PERCEPTION OF SUCCESS AND THE DEGREE OF SOPHISTICATION OF OPERATING AND MANAGEMENT SYSTEMS IN PARTNERSHIPS WITH LOGISTICS SERVICE PROVIDERS IN BRAZIL

Logistics partnerships are cooperative relationships established between shippers and logistics service providers. In general, logistical partnerships are developed to obtain the benefits associated with vertical integration (eg, greater control and predictability of physical distribution), without, however, incurring the costs associated with a verticalized corporate structure (eg, costs associated with maintaining a large-scale bureaucratic apparatus), still avoiding the loss of strategic flexibility, a common fact in vertically integrated organizations (HAYES et al., 1984). In this sense, several authors, such as DEVLIN et al. (1988), present partnership relationships as an alternative to the verticalization of physical distribution or to contracting logistics service providers via the free market. This is because logistical partnerships have proven to be more efficient and flexible solutions in various concrete situations, especially when taking into account the costs incurred to meet a certain level of delivery service. Logistic services have been playing a key role for shippers (manufacturers and suppliers) to offer their customers not only the product itself, but also other value-added activities or services.

This article presents the conclusions obtained regarding the elaboration process of the perception of success in four logistics partnerships in Brazil, in addition to determining how the level of sophistication of these partnerships affects the perception of success. The cases were selected based on shippers and logistics service providers with a recognized reputation and image in their respective markets. Of these four case studies, two logistics service providers are headquartered in São Paulo, one in Rio de Janeiro and the other in Paraná. The case study interviews were recorded and conducted in person during the months of September and October 1997, with the help of an interview script developed specifically for this purpose. Respondents are currently responsible for physical distribution at manufacturers (all held management positions) and representatives of logistics service providers.

2. THEORETICAL FRAMEWORK: THE ISSUE OF SUCCESS IN THE LOGISTICS PARTNERSHIP

In this section, we will address two basic issues in the existing literature on partnerships. Despite being interrelated, these issues are still poorly structured and analyzed in greater depth in the literature. Are they:

* What is the nature of success in a partnership relationship, ie what is a successful partnership?

* Given that success in the partnership has been understood and defined, how to assess its level of success?

Success in the partnership necessarily involves joint collaboration and no longer through specific actions, which traditionally were the basis of all commercial relationships (KANTER, 1994). According to BLEEKE et al. (1995), for joint collaboration to be as productive as possible, it is necessary that the companies involved have complementary skills. In other words, the potential for conflicts to occur will be greater the lower the degree of complementarity between the partners (eg geographic operations, products and services offered, etc.). Like BLEEKE et al. (1995), KANTER (1994) agree that partnerships between companies in the same channel have greater chances of success than partnerships (alliances) between companies in the same sector that operate in different logistics channels. Alliances are more unstable relationships because they are formed by organizations that compete directly with each other, having the same key capabilities, operating in the same geographic markets and presenting the same functional skills.

The evaluation of the level of success in a partnership can be broken down into several dimensions, which go beyond the simple evaluation of operational or financial results. Partnership, by the nature of its definition, is a long-term business proposition and, as such, involves both tangible factors (explicit or easily measurable) and intangible factors (implicit or difficult to measure). Tangible factors include, for example, market share, overall costs, return on investment, inventory turns, or service level. The intangible factors concern, for example, the conditions for accessing new distribution channels, gaining reputation, new customers or business opportunities, association with the partner's image, etc. On a broader scale, both factors contribute to the formation of a joint vision of what a successful partnership relationship would look like.

Two lines of journals were identified that explore how these factors interact with each other, determining the level of success in a partnership. The first encompasses publications focused on business strategy, such as, for example, Harvard Business Review, Sloan Management Review, Journal of General Management, Journal of Business Strategy, etc. The second brings together publications focused on marketing and logistics research, more precisely, on the study of the behavior of the actors involved (individuals, organizations, etc.) in a commercial relationship: Journal of Marketing Research, European Journal of Marketing Research, Journal of Retailing, International Journal of Physical Distribution & Logistics Management, International Journal of Purchasing & Materials Management, Journal of Business Logistics etc.

