Third-Part Logistics Competitive Strategies

Our literature focus is to explore influential factors of competitive advantage of third-party logistics. One of the challenges for third-party logistics is to offer logistics services that create higher value for their customers than the customers may create on their own (Meidute et al. 2012). Supply chain managers continually expect higher levels of logistics services from third-party logistics to succeed in a competitive market (Meidute et al. 2012). Studies by Lieb and Lieb (2015, 2012); Soinio et al. (2012); and Zacharia et al. (2011) confirmed this trend and reported that customers are demanding more value-added and integrated services from third-party logistics. This change in the landscape of services of the third-party logistics has also enhanced the potential benefits of logistics outsourcing (NunezCarballosa and GuitartTarres, 2011). Although many supply chain managers continue to outsource mainly because of cost savings, third-party logistics can offer much more than just cost efficiency (NunezCarballosa and Guitart-Tarres, 2011) and aid in improving the efficiency of the firm’s logistics (Sheikh and Rana, 2012) and customer service (Ulku and Bookbinder, 2012), as well as reduce operational budgets and improve IT support (Sheikh and Rana, 2012).

Problem arises from the increasing use of third-party logistics due to the heavy reliance on e-commerce in sales nowadays. Such increasing demand by e-commerce was not met by efficient and reliable logistics services, which caused a negative effect on the third-party logistics services delivered to customers in several ways and by that negatively impact the third-party logistics to stay competitive in the market and to achieve competitive advantage. Therefore, it becomes urgent to provide competitive knowledge in several areas to be able to use and stay competitive, minimize areas causing dissatisfaction to customers and improve to gain competitive advantage.

Motivated by these issues, our research aims to investigate influential factors of competitive advantage on third-party logistics and the impact of such factors on third-party logistics survival. Therefore, this research aims to figure out areas of competitive measures highly recommended by the logistics users in Selangor Malaysia, and provide solutions to challenges facing the third-party logistics. The study posits that: there is a significant relationship between competitive strategy and competitive advantage progression; there is a significant relationship between network structure and competitive advantage progression; there is a significant relationship between information technology and competitive advantage progression. Following this trait, the study therefore asserts the following hypotheses: customer relationship management significantly moderates the relationship between competitive strategy, network structure, information technology and the firm’s competitive advantage progression; specifically the relationship will be stronger for firm’s who enhance customer relations than non-customer relations firms. A research framework was developed. The framework identifies a set of three factors that determine third-party logistics providers’ initiatives to pursue competitive advantage progression to manage and stay competitive. They comprise competitive strategy, network structure, and information technology. Secondly, the model also postulates that customer relationship management may moderate the relationship between the competitive strategy, network structure, and information technology adoption and competitive advantage progression. Together, these variables form a coherent model for discerning the various factors affecting competitive advantage adoption and its impact on third-party logistics SMEs competitive performance.

This study extends our knowledge on the issues relating to competitive advantage progression of third-party logistics of an emerging economy. The research improves the understanding, by uncovering the existence of differences in the adoption patterns in different economic settings and levels of SMEs manufacturing sector’s dependence on third-party logistics services. Consistent with prior empirical works, this study lends credence to competitive strategy, network structure, information technology adoption in the SME third-party logistics sector. While competitive measures appeared as a significant factor in determining the influential factors of competitive advantage on third-party logistics, most of the respondents have responded with positive feedbacks. Therefore, it is important to plan and consider the competitive items and improve the elements on top priority to outsourcing logistics activities in order to meet customer’s preferences, satisfaction, product and service improvement and greater competitive capabilities and effectiveness.

The findings confirm, majority of the respondents agreed that competitive strategy does influence competitive advantage progression. Competitive strategy is normally high task demands by the user’s management such information, collaboration, ad-hoc changes in scheduling, urgent deliveries, meeting datelines, availability of resources and sudden strategic changes. The competitive strategy is seen as a long-term objective of a particular firm in order to gain a competitive advantage over its competitors in the industry. It is aimed at creating a defensive position in an industry and generating a superior return on investment and it can results in a competitive advantage in the marketplace (Porter, 1980). Based on this study’ analysis, there is a significant relationship between competitive strategy and competitive advantage.

In the network structure, the majority of the respondents agreed that it is an influential factor of competitive advantage progression. The result that came out from analysis shows that communications, cooperation, dependency, commitment, relationship, trust, analyzability, and shares a variety of logistics ideas are important in the network structure. Third-party logistics services are more attractive when they meet the customer’s expectation to achieve economies of scale. Furthermore, third-party logistics can even out demand variations between the different customers and thereby achieve high resource utilization. Therefore, to determine the attractiveness of a third-party logistics in this respect for the SME manufacturing industries, one must decide whether the company can achieve sufficient economies of scale through an efficient network structure between both enterprises. Besides, considering efficient network structure, the users of logistics services would probably benefit from outsourcing their logistics activities.

