COLLABORATIVE RELATIONSHIP BETWEEN LOGISTICS OPERATORS AND THEIR CUSTOMERS IN BRAZIL (PART II)

This article is divided into two parts. Part I dealt with the elements that impact the magnitude of the relationship between logistics operators and their customers, that is, the factors necessary to achieve the collaborative relationship. Part II, presented here, deals with the results of the collaborative relationship that may come in the form of benefits or risks for the logistics operator.

As seen in the first part of this article, the intensity of the relationship between a logistics service provider and its client depends on the trust, commitment and dependence between the partners. These factors, however, are influenced by some elements, which are often found in collaborative relationships or strategic alliance agreements that cover all logistics activities over many years. The so-called elements of the collaborative relationship are: alignment of strategic objectives; performance measures together; risk and benefit sharing; information sharing; flexibility; dedicated investments; expectation of continuity; frequency of interaction; specification of functions and rules; joint planning; joint problem solving; joint team; top management involvement; operator's knowledge of the customer; and customer knowledge of the operator.

However, collaborative relationships differ from transactional relationships not only through their intensity classifiers or their elements, but also because of the expected results. The partnership between shippers and logistics service providers can bring economic, managerial and strategic benefits to both parties. On the other hand, this type of relationship can also bring risks due to the level of involvement and dependence on the partners. This article presents the continuation of the research carried out with 83 Brazilian logistics operators, introduced in Part I, focusing on the positive and negative results perceived by the participants. The benefits and risks expected in the collaborative relationship from the point of view of the logistics operator are described below.

 

Benefits

The benefits associated with collaboration are not immediately visible, but they attract potential long-term rewards and can be classified as operational efficiency, improved performance and better financial results.

 

Operational efficiency

Warehouses and carriers can achieve better utilization of facilities and equipment by concentrating services on a few closer customers, which generates specialization, leveraging the effects of potential synergies, resources and skills. In addition, long-term relationships also provide a baseline level of expected transactions, which allows for more confident investment planning and human resource commitment. Through better use of resources and rationalization of the process, it is possible to increase efficiency and reduce costs.

 

Performance

Collaborative efforts can improve the logistics operator's ability to reduce customer delivery times, anticipate delivery dates, respond to the needs and desires of key customers, and increase flexibility.

In addition to operational performance, the closer relationship can help with service recovery, as errors are likely to happen in any relationship.

Other collaboration possibilities for the logistics operator are the development of new products, the provision of customized services and the leveraging of expertise through the know-how acquired in the relationship that can be transferred to other customers.

 

Financial results

Greater financial results are also expected with the adoption of this type of relationship, as customer retention can bring increased revenue, through the hiring of new services, and increased profitability, as it becomes easier to serve them and not there is a need to dedicate marketing efforts to it. Furthermore, the customer can become an advocate for the service provider, promoting it to other shippers, bringing new customers to the operator and increasing its market share.

The expected benefits of collaboration are summarized in 17 items in Figure 1.

Figure 1 – Expected benefits of collaboration for the logistics operator

 

In the research carried out (more information about the research can be found in part I of this article), the logistics operators evaluated the existence of these 17 benefits in the relationship with the chosen customer, considered important for the company. Figure 2 shows the respondents' average level of agreement on the existence of each benefit.

Figure 2 – Is this a benefit of your customer relationship? (average of responses from logistics operators)

 

According to Figure 2, the most observed benefits in the sample relationships were greater volume of customer business , greater responsiveness, competence development and know-how, greater customization of services, greater ability to handle urgent orders e higher market share.

The least found benefit in the investigated relationships was the cost reduction. Perhaps because a closer relationship with the customer can bring costs that would not exist if the relationship were transactional, such as specialized investments, greater dedication of human and financial resources, greater planning, etc. Thus, the low rate of perception of cost reduction in the relationships chosen by the respondents is justified.

A reduction of delivery time it was also a result that was little noticed in the analyzed relationships and this can be explained by the partnership relationship that exists between the shipper and the customer. Because of the collaboration, the customer himself can assess whether the reduction in delivery time is so important as to compensate for the extra expenses that are necessary for this result. When the relationship between the shipper and the customer is close, the evaluation of this trade-offs it is done in a more conscious way and the reduction in delivery time may no longer be so valued compared to the cost that it may bring.

 

Risks

The potential benefits of partnership can be challenged by the potential risks associated with a long-term relationship with a limited number of partners. Asset specificity, for example, is a cost of the collaborative alliance. In certain operations, additional investments in information systems and specialized equipment may be necessary. Furthermore, these facilities or equipment may not be transferable to other customers, making the high initial investment a risk for the logistics service provider. However, it is possible to share the responsibility and amortization of these investments with the shipper through long-term agreements, helping to mitigate the risks of dedicated investment.

