship
development.

2. Research methodology

The aim of this article is not new theory development but grounded theory
refinement and adaptation to the 3PL industry. The authors aim to discover poten-
tial new criteria and determine a new hierarchical order of criteria appropriate for
MCDM method selection in 3PLP decision-making process within grounded and
general theory.
Although the article contains a bit of testing of the current theory, ‘which
suggests a deductive approach, and although a quasi-deductive theory testing
means is used [25], the paper is ultimately closer to the inductive approach, which
helps the researchers to delineate important variables and directs interpretation of
findings’ [26], but does not help to develop new theory. Mixed method research,
which uses both quantitative and qualitative data, is preferred for allowing a better
understanding [27] and spurring progress in a new field, but is not so fruitful for
theory development and does not investigate the relationship between reality and
grounded theory [26].
A systematic combining process was, on the other hand, found to be particularly
useful in the refinement of existing theories and even in matching theory and reality
[26, 28]. It was therefore used in this paper for the creation of the framework that
facilitates the choice of a MCDM method in 3PLP selection. In line with the sys-
tematic combining process a five-phase methodology was adopted, as shown in
Figure 1.

Figure 1.
Phases of the research.

3. A framework facilitating choosing an appropriate MCDM method

A framework proposed in this article builds on the interactive decision support

system (IDSS) of [29], on the general tentative guidelines of [21], on the multi-
criterion evaluation approach of [23] and on two rather new studies, by [20, 30].
Authors [29] stated that the particular IDSS should be based on a set of selected
methods and on a suitable approach for the specific problem. Authors [23] proposed
defining common criteria as a basis for establishing a correspondence between

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Application of Decision Science in Business and Management

characteristics of the spatially-referenced decision problems and characteristics of

the multi-criterion aggregation procedure. Authors [23] suggested starting the
study of MCDM methods first by identifying a set of criteria for each method. After
that a comparative study using a carefully crafted simulation is made.
The selection of the MCDM method depends on specific characteristics of the
decision-making problem, characteristics of MCMD methods and resource con-
straints [19, 21–23, 29]. To select an appropriate MCDM method all three groups of
characteristics should correspond among themselves and correspondence should be
established in accord with common criteria [21–23, 29].
Keeping in mind the views of these researchers, the following 4-step framework
is proposed: (1) Identifying common criteria (limits, conditions of application for
MCDM method) for evaluation and identification of the characteristics of the 3PLP
selection process and characteristics of MCDM groups of methods or single methods
that are harmonised in regard to the 3PLP selection process. (2) Analysing all
aspects of the 3PLP selection problem in view of common criteria. The result of this
step is to elucidate the characteristics of the 3PLP selection problem. (3) Analysing
the selected MCDM methods in view of common criteria, which highlights the
appropriate groups of methods or a single MCDM method. (4) Proposing a decision
tree to facilitate selecting the appropriate MCDM method.

3.1 Identifying common criteria

Authors [23] suggested the evaluation of the decision problem and MCDM
methods based on three common criteria: (1) type of decision problem, (2) nature
of the set of alternatives and (3) nature and features of input information. Authors
[29] stated that the particular decision-making system should be based on the set of
ordinary criteria, pseudo-criteria and quasi-criteria. Authors [21] identified the
following groups of common criteria: (1) the input data, (2) the preference eluci-
dation, (3) the aggregation procedure, (4) the quality and quantity of the input
information, (5) the compensation degree of the method and (6) the decision
support system (software, user friendly aid packages).
Authors [30] claimed that the choice of criteria is very dependent on the
decision-making context. A crucial parameter in their view is the adaptation of the
type of results the method is expected to deliver, following with the correct han-
dling of input information and adaptation of the degree of compensation.
In view of these findings two groups of common criteria were identified: pri-
mary and secondary (Figure 2). Criteria are presented in a hierarchical order (from
the most important to the least important) to help the decision-maker chose the
most appropriate method. However, the order of criteria within the key criteria
related group is not mandatory.
The decision-maker can choose mainly between following types of results: a
numerical value that is, available for each potential action, ranking of potential
actions, without assignment of a numerical value for each potential action, selection
of a subset of actions in preparation for making a final choice and assignment of
actions to some a priori defined categories.
Kind of input information determines whether the information is qualitative,
quantitative or mixed. An information feature deals with the information deter-
minism or non-determinism (certain, uncertain, ambiguous, non-ambiguous
information, etc.) [21]. There are three crucial types of problem statements:
(1) The choice problem statement in which one or more alternatives are selected.
(2) The sort problem statement in which various alternatives are sorted in classes.
(3) The rank problem statement that ranks alternatives according to a preference
structure [22, 29].

