3pl Providers and Users
A STUDY OF THIRD PARTY LOGISTICS PROVIDERS AND USERS Dr. S. Samar Ali, Associate Professor : Operations & Logistics Management * JK Business School, Damdama Lake Road,Bhondsi, Gurgaon 122102, India Telephone: +91-9971876017, Email address: [email protected]
com ABSTRACT Third party logistics (3PL) has been gaining importance in most places in the world. The implementation of 3PL practices is just beginning and emerging effectively. This paper examines the Indian 3 PL Supply Chain Management and practices with respect to the key success factors and growth strategies .
After identifying the critical success factors SERVQUAL is applied to reveal the gap between their achievement and expectation. Respondents to the survey are categorized based on their rating of the key growth strategies on the basis of AHP. Key Words: 3PL; Third Party Logistics Providers; India; Factor Analysis; SERVQUAL; AHP 1. Introduction As conditions for doing business in a global setting have changed significantly during the last two decades the importance of logistics and supply chain management (LSCM) has been recognized universally.
As companies realized the need to adapt to the ever changing conditions in an environment of globalization, technological innovation, and more sophisticated consumer demand to survive and flourish they began to incorporate into their systems of operations and focus on a strong LSCM component (Rushton & Walker, 2007). Superior logistics and supply chain performance is now a well-recognized strategic dimension for companies to gain competitive advantage.
The growth of logistics outsourcing in the USA is attributable to better transportation solutions; greater focus on core businesses; impact on cost reduction; improvements in services; development of necessary technological expertise; availability of computerized systems; and the need for more professional and better prepared logistics services (Sheffi, 1990). The growth of business dynamics has caused outsourcing of the logistics activities to gain increasingly greater importance.
Companies have been considering various options to manage their logistics activities including, creating in house dedicated logistics function, setting up logistics subsidiaries or acquiring a logistics firm. (Sahay & Mohan, 2006). A 3PL provider is a company which supplies and/or co-ordinates logistics functions across multiple links in the supply chain. The company acts as a 1 “third party” facilitator between seller/manufacturer (the “first party”) and buyer/user (the ‘second party’), Figure 1. Figure 1. Main components of 3PL.
Source: Research on India – Third Party Logistics – India, November – 2009. www. researchonindia. com Various authors have provided their version of 3PL definition, which are listed in Table 1. Table 1 – Definitions of 3PL in the logistics literature. Authors Lieb (1992) Definition The use of external companies to perform logistics functions that have traditionally been performed within an organization. The function performed by the third party can encompass the entire logistics process or selected activities within that process. Andersson (1997) Murphy and Poist (1998)
The procurement of an integrated set of logistics services in a longterm relationship between a shipper and a service provider. A relationship between a shipper and third party which, compared with basic services, has more customized offerings, encompasses a broader number of service functions and is characterized by a longer term, more mutually beneficial relationship. 2 Vab Laarhoven et al. (1999) Berglund (2000) Bask (2001) Activities carried out by a logistics service provider on behalf of a shipper and consisting of at least management and execution of transportation and warehousing.
In addition, other activities can be included, for example inventory management, information related activities, such as tracking and tracing, value added activities, such as secondary assembly and installation of products, or even supply chain management. Also, the contract is required to contain some management, analytical or design activities, and the length of the co-operation between shipper and provider to be at least one year, to distinguish 3PL form traditional “arm’s length” sourcing of transportation and/or warehousing.
Organizations use of external providers, in intended continuous relationships bound by formal or informal agreements considered mutually beneficial, which render all or a considerable number of the activities required for the focal logistical need without taking title. Relationships between interfaces in the supply chains and third party logistics providers, where logistics services are offered, from basic to customized ones, in a shorter or longer-term relationship, with the aim of effectiveness and efficiency.
