Adriana Rossiter Hofer
University of Maryland, College Park
Partnership determinants in logistics outsourcing:
A relationship marketing perspective
Academy of Management
Operations Management Doctoral Consortium
Atlanta, August 12th 2006
About my dissertation
– Dissertation Committee:
•
•
•
•
•
Prof.
Prof.
Prof.
Prof.
Prof.
Martin E. Dresner, Chair (Logistics and Transportation)
A. Michael Knemeyer (Supply Chain Management)
Curtis M. Grimm (Supply Chain Management and Strategy)
William J. DeWitt (Logistics and Transportation)
Donna B. Hamilton, Dean’s representative (English)
– Defended proposal in May, pretest in process
About my dissertation
– Research questions:
• What factors impact firm partnering behavior with third-party logistics
providers (3PLs)?
• What is the interplay between firm, inter-organizational, and environmental
factors?
– Expected contributions:
• Academic:
– Theory-based model of partnering in logistics outsourcing relationships
– Integration of partnering and marketing literatures, applying them in a
different context
• Practical:
– Assist 3PLs by enhancing their relationships with customers, thus
retaining and expanding customer base
– Research methodology: cross-sectional survey, structural equation modeling
– Unit of analysis: relationship, 3PL customer is the focal firm
Building closer relationships is growing in importance for
3PLs and customer firms
On the customer side:
On the 3PL side:
-
-
Globalization
Competition
Complex supply chains
Increasing customer demands
Increasing customer demands
Increasing competition
Higher fuel prices, driver shortages
Capacity crunch
Need to work
together!
Showing that they are reliable partners is a strong feature
of 3PLs’ marketing strategy
Theory-based 3PL research has focused on the positive
effects of close logistics outsourcing relationships …
– Relationship characteristics (e.g., communication, reputation) positively
influence performance and relationship outcomes (e.g., customer
retention, referrals, service recovery) (Knemeyer and Murphy 2004, 2005)
– Relationship orientation improves supply chain effectiveness and
performance (Panayides and So 2005)
– Positive effect of relational performance on customer market share
(Stank et al 2003)
… and this research aims to look at the antecedents of
these relationships.
The model builds upon Ganesan (1994): “Determinants of long-term
orientation in buyer-seller relationships”
Theoretical framework: relationship marketing + social exchange theory
(SET)
Structure of the model
3
2
1
ANTECEDENT
PRIMARY
ANTECEDENT
ANTECEDENT
DEPENDENT
VARIABLE
ANTECEDENT
PRIMARY
ANTECEDENT
ANTECEDENT
Defining the dependent variable: degree of partnering …
“A partnership is a tailored business relationship based on mutual trust, openness, shared risk and
shared rewards that result in business performance greater than would be achieved by the two
firms working together in the absence of partnership.”
(Lambert et al 2004)
• Partnership behavioral elements are drawn from relational contract literature
•
•
•
•
•
(Gardner et al 1994):
planning
sharing benefits and burdens
extendedness
systematic operational information exchange
mutual operating controls
No partnership elements
present
Many elements of partnership
present
Just short of full vertical integration,
e.g., corporate vertical marketing systems
Arm’s length
Range of relationship styles
(Source: Gardner et al 1994)
SET suggests that relationship formation and
development are based on interorganizational factors
Lambe et al 2001
A firm engages in a relationship
because it believes it will be rewarding
Interactions
> CL ?
Outcomes are compared to two standards
(Comparison Levels - CL):
Trust is built over time…
> CLalt ?
satisfaction
dependence
Earlier partnering experiences with other 3PLs might
affect the firm’s capability to engage in such
relationships…
- From a social network perspective, prior experiences with other partners
- Shape firm’s expectations regarding the new relationships
- Increase the likelihood of future endeavors
(Uzzi 1996):
- Previous positive experiences with other 3PLs should impact a firm’s comparison level:
- Learning effect
- More realistic expectations
Hypothesis: Prior experience with partnering with 3PLs is positively associated with the degree
of partnering with the focal 3PL.
