Textile and Clothing Exporting Firms' Evaluation of LSPs' Capabilities and Logistics Outsourcing Performance

Introduction

In international business today, most global companies have moved their production activities and sources of material to lower cost overseas markets. This demands careful coordination of the physical movement of materials and supplies to different destinations throughout the global supply chain (Anderson et al., 2011; Sum & Teo, 1999). Logistics operations are a cornerstone in global supply chain processes (Lambourdiere et al., 2013) and an influencing factor in firms’ competitiveness (Schramm-Klein & Morschett, 2006). The ultimate goal of logistics operations is to handle a firm’s goods and services efficiently and effectively at lower costs and with a higher level of customer service (Bourlakis & Melewar, 2011; Christopher, 2006). Hence, the increasing awareness of the vital role of logistics operations in a complex global supply chain surrounded by the environmental uncertainty of international trade increases the demand for outsourced logistics activities (Hung Lau & Zhang, 2006). Logistics outsourcing is an alternative for companies to bridge the gap between what they want to achieve with their logistics operations and what they can realize in-house (Sum & Teo,1999).

Logistics operations encompass different logistical activities such as transportation, warehousing, inventory management, logistics coordination, carrier selection, reverse logistics, freight forwarding, rate negotiation, the electronic transfer of funds, product assembly, customer spare parts, marketing services, customer clearance, project management, and logistics information systems. These logistics activities represent the greater part of the service component of a firm’s product/service package (Fawcett & Clinton, 1996). Saglietto (2013) provided a comprehensive review of fourth party logistics (4PL) litertaure. In this review, Saglietto (2013, p. 106) provided a classification of logistics service providers (LSPs) based on several criteria such as asset and non-asset based; service or solution providers; service capabilities and performance results (based on RBV theory); relationship structure and the complexity of the supply and level of outsourcing. Other criteria for classifying LSPs are the type of relationship structure; levels (the firm, dyad, network); LSPs’ role; type of service provided and the distinction between execution and planning & control activities in operations management.

Previous studies revealed that outsourcing logistics activities create value added logistics services for customers through quick delivery, product availability, timeliness, ease of placing orders, and superior customer service that helps customers to become more competitive and profitable (Daugherty & Pittman,1995; Langley & Holcomb, 1992). Therefore, integration of logistics capabilities with global manufacturing is very important for business success in international operations (Lu & Yang, 2010) where firms’ logistics capabilities are important differentiators for realizing a competitive edge in the marketplace (Lu & Yang, 2006). Hertz & Alfredsson (2003, p.140) make clear that LSPs are external providers who manage, control, and deliver logistics activities on behalf of their shippers. They have the competence to perform logistics activities, as it is their core business (Sink et al.,1996). LSPs have resources, economies of scope and scale, and experience that allow them to deliver logistics activities more efficiently and effectively than exporters can do in-house (Yang, 2014).

Thus, this chapter’s objective is to investigate the influence of LSPs logistics capabilities as drivers of logistics outsourcing performance. A resource-based view is used as a theoretical framework in the formulation of the conceptual model in the next section. The rest of this chapter is organized as follows: the theory, literature and hypotheses are highlighted in the next section. This is followed by the research methods, the results and discussion. The chapter ends with a conclusion.