Source: Marasco, A. , A Survey of Third Party Logistics Literature: Preliminary Findings. RIRL 2006 – Sixth International Congress of Logistics Research. Since the 1980s, along with the trend to outsource non-core activates (Sink and Langley, 1997), companies have increasingly turned to third-party logistics providers (3PL) both in the USA (Lieb and Randall, 1996; Rabinovich et al. , 1999; Knemayer and Murphy, 2004) and in Europe (Van Laarhoven et al. , 2000). PL services help to achieve the strategic objectives by concentrating more on core competency of the main business. The study by Sahay and Mohan, 2006, has cited substantial growth in various financial indicators using services of 3PL, for instance, various improvements in sales revenue by 13. 5%, working capital by 12. 3%, returns on assets by 10%, capital assets reduction by 10%, production cost reduction by 10. 5%, labor cost reduction by 10. 0%, and logistics cost reduction by 15%. PL users depend on 3PL service providers to secure capacity and gain agility (Hannon, 2005) who not only provide core services like supplying right quality product, Figure 2. Outsourcing Development of Logistics Services and Network Source: Hapanen and Vepsalainen, 1999. 3 in the right amount, at the right price and place, and at the right time but also provide value added services such as tracking and tracing, sending information prior to the arrival of products, flexibility in delivery, which are valued by customers.
The role 3PL service providers play in enhancing services and thereby satisfying customers has been universally recognized. The growth in 3PL service providers is seen across the world. As the logistics service demand increases, the challenges and opportunities will continue to increase. With the wide availability of modern decision making tools and information technology a paradigm shift in logistics is witnessed. Figure 2 depicts the evaluation and the state of the art witnessed in ogistics outsourcing. Companies across industries and around the world regard logistics and supply chain management as key components of their overall business success. Many users feel that their relationships with 3PLs have helped them achieve critical goals related to service, cost, and customer satisfaction. Third Party Logistics in India: Ever since the liberalization of its economy India has been on a path to become one of the top economic powers in the world.
New avenues for progress and development have opened up; manufacturing and retail sectors gained popularity because of the changes in China’s export policy of not exporting manufactured items, from which Indian manufacturing firms have benefitted. Hence this sector will contribute to GDP significantly in the long run. The growth and competitiveness in these two sectors largely depend on the efficiency of the logistics operations that facilitate the companies’ ability to reach out to their customers quickly and at the desired location.
Realizing this many manufacturers and retailers are now restructuring their supply chain processes in a manner to incorporate partnerships with expert supply chain service providers and outsourcing such activities as domestic transportation, international transportation, customs brokerage, warehousing, forwarding, cross-docking, product labeling, packing, assembly, kitting, reverse logistics, freight bill auditing and payment, IT services, fleet management, supply chain consultancy services provided by 3PLs, order entry, processing and fulfillment and limited liability partnership (LLP)/4PL Service.
Currently 3PL services are in their nascent stage in India. Third party logistics will gain considerable share of the logistics sector because of the following compelling facts. • 1 Globally, the logistics industry is valued at US$3. 5 trillion and the Indian logistics industry is currently estimated at US$90 billion (CII)1. Colliers International – Logic of Logistics – http://www. colliers. com/Content/Attachments/India/2009_Logic_Of_Logistics. pdf 4 • • • • • • • •
The industry has generated employment for 45 million people in the country in comparison with the IT and ITES sector, which employs approximately 4. 3 million people1. As per the World Bank Survey, India ranks 39th in terms of the logistics performance index and indicators, with Singapore on top, the UK, USA and China in 9th, 14th and 30th positions, respectively. India spends US$1,148 in handling costs to import one cargo container and US$820 to export it. In comparison, Singapore spends US$367 per imported container and China US$390, according to a World Bank study1.
India spends 13% of its GDP on logistics compared to an average of 10% in developed countries, while the U. S. spends just 8%. Better supply chain management has reduced logistics costs by nearly 1% in 10 years1. The Indian government plans to spend US$24 billion over the next eight years on supply chain infrastructure1. 3PL solutions are on course to grow at a compound annual growth rate (CAGR) of over 16% from 2007-2010. Consequently, 3PL service providers are expected to corner an increased share of the Indian logistics pie, from 6% in FY2006 to 13% in FY2011, at a CAGR of 25% (CII)1.
