The dynamics of procurement outsourcing in China: a case study approach

Purpose This study aims to examine the integration of third-party purchasing (3PP) as a procurement outsourcing service within third-party logistics (3PL) operations, focusing on its transactional enablers, supply chain (SC) implications and implementation dynamics. While procurement outsourcing has gained traction, research on its role within SCs – particularly through 3PL providers as procurement intermediaries – remains limited. Using transaction cost economics (TCE) as a theoretical foundation, this study investigates how key transaction attributes (assest specificity, uncertainty, transaction frequency and transaction size) influence 3PP adoption and shape procurement governance models within 3PL services. Design/methodology/approach A qualitative research method was used using a semistructured interview protocol. Data was collected from practitioners of 3PL service providers and users. Findings The study identifies that asset specificity, uncertainty, transaction frequency and size are key enablers of 3PP, shaping contractual governance structures and supplier coordination mechanisms within outsourced procurement. Findings demonstrate that 3PP redefines the role of 3PL providers by transforming them from logistics facilitators to centralized procurement intermediaries. Through demand aggregation and structured procurement contracts, 3PL providers help small and medium-sized enterprises (SMEs) mitigate supplier fragmentation, reduce price volatility and improve cost control. The study further reveals that 3PP functions as a hybrid governance model, combining market-based transactions with centralized intermediation, allowing SMEs to balance procurement flexibility with cost predictability. Originality/value To the best of the authors’ knowledge, this study is among the first to provide an empirical exploration of 3PP as a governance mechanism within 3PL services, bridging the gap between logistics outsourcing and procurement outsourcing. By extending TCE’s application beyond logistics functions to procurement coordination, this study highlights how 3PL providers institutionalize procurement outsourcing through structured supplier management, bulk purchasing power and contract-based risk mitigation. The study contributes to both SC strategy and procurement governance by illustrating how 3PP can act as a transformative procurement model, particularly in emerging markets where supply fragmentation and demand volatility are prevalent.