In general, the group of publications on business strategy limits the study of partnership success to the tangible perspective, giving it greater relevance and reserving a secondary role for intangible success factors. For example, according to BLEEKE et al. (1995) “a partnership is successful if both parties achieve their strategic objectives and obtain a return equal to or greater than their cost of capital”. KANTER (1994) states that “the net present value (NPV) of a 'partnership project' must be measured in comparison to the NPV of other company processes”. In other words, the successful partnership would be one whose NPV is higher than that of the organization's other processes. This comparative scale would somewhat limit the range of changes that an organization would be willing to undergo to adapt to a partnership, since this process of change, according to RAMSAY (1996), immobilizes resources that could be allocated to other activities that would bring faster return.

Even if service levels at the end customer or the rate of return on a given investment are easy to measure, tangible factors do not have enough power to fully explain the evaluation that is made of the success of a partnership. This occurs for two basic reasons. In the first place, it is extremely complex to separate the results (or the return) resulting only and exclusively from the individual organizational effort from those resulting from the joint effort. The difficulty in isolating each partner's contribution to the partnership's progress means that its assessment of success transcends calculations made a priori or a posteriori with respect to the financial return of each party involved. Second, the dynamics related to values ​​and perceptions such as trust, cooperation, and commitment can positively influence the execution of several tasks together and their tangible results, since it creates favorable conditions for joint planning, information sharing, and the way in which one partner perceives the relative contribution of the other partner.

The line of marketing and logistics publications addresses in greater depth the issues set out in the two previous paragraphs. There are several works that relate success in partnership with a range of different tangible and intangible factors. Despite the pioneering studies by ANDERSON et al. (1984,1990) and FRAZIER et al. (1988); BUCKLIN et al. (1993) addressed in a more concise and better structured way the issue of assessing the level of success in a partnership and its determining factors. Given that joint performance is the key element in a partnership, the authors proposed a measure of joint benefit as an indicator of success, which they called perceived managerial success. The authors define perceived managerial success as “the extent of mutual commitment and positive evaluations regarding productivity and other benefits (tangible or intangible) of the relationship”. This definition of perceived managerial success is quite similar to the definition of partnership satisfaction proposed by ANDERSON et al. (1984), that is, “the state of positive perception resulting from the evaluation of all aspects involved in the partnership relationship between companies”. Figure 1 illustrates the main determinants of perceived managerial success in a partnership. Positive signs (+) indicate a direct growth relationship (eg, the greater the affinity of the relationship, the greater the perceived managerial success). Negative signs (-) indicate an inverse growth relationship (eg, the higher the transaction costs, the lower the perceived managerial success). Two signs simultaneously (this is the case of (+) or (-)) indicate that the growth relationship of the variables can be direct or inverse, depending on the situation. For example, the impact of contractual formalization on the affinity of the partnership cannot be determined a priori, and will depend on the style of contract adopted.

The contractual formalization should not be excessive, allowing that in addition to the routine exchange of operational information, the partnership is able to develop other communication channels to deal with managerial or even strategic issues (BUZZEL et al., 1993; DEVLIN et al., 1988; KANTER, 1994). As verified by OUCHI (1980), solid commercial relations between companies are based on the level of joint involvement and participation, and the higher this level, the more companies will tend to assume a demanding posture. Excessive formalization can inhibit proactivity in relation to this attitude of demanding greater commitment from the partner, stifling the commercial relationship over time.

Next, the description of the three determining factors of the perceived managerial success of the partnership.

• Business Performance Indicators: is a tangible set of performance indicators of the partnership. This set includes financial and market positioning indicators such as ROI, market-share, pay-off, allocated investments, incurred costs, etc.
• Affinity: It is a direct reflection of the degree of similarity present in the goals, objectives, management style, operational philosophy and organizational culture. SONNENBERG (1992), for example, points to agility in the decision-making process of both organizations as an important factor for strengthening the relationship. Affinity is positively influenced by the existence of a past history of stable commercial relationships.
• Transaction Costs: are relevant as they affect the balance of power between companies (partnership stability). For example, according to WILLIAMSON (1975), the greater need for investments in specific assets by one of the parties in an environment of high uncertainty translates into an expectation of the other party to increase the volume (frequency) of transactions. The power imbalance arises when these expectations are frustrated and the partnership ceases to be the most appropriate position for this commercial relationship (DWYER et al., 1981). As in practice there are no ideal partnerships, that is, fully governed by the existing trust between both parties, the weaker party will need to resort to contractual safeguards (greater contractual formalization) to limit its vulnerability (FRAZIER et al., 1988). In this way, we have the increase in transaction costs as a destabilizing factor in the relationship and with direct impacts on perceived managerial success.

