EVOLUTION OF LOGISTICS PERFORMANCE IN CONSUMER GOODS INDUSTRIES: AN ANALYSIS FROM THE RETAILER'S PERSPECTIVE

In Brazil, the last decades have been marked by changes in the competitive environment, mainly caused by the opening of the market. Some aspects of this process were particularly relevant for the retail sector and its suppliers, in view of the growing entry of imported products into the country, the increase in foreign investment and the greater concentration of the market through merger and acquisition processes.

Compounding the competitive environment in which Brazilian companies still find themselves, economic aspects, mainly the issue of high capital costs in the country, have been exerting strong pressure to reduce inventories. As a consequence, improving the logistics system has become an imperative factor for industries and retailers to gain competitiveness, which has given rise to a series of initiatives to increase operational efficiency, such as the ECR (efficient consumer response) movement, in addition to an increasing number of specific quick response projects involving industry and retail, as well as replanning of distribution networks.

In this new context, logistics efficiency is gaining more and more importance. While on the retail side there is a trend towards an increase in demand levels with regard to delivery, on the industry side there is a search for adapting distribution systems to market parameters, leading to variations in the level of logistic service between industry and retail.

Based on the results of the Benchmark Survey – Customer Service, carried out by the Center for Studies in Logistics at COPPEAD/UFRJ since 1994, this article will seek to present some of the main changes that have occurred in recent years with regard to the most important dimensions of the customer service. physical distribution monitored in the commercial relationship process between consumer goods industries and retailers.

METHODOLOGICAL ASPECTS

Annually, over the period 1994 to 2002ⁱ, the main supermarkets in São Paulo and Rio de Janeiro were askedⁱⁱ (approximately 240 respondents each year) about the average performance of their suppliers and the performance of those they considered to be the best suppliers. This logistical performance was represented by a series of attributes, among which the availability of products at the time of placing the order, delivery of complete orders, delivery time, percentage of late deliveries and frequency of order delivery.

In addition to assessing the logistics performance of industries, the survey also asked retailers to indicate their service requirement. Thus, with information on perceived and expected performance, it was possible to calculate one of the most important indicators of satisfaction and adequacy of the service provided, the Gap, the difference between the service performance that the retailer would like to receive in order not to be dissatisfied and the evaluation made by the retailer with respect to its supplier.

Gaps closer to zero indicate that the service provided by the industry is adequate to retailers' requirements. Gaps with a positive or negative sign indicate, respectively, that the service provided either falls short of expectations or exceeds retailers' requirements.

In order to verify changes in the adequacy of service levels provided by the consumer goods industriesⁱⁱⁱ  over the past few years, tests have been carried out to observe whether there are trends in growth or decrease in these satisfaction gaps. The analyzes were performed both for the Gaps calculated between the service required by retailers and the typical performance of suppliers (Gaps – typical industries), and for the Gaps calculated between the performance required by retailers and the performance of the best suppliers (Gaps – best industries ).

In total, five of the most important logistics service items identified by retailers were evaluated. The first evaluated item, called SATISFIED PERCENTAGE, identifies the percentage of demand met by the supplier during the order placement, and is related to the acceptance or not of all items and quantities requested by the retailer. The second evaluated item, called PERCENTAGE DELIVERED, seeks to identify the percentage of orders actually delivered by suppliers to retailers. The third evaluated attribute, called DELIVERY TIME, measures the total number of days elapsed between the placing of the order by the retailer and the delivery of the products. The fourth monitored item, called PERCENTAGE OF DELAY, seeks to identify the consistency of the delivery time promised by suppliers, measuring the percentage of deliveries that arrive late at retailers. Finally, the fifth evaluated service item, called DELIVERY FREQUENCY, identifies the number of times per month that the supplier delivers to the retailer.

The information presented below will seek to analyze whether, over the years, the logistics service levels of industries – both with typical performance and with the best performances – have been adequate to what is required by retailers in the five different service attributes presented.

RESULTS ANALYSIS

Percentage Satisfied at Taking the Order

The Gaps identified in Figure 1 (Gap 1.a – typical industries and Gap 1.b – best industries) refer to the PERCENTAGE SATISFIED service item, which evaluates the percentage of the retailer's original demand that was actually made available for sale by the supplier during placing the order. This service item is one of the attributes that seeks to measure the availability of products in industries.

Gap 1.a represents the average of the differences between the tolerances (expectations) of each retailer for the non-availability of products at the time of the order (expectation) and the percentage of orders actually accepted by suppliers with typical market performance. Gap 1.b, in turn, represents the average of the differences between retailers' expectations and the percentage actually delivered by their best suppliers. Negative gaps indicate that the service provided by industries is, on average, better than retailers' expectations, representing services provided beyond market requirements.

In 1997, it was verified that the interviewed retailers would tolerate, on average, up to 5,5% more shortages of products when taking the order (negative Gap 1.a). In 1999, this measure dropped to 1,6%, indicating that, on average, the performance of typical suppliers this year was practically in line with retailers' expectations. More recently, in 2001, typical performance returned to 5% above retailers' tolerance.

