Effects of Organizational Learning in Third‐party Logistics

Abstract

INTRODUCTIONThe increasing trend towards outsourcing of logistics activities has contributed to the growth of third-party logistics service providers (LSPs). An LSP is defined as a provider of industrial logistics services that performs the logistics functions on behalf of their clients (Coyle, Bardi, and Langley 1996). Coyle, Bardi, and Langley (2003, p. 425) suggest that third-party logistics involves an external organization "that performs all or part of a company's logistics functions". This broad definition indicates that outsourcing of any major logistics activity (transportation, warehousing, inventory management) can qualify as third-party logistics (Knemeyer and Murphy 2005).It has been recognized that differentiation and competitive advantage for LSPs may no longer be determined by focusing solely on improving upon the traditional logistics performance measures like cost reduction, lead time/order cycle reduction etc (Hertz and Alfredsson 2003). Instead, the strategic edge of LSPs in the market will be increasingly influenced by the way they develop and manage their customer relationships (Hertz and Alfredsson 2003) and their competitive differentiation will be determined by the level of logistics service quality they offer to their clients (Mentzer, Flint, and Hult 2001). Organizational learning has been identified as an important parameter in the accomplishment of logistics and supply chain goals (Hult, Ketchen, and Nichols 2003) and in particular in contributing towards logistics innovation (Flint et al. 2005). Senior managers of an unnamed third party logistics provider stated that a customer's unfamiliarity with logistics best practices or a reluctance to share demand data causes pain and prevents the relationship from yielding the results both parties had expected (Kerr 2005). It follows that organizational learning, client relationships and logistics service quality may be critical parameters in improving firm performance for LSPs.The purpose of this paper is to examine the influence of a key strategic resource, viz. organizational learning (OL) on relationship orientation (RO), logistics service quality (LSQ) and firm performance (P) in third-party logistics.The recent trends in international third-party logistics show major firms such as T&B, TNT Logistics, Exel Logistics and Danzas AEI, forming long-term formal and informal relationships with their clients (vertical alliances) in order to ensure improvements in service levels (Carbone and Stone 2005). However, client relationships and superior service quality necessitates, according to Hertz and Alfredsson (2003) the creation of specific knowledge, an attribute linked to an organization's ability to learn. The organization-wide activity of creating and using knowledge to enhance competitive ad- panayidesvantage is termed organizational learning (Hurley and Hult 1998). Logistics practitioners recognize that knowledge sharing is so pivotal to success that it should begin well before the logistics contract is signed, as indicated by Mike Fielden...

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“…Furthermore, the authors highlight the relevance of combining the expertise of supply chain managers and logistics managers with the expertise of markets or sales professionals for activities connected to customer and market orientation. This is in line with the study by Panayides (2007), the results of which support earlier findings that crossfunctional information sharing within the company improves logistics service quality.…”

“…Flint et al, 2008;Flint el al., 2005;. In order to create a culture of organisational learning, Panayides (2007) states that "managers must stress the value of learning and facilitate learning by encourage and facilitate employees to work together in achieving common goals, to share information with each other and other departments, to reflect critically on actions taken in serving the customers and performing their duties and to preserve and distribute the knowledge created during the course of their operations" (p.136). In addition, the author highlights the importance of managerial efforts and commitment in order to make this happen in practice, as well as influence issues related to cross-functional integration, identification of customer needs, information processing, production and technology.…”

“…Promoting a cross-functional approach may not only benefit the clue-gathering phase but also add value to the entire development process of logistics services. As referred to in the LSP literature by Panayides (2007), managers should stress the value of learning and facilitate this by encouraging employees to work together in achieving common goals, sharing information within their own unit as well as with others and sharing lessons learned during the NSD process. Having a more positive approach towards learning may also lead to identification of "best practice" of NSD activities within the company.…”

“…It is worth mentioning, that in order to realise such an NSD culture many researchers stress the relevance of top management as well as managerial engagement and support (e.g. Busse & Wagner, 2008b;Panayides, 2007;Flint et al, 2005). In addition, since the LSP industry is described as having "transformed from the traditional business notion of simple point-to-point transportation to that of serving the entire suite of customers' logistical needs" (de Souza & Goh, 2008, p. 62), this places requirements on LSPs to better understand and respond to customers' demands.…”

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“…Previous literatures have highlighted the significance of knowledge acquisition in facilitating the aforementioned benefits gained from shipping alliances (Hult et al, 2007;Panayides, 2007). In particular, Song and Lee (2012) explored how maritime business operators such as shipping companies, port terminal operators and freight forwarders could acquire more knowledge, and investigated in turn how this knowledge acquisition can help maritime operators improve the value of their services, using a qualitative research method.…”