According to the ASSOCHAM2, outsourcing of 3PL businesses in India should reach the value range above US$ 90 million by 2012 as the concept first introduced in US and Europe is being adopted at a pace that will lead to increases in the efficiency of domestic operations through better managed logistics functions. Companies in textile, automotive, pharmaceutical, manufacturing, retail and FMCG sectors are increasingly opting to outsource their logistics requirements to specialized service providers. According to a recent survey of 3PL service providers engineering, automotive and retail sectors were top revenue earners. PL Market Structure in India The 3PL market in India is comprised of two segments: the first one is asset based in which assets like trucks, distribution centers and warehouses are utilized in supply chain management, and the second one is non-asset based. There is a significant difference between the nature of Indian 3PL and its counterpart elsewhere, especially in the U. S. , Table 2. Table 2: Comparative Analysis of 3PL in India and the U. S. Parameter Usage of 3PL Common activities outsourced 2 USA 71% Warehousing (73. 7%) Outbound Transportation (68. 4%) India 55% Outbound Transportation (55%) Inbound Transportation (52%) http://www. ommodityonline. com/printnews. php? news_id=23489 5 Reasons for not outsourcing Necessity of ecommerce Collaborative relationship Gain sharing is important for relationship Freight bill payment (61. 4%) Inbound warehousing (56. 1%) Control would diminish (63%) Costs would not be reduced (63%) Service commitment would not be met (48%) Logistics is a core competency (44%) 72% Custom clearing and forwarding (51%) 82% 14% 80% 6. 6% Source: 3PL Practices in India, Sahay. B. S. , Poor infrastructure of provider (81%) Inability to respond to changing needs (81%) Unreliable promised from providers (80%) Concerns about capability of providers (77%) 7% www. cscmpindia. com/Events/20112003/3. PDF Considerable amount of research on the topic of the implementation of 3PL in different countries has been published in academic and trade journals. Viewpoints of both users and service providers have been considered to identify the major issues, industry dynamics, current status and future prospects of the 3PL industry. However most of the research is descriptive in nature and does not go into in-depth statistical analysis of survey data. In the present study Indian 3PL providers’ service dimensions are analyzed in terms of the key success factors and growth strategies using various tatistical tools. 2. Literature Review In this section a review of the literature is presented, which examines the perspectives of the 3PL users and service providers to understand the variation in the services offered and services expected. Table 3 provides a list of recent contributions that address the reasons for outsourcing logistics activities. Table 3. Reasons for outsourcing logistics activities. Author, (Year) Objective Conclusion Sheffi, (1990) Understand the motives for the growth of logistics outsourcing in USA The main motives are to focus on • Core businesses • Better transportation solutions • Cost savings and improved ervices • Development of necessary technological expertise and computerized systems; and need for more professional and better- 6 Maltz, (1994) Establish relative impact of cost and services on the decision to outsource warehousing The study determined that organizations are reluctant to use third party warehousing due to customer service considerations. Author, (Year) Objective Conclusion Rao & Young, (1994) Identify the factors influencing outsourcing of logistics functions Daugherty et al. , (1996) Study the perception of the third party logistics service users van Damme et al. , (1996) Examine outsourcing ogistics management activities Sink & Langley, (1997) Develop a managerial framework for the acquisition of third party logistics services The study identified factors such as • Centrality of the logistics function • Risk and control • Cost/service trade-offs • Information