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Figure 2.
Classification of common criteria.

MCDM methods have different forms of preferences: trade-offs, assessment of

lotteries, direct rating and pairwise comparison, presence of veto, etc. The degree of
compensation which concerns the ‘trade-offs; that is, the possibility of offsetting a
“disadvantage” of some criterion with a sufficiently large “advantage” of another
criterion—whereas smaller advantages would not do the same’ [22].
There are also some criteria that determine the use of the MCDM method but are
totally dependent on the need or request of each individual decision-maker. These
criteria often relate to user-friendliness [21, 31], intelligibility and the structure of
the method [18], ease of computation and costs of adopting methods [31].
Authors [20] suggested also using secondary parameters in case the decision-
maker after taking into account various parameters still hesitates between several
methods.

3.2 Analysing all aspects of 3PLP selection problem in view of common criteria

A literature review on selection criteria in 3PL found that the number of criteria
vary from 6 to more than 20 [15]. In all reviewed articles mixed types of criteria
(qualitative and quantitative data) were applied. Costs were found to be the most
frequently used criterion, closely followed by many qualitative criteria [16]. Based
on these results, it is clear that the 3PL industry is characterised by the mixed types
of input data (quantitative and qualitative) and many input data which are usually
conflicting (lower costs, high quality).
The most frequently used method was found to be the AHP, followed by TOPSIS
and ANP. DEA, VIKOR, DELPHI, DEMATEL, QFD, ISM, PROMETHEE and
ELECTREE were used more rarely [15]. Based on these results, it is clear that the
pairwise comparison of criteria is the most desired preference elucidation mode.
The results of decision-making are most frequently presented as numerical values
(score for each alternative) or as ranked alternatives.
The fuzzy optimised method has been applied the most frequently (in 38 of
108 articles) [15]. Based on this fact, it is clear that the 3PL industry is characterised
by input data, which are usually uncertain.

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Application of Decision Science in Business and Management

In 35% of the reviewed articles, software tools were used. Frequent use of
software tools may prove that user friendly solutions are required. Moreover, ease
of use and low level of complexity are desired.

3.3 Analysing the selected MCDM methods in view of common criteria

A selection of MCDM methods has been made on the basis of the literature
review. Twenty-six methods in total, used in the 3PLP selection process, were found
to exist, but only the most frequently used (in 75% of cases) were selected to be
evaluated according to the criteria presented in the section “Identifying common
criteria”.
The comparison of the methods (Table 3) is based on a review of the literature
[18, 20, 22, 29, 32–37] and not on expert study of each of the methods. Any
method not considered in this table can be added to the table and analysed in the
same way.
According to comparative analysis, the AHP, ANP, TOPSIS, ISM, VIKOR,
DEMATEL and ELECTRE methods were found to be the most appropriate for the
3PLP decision-making problem and were later used in typological decision tree.

3.4 A typological decision tree diagram for the selection of the appropriate
MCDM method

Based on the insights presented mainly in Sections 3.1, 3.2 and 3.3, the three
diagram (Figure 3) which helps decision-maker to narrow down opinions following
the branches was prepared [21, 29, 38]. A typological tree was used, because of its
ability to capture all the sides of the decision-making problem (different methods,
many parameters, extensive information) [21].
On the top of the tree are listed MCDM methods that, in Section 3.3 were found
to be most appropriate in the selection of 3PLPs. The tree structure is then divided
into seven nodes with questions which guide decision-makers in selecting the most
appropriate MCDM. Questions are criteria identified in Section 3.1. The questions

MCDM Type of Kind of Type of problem The preference Compensation

method results info statement elucidation mode

AHP numerical mixed choice, ranking pairwise comparison yes, partially

value

TOPSIS numerical mixed choice, ranking direct rating yes, totally

value

ANP numerical mixed choice, ranking pairwise comparison yes, partially

value

DEA ranking mixed ranking pairwise comparison yes, partially

VIKOR numerical mixed choice, ranking trade-offs/rating yes, partially

value

DEMATEL ranking mixed ranking pairwise comparison yes, partially

ELECTRE ranking mixed ranking pairwise comparison yes, partially

PROMETHEE ranking mixed ranking pairwise comparison yes, partially

Table 3.
Comparison of selected MCDM methods on the basis of common criteria.

