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Article Excerpt
Abstract
The transportation function is critical to efficient and effective logistical operations. In order to improve transportation performance, it may be necessary for firms to form closer relationships with their carriers. Unfortunately, there are few studies examining the nuances and outcomes of shipper-carrier relationships. The focus of this work is to delineate the levels of relational closeness found between shippers and carriers and to assess the effects of relational closeness on carrier performance. Based on data and expertise provided by The Hershey Company, a major U.S. confectionary corporation, this research utilizes qualitative and quantitative techniques to accomplish these tasks. Findings indicate that closer relationships between shippers and carriers have no effect on carriers' on-time performance but significantly influence carriers' willingness to commit assets to the shipper and accept loads during times of constrained transportation capacity.
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The availability of transportation capacity is critical to efficient and effective logistical operations (Bienstock and Mentzer 1999). When transportation capacity becomes constrained, it is difficult for shippers to move product to customers in a cost-effective and timely manner. A recent article in Inbound Logistics states that shippers are currently faced with such an environment (Douglas 2006). One logistics executive quoted in this article stated, "Shippers now have to think about helping their carriers, rather than just dictating to them. The big potential for change rests on collaboration [with carriers]" (Douglas 2006, 162). Several authors echo these thoughts and argue it is necessary to form closer relationships with carriers in order to improve the performance of a firm's transportation function (Richardson 1996; Holcomb and Manrodt 2000).
One way shippers facilitate closer shipper-carrier relationships is by reducing the number of carriers used to form a core-carrier group (Larson 1998). Carrier reduction has been found to improve service levels, trust, and communication frequency while simultaneously reducing claims and total logistics cost. While the benefits of carrier reduction have been established, Dobie (2005) calls for additional research into the shipper-carrier relationships that result from carrier reduction. Research examining shipper-carrier relationships is sparse, and the work that does exist is mostly anecdotal (Gibson, Sink, and Mundy 1993). Specifically, additional research is needed to uncover the various levels of shipper-carrier relationships (Gibson, Sink, and Mundy 1993) and the benefits of these relationships (Gentry 1993).
The focus of this work is to delineate the levels of relational closeness found between shippers and carriers and to assess the effects of these relationships on carrier performance. To address this research question, this article is organized into several parts. First, a literature review pertaining to shipper-carrier relationships is provided. Next, an overview of The Hershey Company (the local company for this study) is presented in order to understand the research context and performance variables examined. Research hypotheses are then presented examining the effects of shipper-carrier relationships on carrier performance. The methodologies used to segment Hershey's carrier base and assess the performance differences between these segments are then explained, followed by the results of our investigation and managerial implications. This article concludes by discussing research limitations and presenting suggestions for future research.
LITERATURE REVIEW
Firms can engage in supply chain relationships that range from purely transactional to full vertical integration (Lambert. Emmelheinz, and Gardner 1996). Partnerships, which embody the presence of high levels of relational closeness, can be thought of as a hybrid governance structure that brings together the advantages of vertical integration with the benefits of independent ownership (Ellram 1991; Dyer 1996). A partnership involves a business relationship between two organizations based on mutual trust, openness, and shared risk/rewards, that can yield performance greater than would be achieved by the firms individually (Lambert, Emmelheinz, and Gardner 1996).
Supplier partnerships can provide a purchasing organization with many of the benefits of vertical integration, such as greater coordination, better asset utilization, and faster response to market changes. In addition, partnerships often facilitate greater levels of information sharing and allow participants to benefit from each other's expertise (Ellram 1991). Partnering with select suppliers often results in reduced costs, increased customer satisfaction, and an increased ability to remain abreast of changes in technology. These advantages have been shown to yield a long-term competitive advantage (Johnston et al. 2004).
While much of the logistics literature has focused on the product supplier-customer dyad, the study of partnership activities should be extended to the services provided by carriers to shippers (Gentry 1993). Shipper-carrier relationships have changed drastically over the years (Gibson, Sink, and Mundy 1993) and closer relationships are likely to become more common in the future because they may engender a competitive advantage (Gentry 1993). For example, in times of shortage, a carrier should be more likely to allocate capacity to a shipper with whom it has formed a closer relationship (Douglas 2006). Further, carriers may be less likely to exhibit opportunistic behavior toward partner shippers and have a greater stake in delivering high levels of service in order to maintain the relationship (Douglas 2006).
The degree of relational closeness between a firm and its transportation providers can be illustrated by thinking of a continuum between a purely "arms'-length," transaction-based philosophy, to an alliance or "partnership"-based philosophy (Gibson, Sink, and Mundy 1993). Many labels have been coined to describe different levels of relational closeness between a firm and its product suppliers (Cooper et al. 1997; Rinehart et al. 2004). Due to the lack of contributions examining relationships with transportation suppliers, we have consulted the literature and propose three basic levels of shipper-carrier relational closeness. Arms'-length carriers exhibit relationship behaviors such as infrequent and low-level communications with shippers, little trust, and minimal integration of processes. Contractual carriers embody some degree of collaboration with their shippers, though much of this collaboration exists at lower levels within the organizations. Partnership carriers, on the other hand, involved integrated processes with the shipper, as well as focus on long-term, mutual benefits for both firms. Our continuum of shipper-carrier relational closeness, and their associated criteria, is presented in Table 1.
There is a rich research stream investigating the benefits associated with firms having closer relationships with their suppliers (Duffy and Fearne 2004; Johnston et al. 2004; Morris and Carter 2005). However, a relatively small number of studies have examined the benefits of shipper-carrier relational closeness, and most of these studies have been exploratory in scope. Utilizing qualitative methods, Esper and Williams (2003) found that increased collaboration between shippers and carriers leads to reduced transaction costs/risks,...
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