It is noticed that the concept of perceived managerial success covers the issue of how organizations face success in partnership. The difficulty of quantifying the amount of resources allocated individually, in parallel with other aspects such as the development of communication channels and affinity between the parties, makes it necessary to consider the various tangible and intangible factors relevant to the elaboration of a perspective of success in the partnership. It is also evident that the formation of logistics partnerships is based on integration as a way of obtaining cost reductions through the specialization of each partner, the joint planning of tasks via information exchange, the improvement in customer service, the reduction in levels of risk; finally, gains of competitive advantage in the market (BOWERSOX et al., 1992). Integration into the logistics partnership requires, due to its particular character, the achievement of several specific activities at the operational level, as proposed by GENTRY (1996). Hence the need, characteristic of logistics partnerships, to define ways to assess their operational success. In other words, the evaluation of the operational success of a partnership is based on the continuous evaluation of the performance of daily activities such as, for example, the exchange of information, joint programming, the definition of operating standards and control mechanisms, etc.

In turn, the evaluation of the performance or degree of efficiency with which these activities are carried out can be inferred through the evaluation of the quality of service provided to the customer. Exchanging information, planning together, defining standard operating procedures, are nothing more than means used to make tangible or translate customer expectations into quality specifications for logistics service. We realized, then, that in a logistics partnership, success occurs simultaneously at two mutually dependent levels: the operational and the managerial. Operational success directly depends on the gap between the quality of the service provided in the manufacturer's perception and his expectation regarding its quality, as proposed by PARASURAMAN et al. (1988). In this way, the smaller this gap, the greater the operational success of the service provision and, consequently, the greater the customer's desire to continue the relationship.

3. THE ROLE OF OPERATING AND MANAGEMENT SYSTEMS AND THEIR RELATION TO PARTNERSHIP SUCCESS

As seen in the previous paragraphs, the implementation of a partnership with logistics service providers necessarily involves the development of operational and management systems, which enable not only the exchange of operational, technical and strategic information, but also the necessary changes in the existing processes for its effective realization in the day-to-day of the relationship.

The design of the operating systems, as shown in Figure 2, is basically based on the definition of the meta-method binomial as a basis for assessing the gap between the quality of service actually provided by the logistics service provider and the quality of service expected by the manufacturer. The smaller this gap, the greater the operational success.

The project of management systems, in turn, is based on the definition of three basic policies for the management of the logistics partnership: exchange of information, investments, sharing of risks and benefits. These policies are regulated by the level of contractual formalization of the relationship between the logistics service provider and its client.

The definition of a policy for the exchange of information has an impact fundamentally on the degree of affinity of the relationship (HEIDE et al., 1990) and on the business performance indicators, due to greater flexibility to meet market requirements and greater control (traceability) in physical distribution. Basically, this policy establishes the bases on which companies will share information, defining not only the hierarchical levels involved and what information will be shared, but also their exchange system (programming and routine) and their systems (telephone, fax, EDI or e-mail). mail). The policy for exchanging information can also determine the procedures to be followed in emergency or unexpected situations.

The investment policy (FRANKEL, 1995; LAMBERT et al., 1996) should reflect the degree of involvement of each company in the acquisition and operation of specific assets or not and in the training or exchange of human resources, being strongly supported and complemented by a policy for sharing risks and benefits. These two policies directly affect the business performance indicators, which in turn determine greater or lesser need for investments in specific assets.

As the bargaining power of the manufacturer is generally greater than the bargaining power of the logistics service provider, its demand for greater investments in assets or training of human resources can unbalance the partnership. In this sense, the level of contractual formalization seeks to correct any power imbalances between the parties through the establishment of contractual safeguards, which establish horizons for renewal, as well as detail exit barriers, exclusivity clauses, financial incentives, etc. (BUCKLIN et al., 1993). Figure 3 illustrates this relationship.

So, the greater the positive evaluation of the three basic policies that make up the design of a partnership's management system, the greater the perceived managerial success of the partnership relationship.