Analyzing the adequacy of services provided by best practices (Gap 1.b), it can be seen that the average gap remained negative throughout the period evaluated. In 1997, it was found that retailers would still be satisfied if, on average, their suppliers had 14,1% less product availability at the time of order placement. There was, however, a significantly proven trend of reduction in the absolute value of this gap, which in 2001 indicated 8,9% availability beyond expectations. This can be interpreted as an indication that, although the best practices have exceeded the expectations of retailers throughout the entire period evaluated with regard to the PERCENTAGE SATISFIED (gaps always negative), there is a tendency for greater adjustment between the performance of best suppliers and the expectations of supermarkets.

Percent Delivered of Total Order

Gaps 2.a and 2.b (see Figure 2) refer to the PERCENTAGE DELIVERED variable. This variable is also an important measure of product availability in the consumer goods industries, as it compares the quantity actually delivered by suppliers to their retail customers, in relation to what the supermarket owner had ordered. Thus, Gaps 2.a and 2.b represent the average of the differences between the percentage tolerated by retailers and the percentage actually delivered by suppliers. Gap 2.a assesses satisfaction with typical performing suppliers and Gap 2.b assesses satisfaction with best practices.

Figure 2 shows that both standard market performance and best practice performance exceed retailers' expectations on average (negative Gap 2.a and Gap 2.b). In both cases, however, the data seem to reveal that the availability of products upon delivery is getting closer to retailers' expectations. In the case of the adequacy of the performance of best practices (Gap 2.b), it was statistically proven that there is a linear tendency to reduce the magnitude of this gap, which in 1994 was around minus 12% and became around minus 8 % in 2001. It can be concluded from this result that the performance of best practices, which previously exceeded expectations more markedly, is increasingly becoming equal to what retailers expect in the PERCENTUAL DELIVERY variable.

Delivery time

Gaps 3.a and 3.b shown in Figure 3 refer to the delivery time counted from the moment the order was placed until the date the retailers received the products. This is a measure of the order cycle time and represents the sum of all the times spent on activities necessary to fulfill the order, such as credit release, product picking and actual delivery.

Negative gaps represent retailers' satisfaction, as they indicate that the delivery time practiced by suppliers is faster than the tolerated delivery time.

Analyzing Figure 3, it is observed that Gap 3.a (difference between the time in days practiced by typical suppliers and the time tolerated by retailers) has fluctuated, over the years, around zero.

Gap 3.b, in turn, which evaluates the adequacy of the delivery time of the best suppliers, varied linearly, showing a significantly proven tendency towards the zero gap. Figure 3 shows that in 1994 the best industries used to deliver products 2,5 days faster than retailers' tolerance, but in 2001 this value was better adjusted to expectations, and Gap 3.b became 1 day, still exceeding retailers' expectations.

Percentage of Late Deliveries

Gaps 4.a and 4.b (Figure 4) refer to the percentage of late deliveries. In order to identify whether the promise of delivery time was fulfilled by suppliers, retailers were asked about the percentage of deliveries that arrived after the agreed date. This is a measure of lead time consistency.

Gap 4.a represents the mean difference between the percentage of late deliveries usually practiced and the percentage of late deliveries considered acceptable by retailers. Gap 4.b, in turn, indicates the average of the differences between the performance of the best suppliers and the tolerance levels for late deliveries. Negative gaps indicate that, on average, supermarket owners are satisfied with the punctuality of their suppliers' deliveries and positive gaps indicate that retailers expect the percentage of late deliveries to be lower.

Gap 4.a remains above zero throughout the period evaluated, as shown in Figure 4, which indicates that the performance of typical suppliers was worse than retailers' expectations.

Unlike Gap 4.a, Gap 4.b has remained negative since 1994, indicating that suppliers with best practices experience fewer delays than retailers are willing to tolerate. During the years evaluated, gaps around -5% were recorded. However, it was statistically verified that the absolute values ​​of these gaps show a tendency of slow decrease over the years, indicating a linear approximation to the zero gap. This trend indicates a reduction in the degree of exceeding expectations, which means a greater adjustment of supplier performance to the service levels expected by retailers.

Delivery Frequency

The possibility of more frequent deliveries to retailers allows the size of the purchase lot to be reduced, reducing the supermarkets' need for inventories and reducing costs related to them. The DELIVERY FREQUENCY variable, evaluated in this research, measures the number of deliveries per month carried out by the same supplier (see Figure 5).

Gap 5.a represents the difference between retailers' expectations and the total deliveries per month typically made by industries. Gap 5.b, in turn, is calculated from the average of the differences between retailers' expectations in terms of delivery frequency per month and the performance of the best suppliers. Negative gaps indicate that suppliers' performance is better than retailers' tolerance, that is, suppliers are able to deliver more frequently than retailers' minimum requirement.