technologies and relationships with logistics service providers • Product-related (e. g. special handling needs), process-related (e. g. cycle times) and networkrelated (e. g. countries served) drivers are believed to have an indirect influence in the outsourcing decision The service users believe that they are getting benefits like reduction in nventory levels, order cycle times, lead times and improvement in customer service. The “do or buy” decision is also affected by evaluation of cost/service trade-offs. One important determinant of the decision is cost comparison between alternative options. Costs associated with performing logistics activities inhouse and investment in capital assets are traded-off against service provider fees. The lowest cost solution should Concentration towards the core competencies was the most important factor for the acquisition of third party logistics services. Bhatnagar et al. , (1999) Find out factors for decision-making process or choosing contract logistics service providers. Ascertain benefits of alliance between manufacturing and global logistics service providers. Study benefits of outsourcing the logistics activities. The major reasons to outsourcing of logistics activities were cost saving (86. 8%), customer satisfaction (76. 3%) and flexibility (75%). Study growth strategies for logistics service providers Forming relationships with 3PL providers is an efficient and effective means of achieving the required services without investing heavily in assets and new capabilities. Bhatnagar and Viswanathan, (2000) Bask, (2001)
Persson and Virum, (2001) The manufacturing firms got the advantage of reduction in inventory levels, order cycle times, lead times and improvement in customer service. The customer satisfaction increases significantly and provides access to international distribution networks. 7 Sohail & Sohal, (2003) Examine the reasons for outsourcing logistics activities in Malaysia The major reasons reported are • Cost savings • Improved services • Better transportation solutions • Better professionalism Author, (Year) Objective Conclusion Wilding & Juriado, (2004) Determine customer perceptions on logistics outsourcing in the
European consumer goods industry The main reasons for outsourcing the logistics activities are • Competencies of 3PLs • Operating flexibility • Cost reduction • Focus on core businesses Aktas & Ulengin, (2005) Review the reasons for outsourcing logistics activities in Turkey Turkish firms basically outsource the transportation activities to reduce the operating costs. Simchi-Levi et al. , (2008) Determine the effect of outsourcing of logistics on the management of the supply chain. The most important reason for outsourcing is that it allows a company to focus on its core competencies and hence on customer requirements.
Studies based on user firms appear to indicate that outsourcing logistics activities is appropriate if it has an impact on one or more factors depicted in Table 4. Table 4. Impact of outsourcing logistics activities. Factor Impact on customer satisfaction Indentified by Gooley (1992); and Lieb et al. (1993) Impact on logistics system performance Lieb et al. (1993) and Dapiran et al. (1996) and Bhatnagar et al. (1999) Reduction in capital investment in facilities Reduction in capital investment in equipment Foster and Muller (1990) and Richardson (1992, 1995) Fantasia (1993), Foster and Muller (1990) and Richardson (1992)
Reduction in investment in information technology Impact on employee morale Goldberg (1990), Sheffi (1990), Trunick (1990) and Fantasia (1993) Bowersox (1990) and Dapiran et al. (1996) Reduction in manpower cost Foster and Muller (1990) and Richardson (1992, 1995) Minaham (1997) and McMullan (1996) Improvement on specific logistics function parameters Improvement in inventory turnover rates Improvement in on-time delivery Increasing productivity Richardson (1990, 1995) Richardson (1995) Bradley (1995) 8 A list of references that address the issue of selection criteria for 3PL providers is given in Table 5. Table 5.