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Figure 3.
The decision tree for selecting MCDM method in 3PLP decision-making.

are in a hierarchical order, from the most general and pertinent to the least perti-
nent [20].
The tree diagram can include any other method and may be upgraded with
additional questions from the third group of parameters as well.

4. Validation of the proposed decision tree using a case study of local

spare parts for a construction and agricultural machinery dealer

To validate the usefulness and practicality of the proposed approach we

present a case study of a local spare parts company dealing with construction and
agricultural machinery. The management intends to outsource all parcel delivery
and occasionally value added services (repackaging of goods) to a single 3PLP. Thus
far they have worked with five domestic and international parcel distributors. Due
to a large number of contacts, different pricing, operating conditions and even
quality of services, the situation can be quite chaotic at times. The dealer therefore
decided to cooperate with one or at most two logistics providers who are
favourable, offer a high quality of service particularly in terms of time, quality and
quantity of package accuracy, flexibility, responsiveness, high frequency of deliv-
ery, etc.
To define the criteria set, the list of the most frequently used criteria detected by
[15] was submitted to the top management of a spare parts dealer. According to the
dealer’s requirements and the nature of its business, the following criteria were

9
Application of Decision Science in Business and Management

selected: costs (C1), warehouse services (C2), added value services (C3), accurate
time, quality and quantity (C4), flexibility (C5), responsiveness (C6), frequency of
delivery (C7), staff quality (C8), information exchange capability (C9). Some of
them are qualitative, some quantitative. Mixed types of data were therefore used in
this selection process, which answered the second question of a tree diagram pro-
posed in Section 3.4.
Selection of the most appropriate MCDM started with answering the six ques-
tions of the decision tree, since the second question was already answered with the
selection of the criteria for choosing the 3PLP. The top management was not famil-
iar with MCDM methods. The authors, therefore, need to explain questions 1, 3, 4,
5, 6 and 7 of the decision tree in order to receive proper answers. The top manage-
ment preferred to have 3PLPs ranked from the best to the worst. They wished to
eliminate subjectivity. Pairwise comparison and not direct rating was selected. They
wanted to take into account compensation and preferred to use an easy method.
Using the tree diagram proposed in Figure 3, the PROMETHEE and DEMATEL
methods were found to be the most appropriate for the requirements of the top
management. But since ‘PROMETHEE shows better balance between theory and
implementation, it is easier to use and the software is simple to understand [18] the
present decision-making process used PROMETHEE.
PROMETHEE requires the use of weights of relative importance fw1 ; w2 ; …; wm g
to associate with the criteria set C ¼ fC1 ; C2 ; …; Cm g, m ¼ 9. The following weights
are obtained with the AHP method: w1 ¼ 0:24, w2 ¼ 0:06, w3 ¼ 0:05, w4 ¼ 0:20,
w5 ¼ 0:11, w6 ¼ 0:10, w7 ¼ 0:18, w8 ¼ 0:03, w9 ¼ 0:03: They are based on the
nine stage Saaty comparison scale [39] and form the pair-wise comparison
matrix M.
The consistency index ðCIÞ of the comparison matrix M is computed using the
normalised principal Eigen vector method and the approximate value of the maxi-
mum eigenvalue λmax which is 9.83 [40]. The consistency index is CI ffi 0:1, divided
with the random consistency index ðRIÞ, which is 1,45, results in the consistency
ratio CR ffi 0:07, which is <10%. Therefore, the comparison matrix M is consistent
and the weights have been properly computed. In the next step, the set of alterna-
tives A ¼ fa1 ; a2 ; …; an g must be evaluated with respect to the proposed criteria. In
the case study n ¼ 5 and fa1 ¼ TNT; a2 ¼ DHL; a3 ¼GLS; a
4 ¼ Posta SLO;
a5 ¼ FEDEXg. Evaluations are defined in the matrix f i aj ; 1 ≤ i ≤ 9 ; 1 ≤ j ≤ 5g and
values of evaluation (Figure 4) are based on the five stage scale where intermediate
evaluations are also allowed (1 = very low,…, 5 = very strong).
Now the preference structure of the PROMETHEE method is defined. For this
purpose the range of evaluations of alternatives is computed with respect to each
criterion:



dk ai ; aj ¼ f k ðai Þ  f k aj (1)

and the preference function PðxÞ is defined as:

0, x≤q
8
>
<x q
>
PðxÞ ¼ , q≤x≤p; (2)
>
> pq
1, x≥p
:

where q and p are, respectively, the smallest and the largest threshold deviation
values sufficient to generate a full preference. In our case q ¼ 0:2 and p ¼ 0:6:
Preferences are values between 0 and 1 and are defined as:

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A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…
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Figure 4.
Evaluation matrix.



Pk ai ; aj ¼ P dk ai ; aj : (3)

The preference degree of criteria ai with respect to aj is defined as:

m

π ai ; aj ¼ ∑ Pk ai ; aj wk (4)
k¼1

and the preference degree of criteria aj with respect to ai is defined as:

m

π aj ; ai ¼ ∑ Pk aj ; ai wk : (5)
k¼1

The multi-criteria preference flows (out and in) are defined as:

1 n
ϕþ ð a Þ ¼ ∑ π ða; ai Þ; (6)
n  1 i¼1
1 n
ϕ ð a Þ ¼ ∑ π ðai ; aÞ; (7)
n  1 i¼1

The positive preference flow ϕþ measures the given alternative’s global prefer-
ence with respect to the preferences of all other alternatives. The negative prefer-
ence flow ϕ measures the global preference of all the other alternatives with
respect to a given alternative. The PROMETHEE complete ranking is obtained by
ordering the actions according to the decreasing values of the flow scores:

ϕðaÞ ¼ ϕþ ðaÞ  ϕ ðaÞ; ϕðaÞϵ½0; 1 (8)

For functions defined by Eq. (1)–(8), it has been verified that all request condi-
tions are fulfilled [41]. Using Eq. (6) the out multi-criteria preference flows are
computed: ϕþ ða1 Þ ¼ 0:11, ϕþ ða2 Þ ¼ 0:01, ϕþ ða3 Þ ¼ 0:09, ϕþ ða4 Þ ¼ 0:75,
ϕþ ða5 Þ ¼ 0:18. Then using Eq. (7) the in multi-criteria preference flows are com-
puted: ϕ ða1 Þ ¼ 0:27, ϕ ða2 Þ ¼ 0:46, ϕ ða3 Þ ¼ 0:28, ϕ ða4 Þ ¼ 0, ϕ ða5 Þ ¼ 0:15.
The ranking of alternatives is obtained using Eq. (8): ϕða4 Þ ¼ 0:75 ≥ ϕða5 Þ ¼ 0:04 ≥
ϕða1 Þ ¼ 0:15 ≥ ϕða3 Þ ¼ 0:18 ≥ ϕða2 Þ ¼ 0:45. The best alternative is Posta SLO
and the least useful is DHL.
To check the usefulness of the proposed framework and the obtained results the
authors asked the spare parts dealer to validate five logistics service providers using

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Application of Decision Science in Business and Management

customer relationship management (CRM) software. The software enables man-

agement of the database of logistics service providers and also offers some extra
services including an evaluation of the service providers. In order to be as objective
as possible authors decided not to inform the dealer of the results of the
PROMETHEE ranking. Authors suggested they use the same criteria as in the
PROMETHEE ranking, while everything else was left to their choice. Posta SI was
found to be the best alternative, followed by FEDEX, TNT, GLS and DHL. The same
results were obtained using the PROMETHEE method.