In terms of supermarket owners' satisfaction with the performance of their typical suppliers (Gap 5.a), it can be seen in Figure 5 that, over the last few years, the gap has remained negative. This indicates that expectations remained below the actual performance of typical suppliers in terms of delivery frequency, except in 1995. In 1995, the number of deliveries per month was slightly less than expected by retailers, but since 1997 , the average performance turned out to be slightly better than the retailers' tolerance, thus exceeding their expectations. Statistical analyzes showed a linear trend in the evolution of gaps over the years, indicating a slight increase in satisfaction (Gap 5.a remained close to zero, which indicates that expectations and performance are adjusted).

In the case of the best industries, it is observed that the Gap 5.b remained negative throughout the period, that is, the performance of the best practices was always above the expectations of retailers in terms of delivery frequency, but not performance adjustment trends to retailers' expectations were identified.

CONCLUSION

The results presented indicated that, in most of the evaluated attributes, retailers seem to be satisfied with the logistical performance of their suppliers, that is, on average, expectations have been met or exceeded. This occurs mainly when it comes to the performance of suppliers considered to have the best practices.

The exception among the observed variables is the PERCENTAGE OF DELAY, which evaluates the punctuality and consistency of the supplier with the delivery time promised to the retailer. It was observed that the performance of typical suppliers, on average, still does not satisfy supermarkets, which indicates that the percentage of delays practiced is greater than the tolerance of retailers. One of the explanations for the occurrence of greater dissatisfaction with delivery delays in relation to other logistics service variables is the fact that failure to meet the deadline is a reflection for the retailer of part of the errors that may occur at any stage of the cycle. of the order. Delays in credit processing, unavailability of products, problems with trucks in physical delivery are examples of problems that generate unforeseen increases in delivery time, which ends up extrapolating the deadline promised to the retailer, thus causing delays and dissatisfaction.

Suppliers who wish to gain competitiveness in terms of logistical services must view on-time delivery as an excellent opportunity to differentiate themselves from the competition.

The fact that the perceived performance exceeds, in most cases, the customers' expectations – even when dealing with suppliers with typical performance – while reflecting retailers' satisfaction with the industries' logistics service, may also indicate an overspecification. of the service provided. This over-specification, although it may mean customer loyalty, may also bring some negative implications for the industry. The first is related to the additional costs of providing a premium service, which could not exist if the performance of suppliers were adjusted to the expectations of retailers. The second implication concerns the tendency for retailers' expectations to increase, given that their experiences with performances that exceed their requirements are decisive for the formation of their expectations in the future. This means that if a supplier exceeds the required levels, it is likely that the expectations of its customers, in the future, will be adjusted to the level of service previously provided, thus creating a scale of increasing expectations over the years. a trap for suppliers who want to exceed expectations to gain competitiveness and differentiation. This is because increasing expectations due to good experiences can force industries to maintain excellent service levels so as not to frustrate their customers and, in the future, that item will no longer be an item that exceeds requirements for the retailer, but a basic service item. , which if not met will generate dissatisfaction.

This study showed that, when evaluating the gaps between retailers' expectations and the performance of best practices, there is a linear trend of gap adjustment towards zero gap. Other studies carried out with the results of this research show that one of the reasons for this is the increase in retailers' expectations, which have been growing over the years in different service variables, which directly influences the size of the satisfaction gap.

The adequacy of the logistics service can be an essential factor to gain competitiveness. Therefore, it is necessary to be able to identify the right account to specify the levels of service to be provided. It is worth remembering that retailers' expectations can change over time, but also realize that there are possibilities for collaborative actions that lead to improvements throughout the supply chain. It is increasingly apparent that the adjustment of suppliers' performance to retailers' requirements must be done jointly, so that all links in the chain can think about improving the service for the final consumer, preventing the latter from noticing a lack of products on shelves or end up paying higher prices due to unnecessarily high logistical costs incurred along the entire supply chain.

BIBLIOGRAPHY

– Bowersox, DJ, Closs, DJ (1996), Logistical Management – ​​The Integrated Supply Chain Process, McGraw-Hill, New York, NY.

– Fleury, PF et al., Business Logistics: The Brazilian Perspective, Atlas, São Paulo, SP.

– La Londe, BJ, Cooper, MC, Noordewier, TG (1988), Customer service: a management perspective, Council of Logistics Management, Oak Brook, IL

– Parasuraman, A., Zeithaml, VA, Berry, L. (1988) “SERVQUAL: a multiple-item scale for measuring consumer perceptions of quality”, Journal of Retailing, Vol 64, No 1, Spring.

ⁱ The Benchmark – Customer Service survey is also being carried out in 2003. The results will be made available in December of this year. The complete and detailed reports, as well as the computerized system for consulting the data, will be delivered to all companies that are already sponsors and also to those that wish to become sponsors.

The Benchmark – Customer Service survey was not carried out in 1996.

ⁱⁱ Since 1998, the survey has covered the regions of São Paulo, Rio de Janeiro, Recife, Curitiba and Belo Horizonte. For the purposes of this article, only data from São Paulo and Rio de Janeiro were used.

ⁱⁱⁱ Consumer goods industries supplying 4 different product classes were considered: Perishable Food, Non-Perishable Food, Hygiene and Cleaning Products and Paper Products.

Authors: Maria Fernanda Hijjar, Kleber Figueiredo, Rebecca Arkader and Cesar Lavalle