Management of outsourced forest harvesting operations for better customer-contractor alignment

The Effect of Customer–Contractor Alignment in Forest Harvesting Services on Contractor Profitability and the Risk for Relationship Breakdown

“…From the customer's perspective, low cost has historically been the most frequently used measure in evaluating contractor performance [6]. Nowadays, customers of harvesting services also consider other more qualitative measures, with high contractor performance across a range of service aspects being necessary to fulfill customer requirements [14,30]. The switch from a cost-only focus in forest harvest contracting to a situation where many aspects of the service are valued is similar to the broader understanding of customer value that now prevails in a more general business context.…”

“…Consequently, many forest companies rely on the services of small or medium-sized harvesting contractors (e.g., [5,6]). Despite the long tradition in the forest industry of working with contracted harvesting resources, large variations in contractor performance have been found regarding, for instance, contractor profitability (e.g., [7][8][9][10]), technical efficiency [11][12][13], and various aspects of the service delivered to the customer [14,15].…”

“…For forest companies who rely on the services of a number of contractors, such variation in performance means that some contractors are more in alignment with the companies' service needs than others [14], which ultimately may lead to difficulties for the forest companies in fulfilling their own downstream requirements. Eriksson et al [14] addressed this issue by analyzing harvesting contractor performance from a customer's point of view.…”

“…Eriksson et al [14] addressed this issue by analyzing harvesting contractor performance from a customer's point of view. They suggested four generic approaches to contractor alignment: incentives, supplier development, use of power advantage, and active sourcing.…”

“…Such statements, paired with reports of the low profitability of many contractors (e.g., [7][8][9]), stalling or declining productivity [22,23], and rising costs ( [24] and [1] (p. 249)), give the impression of serious structural problems in the forest sector. Researchers interested in contractor performance have reported large variations (e.g., [9,11,15,25]), even among contractors working within the same business context [14,26]. For the most part, researchers have focused on contractor-specific factors as explanatory variables.…”