Another risk is the absorption by the shipper of some or even all outsourced functions. This can be done through the acquisition of the logistics service provider by the customer, the customer can simply start to perform the functions internally in his own operation without using the third party in any way or even transferring the know-how to another operator. To avoid this risk, long-term agreements can be made that postpone this decision by the shipper or the provision of higher value-added services more efficiently in an attempt to maintain the relationship.

Finally, it is necessary to highlight the image risk. In case of any failure in the partnership, the customer has great power to deteriorate the image of the logistics operator in front of other potential customers because of the proximity that the shipper has with the company.

Therefore, closer relationships have three potential risks if the relationship does not go as planned: the high investments in specific assets, the transfer of know-how to the client and the image risk.

Figure 3 shows the average level of perception of logistics operators about the existence of these risks in the relationship chosen for analysis.

Figure 3 – Is this a relationship risk with your client? (average of responses from logistics operators)

 

In general, respondents perceived low levels of risk in the relationship. Among the risks listed, the most obvious were specific investment and image risk. The least perceived risk was the transfer of know-how.

A possible explanation for this result may be the low level of relationship intensity between Brazilian partners. The specific investment risk is something inherent to any type of relationship in which the service provider must make investments dedicated to the provision of that specific service, that is, the investment is not necessarily a consequence of a collaborative relationship. It is also not necessary to have a high degree of relationship between the customer and the operator in order to have an image risk, as it is enough to have been a customer for the shipper to be able to harm the image of the third party vis-à-vis other potential customers. Therefore, regardless of the intensity of the relationship, these risks may be present.

The least perceived risk in the survey, the risk of transferring know-how, is only present in very trusting relationships in which the sharing of information, knowledge and experiences is intense. The low perception of this risk from the point of view of Brazilian logistics operators may indicate a low level of exchange and trust between partners.

 

Conclusions

In the first part of this article, the elements of the collaborative relationship and the factors that increase its intensity were identified. Part II brought potential results from a closer, long-term relationship, which may come in the form of benefits or risks for the logistics operator. Figure 4 presents the relationship between the variables presented in the two parts of the article, completing the conceptual model.

Figure 4 - Conceptual model: elements that increase the strength of the relationship and its results

 

The benefits of the collaborative relationship can be many, classified among benefits of operational efficiency, performance and financial result. In this context, the presence of 17 potential benefits of the relationship between logistics service providers and their main customers was investigated.

In the investigated relationships, the most present benefits were greater volume of customer business , greater responsiveness, competence development and know-how, greater customization of services, greater ability to handle urgent orders e higher market share. The least found were cost reduction e reduction of delivery time.

Regarding the potential risks arising from the possibility of ending the relationship, in general, they were little noticed in the research. The most identified risks were image risk and specific investment risk. These risks, however, are inherent in any relationship, regardless of its intensity.

On the other hand, the know-how transfer risk, which is only present in very trusting relationships, where the sharing of information, knowledge and experiences is intense, was the least perceived risk in the survey. The low perception of this risk from the point of view of Brazilian logistics operators may indicate a low level of exchange and trust between partners, confirming the evidence already found in Part I of this article: the relationships between logistics operators and their customers in Brazil are closer to be a common provision of services rather than a collaborative partnership.

 

References

Daugherty, Patricia J. Review of logistics and supply chain relationship literature and suggested research agenda. International Journal of Physical Distribution & Logistics Management, v. 41, no. 1, p. 16-31, 2011.

HUBER, b. Collaborative relationship between logistics operators and their customers in Brazil, Part I. Tecnologística Magazine, June 2015.

HUBER, b. Collaborative relationship in logistics outsourcing. A study with logistics operators in Brazil. Dissertation (Master in Administration) – COPPEAD, Federal University of Rio de Janeiro, Rio de Janeiro, 2012.

NYAGA, Gilbert N.; WHIPPLE, Judith M.; LYNCH, Daniel F. Examining supply chain relationships: Do buyer and supplier perspectives on collaborative relationships differ? Journal of Operations Management, v. 28, n.2, p. 101-114, 2010.

SLACK, Nigel; LEWIS, Michael. operations strategy. Porto Alegre: Bookman, 2009.

To reference the article in your publication, use:

HUBER, b. Collaborative relationship between logistics operators and their customers in Brazil – Part 2. Tecnologística Magazine, São Paulo, Year XXI, n. 236, p. 50-54, Jul. 2015.