In developing country like India, logistics sector is in booming stage and grabbing opportunities to grow infinitely. Currently, Logistics sector contributes around 14% in GDP in India. Boom in e-commerce industry and initiatives like MAKE in India, will definitely bring substantial growth for Logistics Service Providers (LSPs). The LSPs need to redesign their strategies in order to grab all upcoming opportunities. Many challenges are faced by logistics service providers in order to deliver shipments on promised time and in desirable condition. Although, Government has already initiated several mega projects to support LSPs but still it is not synchronized with increased industry requirements. Fragmented and unorganized sector, Infrastructural bottlenecks and Cost implications etc. are the main challenges which come across in delivering high quality services to the end customers. In this study, it has been attempted to identify and analyze the key challenges which impede the effective service quality of logistics service providers. Based on the literature review and experts’ opinion, ten key challenges faced by logistics service providers are identified. A structural relationship model is developed by using Interpretive Structural Modeling (ISM) and further challenges are categorized as drivers, dependent, autonomous and linkage variables based on their driving and dependence power with the help of MICMAC Analysis. Based on MICMAC analysis, three challenges have been identified as dependent variables, four as drivers, one as autonomous and two as linkage variables. The study is expected to provide useful inputs to practitioners and service providers itself in terms of crafting better strategies which can overcome the identified challenges and can design better solutions for delivering better service quality to their customers.