Measuring Performance of Logistics Outsourcing Services

A Review Of Logistics Service Performance Measures

Since the early 2000s, practitioners and researchers realize that a priority should be given on measuring logistics service performance. This has resulted from the increasing awareness of the strategic implications of logistics service towards the organizational performance excellence (Fugate et al, 2010). As a result, various measures have been developed and empirically tested in producing most reliable and valid measures. Various approaches such as financial, strategic management, operations management and marketing have been used to measure the performance of logistics service.

The earlier approach measures the output of logistics service performance more directly, in which it measures the direct impact of logistics service performance on the organizational financial performance. These approaches were viewed from the financial perspective. Those measures include costs, profitability and return on assets or investments. Simultaneously, “hard” measures such as order cycle time, order accuracy, punctuality, etc were also quite significant (Brewer and Speh, 2000; Morash et al, 1996), in which Gronroos (1985) regard it as the technical quality. Fugate et al (2010) considered these two types of measures as the traditional logistics performance measures. In the area of management, several other researchers integrate corporate strategy into logistics service performance (Lambert & Pohlen, 2001; Zacharia & Mentzer, 2004) when using it as a tool to manage strategically. Mentzer and Konrad (1991) describe logistics performance as effectiveness and efficiency in performing logistics activities. This description was extended by Langley and Holcomb (1992) by injecting some marketing elements of logistics differentiation as the key element of logistics performance due to the duo function of logistics activities that is to provide customer value as well as to be the performance indicator of logistics service.