Selection criteria for 3PL providers. Reference Objective Conclusion Bagchi and Virum, (1996) Develop a management model for selecting the logistic service provider Selection criteria typically include: • Cost • Service quality and reliability • Flexibility • Responsiveness to requests • Financial stability Sink & Langley, (1997) Develop a managerial framework for the acquisition of 3PL services Menon et al. , (1998) To study the selection criteria for 3PL providers. Meade and Sarkis, (2002) To develop conceptual model for selecting and evaluating third-party reverse logistics providers. Managers of a firm assign greater mportance to qualitative factors such as supplier reputation, references from clients, and response to information requests, which are used for the initial screening of candidate service The firm’s competitiveness strategy and its external environment affect the selection criteria. The important criteria for the selection of a 3PL provider are: • On time shipment and deliveries • Superior error rates • Financial stability • Creative management • Ability to deliver as promised • Availability of top management • Responsiveness to unforeseen occurrences • Meet performance and quality The most important factors for 3PL election are: • Time • Quality • Cost • Flexibility Aghazadeh, (2003) To select the effective 3PL provider. The criteria for selecting 3PL provider are: • Similar value • Information technology systems • Key management 9 Colson and Dorigo, (2004) H. S. Hwang et al. , (2005) Efendigil et al. , (2008) To develop public warehouse selection support system. The software tool select the public warehouse on the basis of factors like • Storage surface and volume • Dangerous items • Geographical distance to highway connection • Certification • Assistance with customs • Use of technology such as RFID/bar-coding, modem
To develop the supplier The major supplier selection selection and planning indicators are: model. • Serviceability – Meet the lead time • Inventory rotation rate • Lead time • Customer satisfaction • Market share • Production flexibility • Multi-item production capability • New item development/production capability • Quality – Quality assurance Selection of a thirdThe third party reverse logistics party reverse logistics providers selection can be done by provider in the using performance indicators like: presence of vagueness. • On time delivery ratio • Confirmed fill rate • Service quality level Unit operation cost • Capacity usage ratio • Total order cycle time • System flexibility index • Integration level index • Increment in market share • Research and development ratio • Environmental expenditures • Customer satisfaction index Table 6 gives Jharkharia and Shankar’s (2006) list of the selection criteria for 3PL providers as identified by some authors. Table 6. Selection criteria. N o Selection Criteria Relevance in 3PL Selection Reference 10 1 Compatibility with the Users The ability of the user, provider and their support systems to work together in co-ordination. Anderson and Norman 2002), Lynch (2000), Mohanty and Deshmukh (1993). 2 Cost of Service Total cost of logistics outsourcing. Lynch (2000), Stock et al. (1998), Tam and Tummala (2001). 3 Quality of Service It includes many aspects like transportation time, on-time delivery, frequency and cost of damages etc. Razzaque and Sheng (1999), Thompson (1996), Langley et al. (2002). 4 Reputation of Vendor 5 Performance Measurement Opinion of concerned people about 3PL firm. Provision for periodic evaluation of the performance. Lynch (2000), Thompson (1996). Bhatanagar et al. (1999), Lynch (2000), Langely et al. (2002). 6 Willingness to Use