In the information technology, the majority of the respondents agreed that information technology does influence competitive advantage progression. A number of studies have demonstrated various logistics benefits of having information shared with supply chain partners concerning logistics activities. This is because information resources are required to integrate suppliers, manufacturers, wholesalers, retailers, transportation carriers, logistics service providers, and final customers together. Information resources become costly to imitate when they are supported by proprietary technologies and require specific technical skills, and, in some instances, access to capital. Therefore, there is a significant relationship between information technology and competitive advantage progression. The use of technology is very common in today’s business environment, especially in the logistics operations. Employees are required to update the operation schedule including the supplier’s information and all other relevant details. In this point of view, a delay in delivery can cause bad results in competitive performance. Third-Party Logistics would find themselves in a situation where they have to meet their customer's request and demands, and the use of information technology is central to the logistics activities. If the use of information technology is insufficient or less then the employees of the Third-Party Logistics may find it difficult to monitor and control logistics goods movement and this may create errors and delays and frustration in the logistics operations.

This study recommends that third-party logistics should implement customer relationship management in their business practices and get the facts right the first time. Customer relationship management has been proven by researchers that the attraction of new customers is much more costly than the retention of customers, therefore, firms must have in place adequate measures and activities that are meant to enhance customer satisfaction and retain them while at the same time attracting others primarily through the use of word of mouth advertising. Indeed, all these activities can only be undertaken under an effective and adequate customer relationship practices. Further, this study recommends that third-party logistics must undertake continuous research to understand the expectations and needs of their customers and develop products and services that satisfy these needs. Finally, this study recommends that third-party logistics firms must enhance communication to enhance effective customer relationship management strategies in addition to the use of customer loyalty programs.

This study offers pertinent theoretical implications to the logistics competitive advantage literature. Our research extends the knowledge on the issues relating to competitive measures adoption in third-party logistics sector of an emerging economy. Despite the existence of much literature to establish the significant benefits of competitive advantage in managing the logistics activities, is worth noting that third-party logistics providers from emerging economies tend to be laggards in terms of technology acceptance (Razzaque and Sirat, 2001 and Ali et al. 2008). This study also offers different theoretical perspective by uncovering the different impacts of competitive measures in the distinct economic setting. Originating from a developing nation, Malaysia is still in its early growth stage. While most of the previous studies in this area only investigate the antecedents and consequences of performance and capabilities in the isolated framework (e.g. Karia and Wong 2012), this study provides a broader picture by coherently integrated elements in a single model. In response to some scholars (Maloni and Carter 2006; Selviaridis and Spring 2007), who called for supplier-side research, this study supplements the body of knowledge by providing quantitative evidence focusing on logistics users in Selangor, rather than third-party logistics providers.

The study has several important managerial implications. Despite the various potential benefits offered by technology, achieving such capabilities is not an easy task. Logistics managers in the local industry have to consider implementing competitive measures from a broader perspective to enhance their competitive capabilities and survival. Since the implementation of performance can easily be duplicated by competitors, the implementation of mature competitive measures in the local industry will eventually lead to insignificant competitive capabilities, hence suggesting a need for firms to contemplate on cutting-edge technologies, which have not yet diffused widely in the third-party logistics sector in Malaysia. This is pertinent since technology capability emerged as one of the important criteria for logistics users in making outsourcing decisions (Lai et al. 2008), causing this strategic move pivotal for the local third-party logistics sector to move forward. While resources such as information technology are a key input into a firm’s business processes, rare and imperfectly imitable assets are needed to achieve a competitive advantage.

While increased breadth, depth and scope of competitive knowledge could enhance the third-party logistics growth, successful implementation of strategies, networks and technologies warrants support and commitment from both the enterprises since this strategy involves considerable resource allocation and investments over a long-term horizon. Furthermore, third-party logistics need to attend training programs by industry practitioners and related government agencies to ensure effective use of such technologies. Such steps are vital since the competitive measures and would affect their business processes, inter-organizational relationships and balance of power (Lambert et al. 1998).

Several limitations which must be taken into account in interpreting the results and their implications. First, since this study was conducted in Selangor Malaysia, there may be particular characteristics relating to the SME manufacturing industries that might not apply to other regions, which may limit the generalizability of this study. A second possible criticism is a reliance on cross-sectional data. As such, the present study can only test associations between constructs. Since this type of research design measures the predictors and outcome at one point in a time, causality inferences are difficult to establish (Pinsonneault and Kraemer 1993). The study presented provides avenues for future research. The dimension of competitive measures should be examined in greater depth by extending the survey to a larger sample size from different sources of databases. Future studies should also incorporate perspectives from other developing countries to gain a wider understanding of this issue and to increase the generalization of the findings. Upcoming research would also benefit from a longitudinal approach to data collection, as this method would enable a more fine-grained exploration of how the predictors and impact of competitive measures change over time. The study could be extended to other regions and comparisons made on their opinions to see whether they significantly differed from Selangor. More variables to be included in the study to give a stronger perception of competitive advantage progression.