4. DEGREE OF SOPHISTICATION OF OPERATING AND MANAGEMENT SYSTEMS

In the implementation of a logistics partnership, the scope and complexity of the operational and management systems are determined by environmental factors (external and internal) specific to each case, which can act as positive or negative forces to its development. As a result, LAMBERT et al. (1996) state that, although many partnerships present some elements and characteristics in common, there is simply not an ideal relation of characteristics related to managerial and operational systems that is suitable for all situations. Given that each partnership has its own set of initial motivations, as well as enablers, constraints and selection criteria; the architectures of operating and management systems will vary from case to case.

Thus, the author classifies the components of the partnership's managerial and operational systems into three levels of sophistication. For example, as shown in Table 1, the design of the partnership's operating systems is made up of two main components: operating procedures (method) and service quality standards (goal). Each of these components has several characteristics, such as service quality standards, which are characterized by the stipulation of performance indicators and their scope. In unsophisticated or Type I partnerships, for example, performance indicators are determined unilaterally and do not cover the entire process. On the other hand, in very sophisticated partnerships, or type III, performance indicators are prepared jointly, focus on the performance of the manufacturer and the service provider, and cover the entire process.

The same occurs with the project of management systems, formed by the components: exchange of information, policy for sharing risks and benefits, contractual formalization and investment policy. For example, the investment policy is characterized by investments in specific assets and in personnel. Unsophisticated logistics partnerships (type I) have little or no investment in specific assets and personnel training. On the other hand, in very sophisticated partnerships (type III) there is joint acquisition of high value assets and there is strong exchange and/or training of personnel.

According to table 1, it is possible to draw a standard profile for the partnership, if all its managerial and operational components belong to type I, II or III.

• Type I standard logistic partnership profile: In this case, the level of operational and managerial integration is small. The companies recognize themselves as partners, however, they coordinate and plan activities in a not comprehensive way. The partnership is focused on the short term and involves only one department of the manufacturer (usually its transport management or physical distribution).• Standard type II logistics partnership profile: companies move from coordination to integration of activities. There is a long-term perspective to the relationship and various departments and manufacturer functions are involved (transport, accounting, sales, etc.).
• Standard type III logistics partnership profile: there is a significant level of operational and managerial integration, in which each company perceives the other as an extension of its business unit. There is no predefined time frame for the duration of the relationship.

Normally, successful logistics partnerships will present the dimensions of their operational systems (planning and control mechanisms) and management systems (policies for exchanging information, investments and sharing risks and benefits) varying between these three levels. Depending on the operational and managerial arrangement adopted, the partnership may be characterized by a greater or lesser degree of sophistication (cf. figure 4).

It is expected that the majority of successful logistics partnerships present components of operational and managerial systems of types I and II, while type III partnerships would be restricted to a small number of special cases, in which the logistics service provider is really a critical element for the manufacturer in the long run.

5. DETERMINING FACTORS OF THE DEGREE OF SOPHISTICATION OF OPERATING AND MANAGEMENT SYSTEMS

Table 2 contains the consolidated classification of the partnerships documented in the four case studies carried out by WANKE (1998). This classification was prepared according to the characteristics of their projects for operating and management systems vis a vis Table 2.

The table above indicates that the degree of sophistication of the management system and the operating system are mutually dependent. In other words, partnerships with little (very) sophisticated operating systems tend to present little (very) sophisticated management systems. Specifically, the four case studies point out that the degree of sophistication of the operational and management systems of a partnership with logistics service providers will depend on the conjunction of four basic factors (cf. figure 5):

• the scope of the operation, ie whether the operation is regional or national;
• the characteristics of the product to be handled, such as: attractiveness to theft, perishability, fragility, weight, volume, added value;
• requirements regarding customer service levels;
• whether or not to segment the customer base, making meeting their needs more complex.

The more intense these factors are, the greater the probability of structured operational systems being structured, which in turn demand sophisticated management systems. Sophisticated operating systems, articulated with information systems, are the basis for better performance in physical distribution.

By ensuring the stability and consistency of operational performance indicators, the manufacturer and the logistics service provider can direct their attention to management issues. This is because sophisticated operating systems are usually structured based on large investments, leading to the formulation of the three basic policies of the management system: exchange of information, investments in specific assets and sharing of risks and benefits that regulate the partnership.