5. Discussion

After proposing a typological tree and testing its usefulness it can be concluded
that the tree cannot be simply used by a decision-maker in the same way as it was
presented, but must be tailored to each specific 3PL selection process. Each 3PL
selection process is unique and each decision-maker has different requirements in
regard to the questions (criteria) and also different levels of knowledge about
MCDM methods.
Moreover, due to the diversity of methods, the answers to the questions presented
in the tree are often quite complicated. The comparison of MCDM methods
presented in Chapter 3.3 also revealed that by some criteria methods cannot simply
be compared [20] because of diversity of calculation, lack of an approach, for exam-
ple, to characterising the degree of compensation, etc. [22] etc.). Authors [21],
therefore, argue that a comparative analyse of different MCDM can only be used to
identify in what circumstances (by which criteria) one method is appropriate.
Accordingly, it is impossible to describe all the 3PL decision-making situations
and to formulate a tree diagram with a family of questions that would simply allow
choosing the appropriate method [20]. The tree diagram presented here, as a final
stage of the proposed framework, is therefore not a miraculous tool which enables
the choosing of the proper methods, but only a general guideline that facilitates the
choice of the proper methods.
The proposed framework is based on three different characteristics: 3PL charac-
teristics; those of MCDM methods; and individual requirements of each single
decision-making process. When selecting an appropriate method all three charac-
teristics need to be matched [22], which is not an easy task, one requiring knowl-
edge of the MCDM methods. The MCDM methods resulting from the tree diagram
are frequently also equivocal, which requires a deep and axiomatic study in order to
confidently make a choice.

6. Conclusion

Decision-making in 3PLP selection has an important impact on logistics

outsourcing success. Therefore, the appropriate MCDM method or methods must
therefore be used to select the most appropriate 3PLP. Because of the sheer volume
and variance among MCDM methods, decision-makers face a difficult dilemma.
To solve this problem a four step approach facilitating the choosing of an
appropriate method was proposed. The first two steps relate to criteria identifica-
tion, the third to the identification of the right MCDM methods for 3PLP selection
and the last combines all of the first three steps’ results on order to construct a
typological tree.
The typological tree is divided into branches (simple questions) which orients
the decision-maker, guiding him towards an eventual opinion. The questions relate
the characteristics of the logistics industry, aspects of MCDM methodology and the

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preferences of the decision-maker. The order in which questions follow is chosen

according to the priorities in making choices. The authors argue that the most
relevant criteria to consider is the type of the results, followed by the type of data,
elimination- or degree of limitation- of subjectivity, preference elucidation mode,
degree of compensation, and finally, the ease of use and the availability of software.
The tree diagram could be upgraded with additional branches but it will neverthe-
less remain easy to understand, even for those decision-makers who are not familiar
with MCDM methods.
The proposed guideline was illustrated by a single case study of a local spare
parts company. The decision-making process was made using the PROMETHEE.
The PROMETHEE ranking of alternatives was at the end compared with results
obtained by the CRM software tool. The evaluation of the framework in the case
study demonstrated its utility.
The paper upgrades the general theory of IDSS and tailors it to the 3PL purposes,
contributing to the theory by firstly suggesting a novel framework for facilitating
the selection of the MCDM method. Further, it identifies and evaluates the criteria
that characterise 3PLP decision-making in view of MCDM as well as individual
criteria. The paper also suggests a suitable order of criteria and makes a comparative
analysis of MCDM based on the criteria.
From a managerial perspective, this paper provides a kind of a tool for guiding
decision-makers selecting an MCDM method. A decision-maker should first decide
how many and which criteria are relevant for the decision-making process. Then, a
decision-making tree helps the decision-maker focus on the proper MCDM method.
Moreover, the proposed framework makes a significant contribution to the
choice of the 3PLP that best suits decision-maker needs and consequently decreases
relationship risks and increases performance outcomes for the 3PLP and its buyer.
The paper has some limitations. First, the drawback of a single-case design is its
inability to provide a generalised conclusion. To strengthen the external validity of
guideline, further empirical studies are necessary. The authors suggest testing the
guideline in other case studies. Second, an issue that remains open, one that was not
considered in this paper, is the importance of each criterion within the framework.
Not all criteria are equally important. Further studies that will measure the weight
of each criterion should be conducted.

Author details

Patricija Bajec* and Danijela Tuljak-Suban

Faculty of Maritime Studies and Transport, University of Ljubljana, Portorož,
Slovenia

*Address all correspondence to: [Link]@[Link]

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms
of the Creative Commons Attribution License ([Link]
by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,
provided the original work is properly cited.

13
Application of Decision Science in Business and Management

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