Logistics Manpower Razzaque and Sheng (1998), Ackerman (1996). 7 Flexibility in Billing Willingness of 3PL provider to retain users’ logistics employee, who would otherwise become unemployed after outsourcing contract. Flexibility in billing and payment conditions which increases goodwill between user and supplier. 8 Long-Term Relationship Includes shared risk and rewards. Lynch (2000), Boyson et al. (1999). 9 Quality of Management Anderson and Norman (2002), Lynch (2000), Boyson et al. (1999). 10 Information Sharing and Mutual Trust Able management not only provides good services but also fosters a long-term elationship. For continuance of agreement and continuous improvement of services. 11 Operational Performance 12 Information Technology Capacity 13 Fixed Asset Langely et al. (2002), Tam and Tummala (2001). Anderson and Norman (2002), Lynch (2000), Langely et al. (2002), Babbar and Prasad (1998). Hum (2000), Boyson et al. (1999). 14 Experience in Similar Product 15 Delivery Performance Can be measured by delivery performance, performance monitoring capacity etc. The advanced IT capacity helps in reducing uncertainties and inventory level. Tracking of goods becomes an easy process. Size and Quality of fixed sset helps in good operational performance. Prior experience in product line of shipper is added advantage. Speed and reliability. Bradley (1994). Lynch (2000). Razzaque and Sheng (1998), Ackerman (1996). Stock et al. (1998), Gattorna and Walters (1996). 11 16 Employee Satisfaction Level Improves operational performance. 17 Financial Performance Ensures continuity in services, regular updation of equipments. 18 Market Share It reflects its financial performance, customer satisfaction and reputation. Thompson (1996). 19 Geographical Spread and Range of Services Provided Flexibility in Operation and Delivery
Create enhanced access to the user. Maltz(1995), Boyson et al. (1999), Bradlley (1994). Stank and Daugherty (1997). 20 It may enable the user to give customized service to the shipper, particularly in special or non-routine request. Lynch (2000), Boyson et al. (1999), Langely et al. (2002). Anderson and Norman (2002), Boyson et al. (1999). Table 7. Growth Strategies Reference Objective Conclusion Sum and Teo, (1999) To find out Strategic posture of logistics service providers in Singapore 3PL performance and profits can be improved by: • Cost reduction, • Market segmentation • Service differentiation
Environmental changes and the introduction of new technologies have an impact on LSP strategic planning Both vertical (shipper-LSP) and horizontal (among LSPs) alliances are set up mainly with the aim of getting access to complementary resources and capabilities. In particular, horizontal alliances among LSPs are deemed necessary for the development of cross-border logistics solutions Hum, (2000) van Hoek, (2000) To find out the factors that affect the LSP strategic planning To find out the reasons for doing alliances. 12 Stone, (2001 & 2002) To find out the growth strategies used by UK’s 3PL providers.
Carbone and Stone, (2005) To identify the growth strategies used by European logistics service provider and its out come C. John Langley, Jr. , Ph. D. , and Capgemini U. S. LLC. 2009, 2008, 2007, 2006, 2005 To identify the growth strategies used by the logistics provider in the world. LSPs employ a variety of growth strategies. Important means of expansion include: • Mergers and acquisitions (M&As) • Joint ventures • Strategic alliances • Piggybacking (i. e. following the client’s expansion and establishing new operations in foreign markets) • Organic growth European logistics service providers use M for gaining dvantage in factors like: • Economies of scope • Expanded geographical coverage • Acquisition of specialized capabilities • Requirements for investment in IT and equipment Third party logistics providers use following strategies for growth of the company. • M • Service Portfolio • 3PL User/Provider Relationships. • RFID and IT • Future Growth of the 4PL Provider Concept • 3PL Creation of Supply Chain Value • Integration & Collaboration • Green Supply Chain 3. Research Methodology The research objectives of this paper are as threefold: 1. To identify the success factors of Indian 3PL firms and their relative importance. . To analyze the gap between achievement and expectation as defined by the success factors identified. 3. To prioritize the growth strategies and their relative importance. 13 3. 1 Type of Research Employed In this paper we used an exploratory research to help formulate relevant questions and hypotheses that can be the basis of subsequent inquiries into the issues faced by 3PL providers and users. This type of research is particularly useful when the researcher is uncertain of the theories that are relevant, and would like to seek insights and ask questions to assess the phenomena he has observed in a new light.