Relationship marketing research has emphasized that
some firms employ relationship marketing as a
philosophy: Relationship Marketing Orientation
- To use relationship marketing, a relationship orientation must pervade the mindset, values and norms of the organization (Day 2000)
- Relationship Marketing Orientation: “an organizational culture that puts the
buyer-seller relationship at the center of the firm strategic or operational thinking”
(Tse et al 2004, Sin et al 2005)
-
Carriers within buyer-seller partnerships exhibit higher degrees of partnership elements (Gentry 1996)
- Trust and commitment are mediators of satisfaction only for high relational customers (Garbarino and Johnson
1999)
3PL
3PL customer
relationship
buyer
Hypothesis: A 3PL customer’s relationship marketing orientation is positively associated to the
degree of partnering with a 3PL
A model of 3PL customer’s degree of partnering
7 Primary Hypotheses
Dependence of
customer on 3PL
Sub-model 1
Perception of 3PL’s
dependence on customer
3PL’s credibility
(trust)
Sub-model 2
3PL’s benevolence
(trust)
Degree of
partnering
Prior experience
partnering
Relationship Marketing
Orientation
Satisfaction with
previous outcomes
*Based on and expanded from Ganesan (1994)
The antecedents of dependence are related to
environmental, relationship, and firm specific factors
Antecedents of Dependence (Sub-model 1)
Customer
capabilities
Env. Diversity
3PL market
Env. Volatility
3PL market
Env. Diversity
Product market
Env. Volatility
Product market
Logistics
complexity
TSI by customer
Perception of
TSI by 3PL
Dependence of
customer on 3PL
Perception of 3PL’s
dependence on customer
Environmental uncertainty in the market for 3PL
services:
Diversity negatively related to customer’s dependence on
3PL
Volatility positively related to customer’s dependence on 3PL
Environmental uncertainty in the product market:
Diversity positively associated with customer’s dependence
on 3PL
Volatility positively associated with customer’s dependence on
3PL
Transaction-specific investments:
TSI by customer positively related to dependence on 3PL
and negatively related to perceived 3PL dependence
Perception of 3PL TSI negatively related to customer’s
dependence and positively related to perceived 3PL
dependence
Firm specific:
Complexity of logistics operations positively associated with
customer’s dependence on 3PL
Customer’s logistics capabilities negatively associated with
customer’s dependence on 3PL
The antecedents of trust are mainly related to the
partner’s behavior and experience with the partner
Antecedents of Trust (Sub-model 2)
• A 3PL customer’s perception of the 3PL’s TSI
is positively related to the customer’s
perception of the 3PL credibility and
benevolence.
Perception of
TSI by 3PL
Reputation of
the 3PL
3PL’s credibility
(trust)
Customer’s
experience with 3PL
3PL’s benevolence
(trust)
Satisfaction with
previous outcomes
• The reputation of a 3PL is positively related
to its customer’s perception of the 3PL’s
credibility.
• A customer’s experience with a 3PL is
positively related to the customer’s
perception of the 3PL’s credibility.
• A 3PL customer’s satisfaction with past
outcomes is positively related to the
customer’s perception of the 3PL’s credibility
and benevolence.