In contrast, in simpler operating systems, systems generally do not exist for fault remediation, vehicle tracking or risk management. Simpler operations practically do not require regulatory policies for investments and for sharing risks and benefits. Hence the fact that management systems are less sophisticated in these situations.

We should point out, however, that simple operating systems do not necessarily imply inefficiency and ineffectiveness, they just have a smaller apparatus of procedures and technologies both for day-to-day and for dealing with emergency situations.

6. THE IMPACT OF THE SOPHISTICATION OF THE OPERATING AND MANAGEMENT SYSTEMS ON THE PERCEPTION OF SUCCESS OF THE LOGISTICS PARTNERSHIP

As seen in these four case studies, the sophistication of a partnership's operating systems is usually matched by the sophistication of its management systems. Sophisticated operations are capital intensive and require considerable investment. In turn, considerable investments require not only a single policy that regulates them, but also the support of a policy for sharing risks and benefits, making partnership management more sophisticated.

In this way, when operational sophistication is high, these management policies are articulated and coordinated by a specific contract, where it is practically established that the fulfillment of its goals will guide the success of the partnership. In more sophisticated partnerships (first and fourth cases) the contract establishes the parameters from which success will be evaluated, from a managerial point of view, assuming a more administrative than strategic role, as proposed by LAMBERT et al. (1996).

This does not necessarily imply that the contracts do not detail the operational agreement of the partnership, defining, for example, responsibilities or targets for performance indicators and foreseeing escape clauses. In sophisticated partnerships, the contractual detailing of the operation makes both parties “feel more protected” to formalize issues with future investments vis a vis a given level of movement or capacity utilization. We see that even so, the issue of success remains linked to its managerial perspective.

On the other hand, in less sophisticated partnerships, success will be evaluated mainly from the operational perspective of meeting the stipulated performance indicators. This is because simple operating systems, as seen in the second and third cases, despite not requiring a considerable capital contribution and consequently sophisticated management systems, are more vulnerable to failures. In these situations, the partnership is governed by informal or “moral” contracts, which depend on people's words, on the technology involved and, above all, on the operational performance verified on a day-to-day basis. It is noticed that success is, in these cases, strongly influenced by the operational perspective.

7. CONCLUSION

Both operational success and managerial success are necessary conditions, but not sufficient separately, to verify the maintenance of a logistical partnership (cf. figure 4). Shippers must have a strategic perception of physical distribution, considering their logistics service providers as an extension of their own business units. This vision encompasses not only the manufacturer's own logistics network, but also its position in the logistics chain vis-à-vis its customers or suppliers (image, relationship, etc.).

The simultaneous occurrence of operational success and managerial success is favored by a context of cooperation and long-term commitment. Thus, as proposed by ARKADER (1997), when studying lean supply relationships in the Brazilian automobile industry, the strategic perception of the role of suppliers is fundamental for achieving partnership, acting as a complementary element to operational and managerial integration. In the logistics partnership, this strategic integration favors the joint project of the physical distribution operation, while it consolidates the parameters that will guide its perceived managerial success. We must point out, however, that the strategic perception of a logistics service provider as an extension of the manufacturer's structure does not imply, a priori, a high degree of affinity, trust, balance of power and good performance indicators. All these dimensions will be verified or not during the course of the relationship, and will depend not only on operational integration (day-to-day), but also on the systems for exchanging information and investment policies and for sharing risks and benefits established throughout of the relationship.

BURNES et al. (1997) corroborate this perspective, stating that “in a partnership, companies can collaborate simultaneously at different levels, ranging from operational to strategic”. At the operational level, the integration of activities and processes is a precondition for increasing efficiency in the commercial relationship. At the managerial level, a feature that strengthens integration is the existence of a clear structure for determining costs, prices and profits for both parties (risks and benefits sharing policy). Finally, at the strategic level, integration is verified with the presence of the following elements: (a) long-term commitment; (b) proactive posture of both companies; (c) philosophy that the partnership should be good for both companies. The author also points out that, despite the importance of strategic integration as an element for consolidating the partnership and minimizing conflicts and distrust, the logistical partnership is developed on a day-to-day basis (operational integration) and through the creation of mechanisms that reconcile the operation with the partnership strategy (managerial integration).

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