The tools one may employ to conduct exploratory research include review of the literature, and surveys of the opinions of experts and focus groups. 3. 2 Sampling Procedure We employed a non-probability sampling technique, Quota Sampling. Quota sampling is used to ensure that a set of specific characteristics that are of interest to the investigator is present in the sample. 3. 3 Sample Size To collect data we sent out a structured questionnaire to 220 third party logistics providers’ employees. 124 of the replies could be used for the analysis. Industry Review factor analysis, the research . 5 Tools of Analysis Literature Review Research Issue In our study we used SERVQUAL and AHP. The stages of process are shown in Figure 3. Research Questions First Version Development of Questionnaire Final Version Revised Version Data Collection Data Analysis 14 Conclusion Figure 3 Research Process 5 . Data Analysis 5. 1 To identify the success factors of Indian 3PL firms and its relative importance. The data collected through questionnaire was analyzed through SPSS 15. 0 to find out the success factors and their relative importance. The KMO and Bartlett’s test results shown in Table. indicate the suitability of the data for factor analysis. Kaiser-Meyer-Olkin Measure of Sampling Adequacy is 0. 769 which is greater than 0. 5. This indicates that a factor analysis will be useful with the data. The value of significance level is 0. 000, which is less than 0. 05. So there is a significant relationship among the variables. The initial extraction shows that the communalities are very high, which indicate that the extracted components represent the variables well. Table 9. Table 8. KMO and Bartlett’s Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. 0. 769 Bartlett’s Test of
Sphericity 3167. 333 Approx. Chi-Square Df Sig. 325 .000 Table. 9 Communalities Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Initial 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 Extraction .477 .611 .638 .667 .595 .670 .653 .536 .766 15 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25 Q26 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 1. 000 .661 .588 .624 .604 .664 .753 .748 .774 .589 .690 .695 .734 .671 .653 .582 .607 .641 Extraction Method: Principal Component Analysis. 16 Table 10. Total Variance Explained
Initial Eigen values % of Cumulative Variance % 23. 065 23. 065 12. 909 35. 974 Extraction Sums of Squared Loadings % of Cumulative Total Variance % 5. 997 23. 065 23. 065 3. 356 12. 909 35. 974 Rotation Sums of Squared Loadings % of Total Cumulative % Variance 3. 064 11. 786 11. 786 2. 964 11. 398 23. 184 42. 224 1. 625 6. 250 42. 224 2. 602 10. 007 33. 191 47. 529 1. 379 5. 305 47. 529 2. 118 8. 147 41. 339 4. 802 52. 331 1. 249 4. 802 52. 331 1. 829 7. 034 48. 372 4. 467 56. 798 1. 161 4. 467 56. 798 1. 599 6. 151 54. 523 1. 098 4. 225 61. 023 1. 098 4. 225 61. 023 1. 434 5. 515 60. 038 1. 023 . 935 64. 958 1. 023 3. 935 64. 958 1. 279 4. 920 64. 958 Component Total 1 2 5. 997 3. 356 3 1. 625 6. 250 4 1. 379 5. 305 5 1. 249 6 1. 161 7 8 9 .936 3. 598 68. 557 10 .869 3. 344 71. 901 11 .788 3. 031 74. 931 12 .704 2. 707 77. 638 13 .671 2. 580 80. 218 14 .608 2. 338 82. 556 15 .594 2. 284 84. 839 16 .552 2. 123 86. 963 17 .542 2. 083 89. 046 18 .503 1. 933 90. 979 19 .389 1. 497 92. 476 20 .380 1. 462 93. 938 21 .343 1. 318 95. 256 22 .317 1. 220 96. 476 23 .297 1. 144 97. 620 24 .242 .931 98. 550 25 .196 .753 99. 304 26 .181 .696 100. 000 Extraction Method: Principal Component Analysis. 7 Table 11. Rotated Component Matrix (a) Component 1 2 Q1 Q2 3 4 5 6 7 8 .504 .431 Q3 .760 Q4 .417 Q5 .639 Q6 .502 .488 Q7 -. 407 .646 Q8 .505 Q9 Q10 .813 .739 Q11 .555 Q12 .419 .699 Q13 .647 Q14 .639 Q15 .823 Q16 .815 Q17 .772 Q18 .457 Q19 .514 .491 Q20 .658 Q21 .731 Q22 .643 Q23 .742 Q24 .676 Q25 Q26 .688 .635 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a Rotation converged in 24 iterations. We note that about 65% (. 64958) of the total variation in the 26 variables is attributable to the first eight components, Table 10.
We also observe that Component 1 explains a variance of 3. 064, which is 11. 786% of total variance of 26; Component 2 explains a variance of 2. 964, which is 11. 398% of total variance and so on. The rotated component matrix contains the same information as the component matrix, except that it is calculated after rotation, Table 11. From this table we construct the following factor matrix, Table 12, where the key elements of importance in relation to the eight factors are shown. 18 Table 12. Factor Matrix Eigen Value Factor No. Factor Name Total