Final Model
Customer
capabilities
Env. diversity
3PL market
Env .volatility
3PL market
Env. diversity
product market
Env. volatility
product market
Dependence of
customer on 3PL
Perception of 3PL’s
dependence on customer
Degree of
partnering
Logistics
complexity
TSI by customer
Perception of
TSI by 3PL
Reputation of
the 3PL
Customer’s
experience with 3PL
Satisfaction with
previous outcomes
3PL’s credibility
(trust)
3PL’s benevolence
(trust)
Prior experience
3PL partnering
Relationship Marketing
Orientation
*Based on and expanded from Ganesan (1994)
Research Methodology
- Web-based survey of customers of Rapidão Cometa, a large Brazilian 3PL
- Large array of services offered
- Diverse customer base: various industries, sizes, logistics functions contracted,
experience
- Diversity of relationship styles
Survey design and implementation
Research Methodology
- Measurement of the constructs:
- most items adapted from existing research
- logistics complexity and capabilities: new scales
- Survey pretests: concurrent and retrospective think-aloud interviews
- Survey implementation:
- Sample size: approximately 4,000 customer firms
- Key informants: provided by Rapidão Cometa
- Pre-notification e-mail (Rapidão Cometa)
- Web-based survey implementation
- Thank you/reminder e-mails
- Test for non-response bias
Structural Equation Modeling
Research Methodology
- Quality of data evaluation:
- Check for outliers
- Check for symmetry
- Check for missing data
- Controls (as in Knemeyer and Murphy 2005): firm size and number of functions
outsourced
- Tests for unidimensionality, convergent and discriminant validity, and
scale reliability
- Two-step SEM with EQS software:
- Measurement phase
- Structural phase
- Check goodness-of-fit information
- Interpretation of path coefficients
Concluding Remarks
- Managerial implications:
- What factors should 3PLs emphasize in their relationship with customers and
in the pursuit of new customers
- Relative impact firm vs. environmental vs. relationship characteristics on
partnering behavior
- Limitations:
- Not capturing dyadic observations
- All firms are customers of a single 3PL - asset based firm
Thank you!
Questions? Comments?
Extras …
Partnership Construct (Gardner et al 1994)
Partnership
behavior
…..
Extendedness
Operational
Info Exchange
Operating
Controls
Sharing Benefits
& Burdens
Planning
Partnership Construct: a second order factor?
Partnership
behavior
Extendedness
Operational
Info Exchange
Operating
Controls
Sharing Benefits
& Burdens
Planning
Primary Hypotheses:
H1: Dependence of a customer on a 3PL is positively related to the customer’s
degree of partnering.
H2: Perceived dependence of a 3PL on a customer is negatively related to the
customer’s degree of partnering.
H3: A customer’s trust in a 3PL’s credibility is positively related to the degree of
partnering.
H4: A customer’s trust in a 3PL’s benevolence is positively related to the degree of
partnering.
H5: A customer’s satisfaction with past outcomes of the relationship with a 3PL is
positively related to the customer’s degree of partnering with that 3PL.
H6: There is a positive relationship between prior experience with partnering with
3PLs and the degree of partnering with the focal 3PL.
H7: There is a positive relationship between a customer’s relationship marketing
orientation and the degree of partnering with a 3PL, all else constant.
Antecedents of dependence:
H8: Environmental volatility in the product market is positively related to a customer’s dependence on a
3PL.
H9: Environmental diversity in the product market is positively related to a customer’s dependence on a
3PL.
H10: Environmental volatility in the market for 3PL services is positively related to a customer’s
dependence on a 3PL.
H11: Environmental diversity in the market for 3PL services is negatively related to a customer’s
dependence on a 3PL.
H12: A customer’s logistics complexity is positively related to a customer’s dependence on a 3PL.\
H13: A customer’s TSIs are positively related to a customer’s dependence on a 3PL.
H14: A customer’s TSIs are negatively related to a customer’s perception of 3PL dependence on a
customer.
H15: A customer’s perception of a 3PL’s TSIs is negatively related to a customer’s dependence on a 3PL.
H16: A customer’s perception of a 3PL’s TSIs is positively related to a customer’s perception of a 3PL
dependence.
H17: There is a negative relationship between customer’s perceived logistics capabilities and dependence
on a 3PL.
Antecedents of trust:
H18: The reputation of a 3PL is positively related to its customer’s perception of the 3PL’s
credibility.
H19: A customer’s satisfaction with past outcomes is positively related to the customer’s perception
of the 3PL’s credibility.
H20: A customer’s satisfaction with past outcomes is positively related to the customer’s perception
of the 3PL’s benevolence.
H21: A customer’s experience with a 3PL is positively related to the customer’s perception of the
3PL’s credibility.
H22: A customer’s experience with a 3PL is positively related to the customer’s perception of the
3PL’s benevolence.
H23. A customer’s perception of 3PL specific investments is positively related to the customer’s
perception of the 3PL’s credibility.
H24. A customer’s perception of 3PL specific investments is positively related to the customer’s
perception of the 3PL’s benevolence.