IV1ESI.J RETURNING MATERIALS: Place in book drop to “saunas remove this checkout from .—J_. your record. FINES win be charged if book is returned after the date stamped below. ' NOV 0 5 2007 OUTSOURCING LOGISTICAL SERVICES: FIRM-SPECIFIC USAGE PATTERNS BY Patricia Joan Daugherty A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of marketing and Transportation Administration 1988 ABSTRACT OUTSOURCING LOGISTICAL SERVICES: FIRM-SPECIFIC USAGE PATTERNS (AN EMPIRICAL STUDY) By Patricia Joan Daugherty Outsourcing refers to the purchase of products or ser- vices from external providers. The purpose of this research was to study the outsourcing of logistical services among United States manufacturing firms. More specifically, the objectives were to examine: the anticipated usage of exter- nal logistical services and factors influencing the out- sourcing decision. A mail questionnaire was sent to selected logistics executives within United States manufacturing firms. Three hundred eighty responses were received and analyzed. Analy- sis of variance (ANOVA) was the primary procedure used to identify and evaluate outsourcing behavior. Two sets of dependent variables were used in the re- search. The first set was used to determine anticipated outsourcing for the five logistical services. Five types of logistical services: transportation: warehousing: order entry and processing: inventory management: and freight audit and payment were analyzed. The second set. of dependent ‘variables was used to determine relative importance of factors influencing the outsourcing decision. The factors selected were: deregula- tion: type of service available: quality of service, data processing/communication services provided: vendor manage- ‘ment quality: and customer service or attitude of the vendor. The independent variables were: level of centraliza- tion; strategic orientation: level of formalization: size, industry, and an overall measure of logistics performance, the Common Attributes Index. The major findings are indicated below: 1. Transportation and warehousing and, to a somewhat lesser degree, freight audit/payment services are more apt to be outsourced than are order entry/processing and inventory management services. 2 . Outsourcing appears to be related more to managerial behavior than structure. Management style as well as strategic and 'tactical, decisions influence a firm's usage of outside logistical services. Usage of outside logistical services was found to be independent of structural characteristics such as centralization, size, and industry in many instances. 3 . External factors having the most influence on out- sourcing decisions are associated with quality. Firms look at more than cost when evaluating service offerings. They are concerned with the service options available, the quality of those services, and the quality of vendor management. Copyright by PATRICIA JOAN DAUGHERTY 1988 iv ACKNOWLEDGEMENTS I would like to thank Donald J. Bowersox, Chairman of 'the dissertation committee. Dr. Bowersox provided guidance throughout the doctoral program and especially during the writing of this dissertation. I have learned much while working with Dr. Bowersox. I truly appreciate his assistance and the opportunity to have worked with him. I would also like to thank dissertation committee members Drs. H. Bixby Cooper and Cornelia Droge for their iconsiderable assistance. Their insight and substantive suggestions are greatly valued. TABLE OF CONTENTS Page LIST OF TABIIES .0.000..00.00....OOOOOOOOOOOOOOOOOOOO... Viii LIST OF FIGURES 0..C...OOOOOOOOOCOOOOOOOOOOOOO00.0.0.0... Xi I. II. Imomfllon OOOOOOOOOOOOOOOOOOCOOOOO0.0...00.0.00... NEED FOR LOGISTICAL SUPPORT ...................... MAKE-OR-BUY DECISION ............................. FACTORS INFLUENCING MAKE-OR-BUY DECISIONS ..... OUTSOURCING LOGISTICAL SERVICES ................. DEFINITION OF OUTSOURCING .................... LOGISTICAL SERVICES .......................... PURPOSE AND SCOPE OF THE RESEARCH ............... SURVEY OF THE LITERAWRE OOOOOOOOOOOOOOOO0.00.0.0... SERVICE EVALUATION PROCESS ...................... DETERMINANTS OF SERVICE QUALITY .............. EVALUATION OF THE SERVICE PROCESS ............ LONG-TERM INTERACTIVE RELATIONSHIPS ............. DYADIC INTERACTIONS .......................... NETWORK/INTERACTION THEORY ................... POLITICAL ECONOMY APPROACH ................... CREDIBLE COMMITMENTS ......................... INTERNAL FACTORS AFFECTING OUTSOURCING .......... ORGANIZATION STRUCTURE ....................... STRATEGIC ORIENTATION ........................ FORMALIZATION ................................ SIZE ......................................... INDUSTRY TYPE ................................ PERFORMANCE INDEX ............................ SUMMARY ......................................... III. RESEARCH DESIGN OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO IV. RESEARCH DESIGN FRAMEWORK ....................... IDENTIFICATION OF VARIABLES .................. RESEARCH QUESTIONS .............................. SAMPLE SELECTION ................................ THE RESEARCH INSTRUMENT ......................... PROFILE OF RESPONDENTS .......................... DATA ANALYSIS ................................... SUMMARY ......................................... RESULTS O...OOOOOOOOOOOOOO00.00.00.000...00......0.. vi 1 1 2 7 16 16 19 21 24 25 26 28 29 30 31 33 36 38 38 42 45 46 48 49 50 51 51 51 59 66 67 67 71 74 75 OVERVIEW OF FINDINGS O O O O O O O O O O O O O O O O O O O O O O O O O O O O 7 5 ANALYS I s or VARIANCE O O O O O O O O O O O O O O O O O O O O O O O O O O O O 7 7 EVALUATION OF RESEARCH QUESTIONS ................ 83 SWY OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO 154 v . SW! “D CONchIONS O O O O O O O O O O O O O O O O O O O O O O O O O O O 156 RESHRCH SW! O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 156 LIHITATIONS O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 166 CONCWSIONS O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 167 USAGE mm O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 167 FIRM-SPECIFIC USAGE PATTERNS ................ 169 INFLUENCE OF EXTERNAL FACTORS ............... 171 “NAGERIAL IMPLICATIONS O O O O O O O O O O O O O O O O O O O O O O O O 172 TYPES OF SERVICES ........................... 172 QUALITY ORI ENTAT ION O O O O O O O O O O O O O O O O O O O O O O O O O 1 7 3 STRATEG I C ALLIANCES O O O O O O O O O O O O O O O O O O O O O O O O O 1 7 4 MENTIAL USERS O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 175 QUESTIONS FOR FUTURE RESEARCH .................. 177 .APPENDIX A QUESTIONNAIRE O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 179 APPENDIX B COMMON ATTRIBUTES INDEX COMPONENTS ............. 195 APPENDIX C LOGISTICS RESEARCH ADVISORY BOARD .............. 196 APPENDIX D STATISTICAL HYPOTHESES ......................... 197 APPENDIX E STATISTIQL ANALYSES O O O O O O O O O O O O O O O O O O O O O O O O O O O 2 09 APPENDIX F ”COVA RESULTS O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O 222 BIBLIWMPHY OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO 23o vii OGNGU©MNHONGU§UNHUNH LIST OF TABLES MAJOR REASONS FOR “BUYING-IN" SERVICES/GOODS AVERAGE NUMBER OF LOGISTICS RESPONSIBILITIES TRADITIONAL LOGISTICS FUNCTIONS INDEPENDENT VARIABLES ........................................ ANNUAL SALES FOR RESPONDENT FIRMS RESPONDENTS BY INDUSTRY GROUP ................................ DESCRIPTION OF THE SENIOR LOGISTICS EXECUTIVES ............... NUMBER OF YEARS LOGISTICS HAS BEEN FORMALLY ORGANIZED LOGISTICAL REORGANIZATIONS WITHIN LAST FIVE YEARS ANTICIPATED USAGE OF OUTSIDE LOGISTICAL SERVICES ............. INFLUENCE OF EXTERNAL FACTORS ON OUTSOURCING DECISIONS ANTICIPATED USE OF OUTSIDE LOGISTICAL SERVICES EXTERNAL FACTORS INFLUENCING OUTSOURCING ANOVA: ANOVA: ANTICIPATED USAGE OF OUTSIDE LOGISTICAL SERVICES FACTORS INFLUENCING OUTSOURCING ...................... T-TESTS: ANTICIPATED USAGE OF OUTSIDE LOGISTICAL SERVICES T-TESTS: FACTORS INFLUENCING OUTSOURCING TWO-WAY ANOVA PROCEDURES - CENTRALIZATION OOOOOOOOOOOOOOOOOOOO ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE UAREHOUSING SERVICES TWO-WAY ANOVA PROCEDURES - STRATEGIC ORIENTATION ............. ANOVA: ANTICIPATED USAGE OF OUTSIDE TRANSPORTATION SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES . ANOVA: ANTICIPATED USAGE OF OUTSIDE FREIGHT AUDIT SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES ANOVA: INFLUENCE OF EXECUTIVE LEVEL ON USAGE ................ T-TESTS: INFLUENCE OF EXECUTIVE LEVEL ON USAGE .............. TWO-WAY ANOVA PROCEDURES - EXECUTIVE LEVEL .................. ANOVA: ANTICIPATED USAGE OF INVENTORY MANAGEMENT SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES ANOVA: ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES ANOVA AND T-TEST: INFLUENCE OF FORMALIZATION ON USAGE ...... ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES ANCOVA ANALYSIS - SALES COVARIATE ........................... ANOVA: INFLUENCE OF COMMON ATTRIBUTE INDEX GROUP ON USAGE TWO-WAY ANOVA PROCEDURES - CAI GROUP ........................ TWO-WAY ANOVA PROCEDURES - CENTRALIZATION ANOVA: INFLUENCE OF DEREGULATION ........................... ANOVA: INFLUENCE OF MANAGEMENT QUALITY ..................... ANOVA: INFLUENCE OF CUSTOMER ATTITUDES ..................... ANOVA: INFLUENCE OF MANAGEMENT QUALITY ..................... ANOVA: INFLUENCE OF CUSTOMER ATTITUDES ..................... viii kkk§b§# a I I I a a “NHO‘OQNU‘U‘ o u n u viviuvu‘unuvuvuvUIUIc-S-a-b-a-£:&-¢'¢'$‘U’U’hauaua ##bkk#b#?b#&kbbk#b \OONO‘U‘OUNHVDQNO‘UOUNHO‘OQNO‘U‘ ANOVA: INFLUENCE OF CUSTOMER ATTITUDES ............ ANOVA: INFLUENCE OF STRATEGIC ORIENTATION ......... THO-HAY ANOVA PROCEDURES - CENTRALIZATION .......... ANOVA: INFLUENCE OF SERVICES AVAILABLE ............ ANOVA: INFLUENCE OF SERVICE QUALITY ............... ANOVA: INFLUENCE OF MANAGEMENT QUALITY ANOVA: INFLUENCE OF CUSTOMER ATTITUDES ............ ANOVA: INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS ANOVA: INFLUENCE OF CUSTOMER ATTITUDES ............ ANOVA: INFLUENCE OF DEREGULATION .................. ANOVA: INFLUENCE OF SERVICE QUALITY ................ ANOVA: INFLUENCE OF MANAGEMENT QUALITY ............ ANOVA: INFLUENCE OF DATA PROCESSING/COMMUNICATIONS ANOVA: INFLUENCE OF MANAGEMENT QUALITY ............ THREE-WAY ANOVA PROCEDURE T-TESTS: INFLUENCE OF EXTERNAL FACTORS ON OUTSOURCING TWO-HAY ANOVA PROCEDURES - FORMALIZATION ........... ANOVA: INFLUENCE OF MANAGEMENT QUALITY ............ ANOVA: INFLUENCE OF MANAGEMENT QUALITY ............ ANOVA: INFLUENCE OF SERVICE QUALITY ............... ANOVA: INFLUENCE OF MANAGEMENT QUALITY ............ ANOVA: INFLUENCE OF CUSTOMER ATTITUDES ............ ANCOVA ANALYSIS ANOVA: IMPORTANCE OF INDUSTRY GROUP ANOVA: IMPORTANCE OF COMMON ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE ANTICIPATED USAGE OF OUTSIDE INFLUENCE OF SERVICES AVAILABLE INFLUENCE OF SERVICE QUALITY INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS INFLUENCE OF MANAGEMENT QUALITY INFLUENCE OF DEREGULATION INFLUENCE OF SERVICE QUALITY INFLUENCE OF MANAGEMENT QUALITY INFLUENCE OF SERVICES AVAILABLE INFLUENCE OF SERVICES QUALITY INFLUENCE OF MANAGEMENT QUALITY INFLUENCE OF CUSTOMER ATTITUDES ATTRIBUTES INDEX GROUP FREIGHT AUDIT SERVICES FREIGHT AUDIT SERVICES ix TRANSPORTATION SERVICES WAREHOUSING SERVICES .. INVENTORY MANAGEMENT SERVICES TRANSPORTATION SERVICES ORDER ENTRY SERVICES .. INVENTORY MANAGEMENT SERVICES ORDER ENTRY SERVICES .. INVENTORY MANAGEMENT SERVICES ORDER ENTRY SERVICES .. UAREHOUSING SERVICES .. ORDER ENTRY SERVICES .. INVENTORY MANAGEMENT SERVICES UAREHOUSING SERVICES .. OOOOOOOOO 000000000 OOOOOOOOO INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS ................. 219 INFLUENCE OF MANAGEMENT QUALITY ............................. 219 INFLUENCE OF MANAGEMENT QUALITY ............................. 219 INFLUENCE OF MANAGEMENT QUALITY ............................. 220 INFLUENCE OF MANAGEMENT QUALITY ....... . ..................... 220 INFLUENCE OF MANAGEMENT QUALITY ...... . ...................... 220 INFLUENCE OF MANAGEMENT QUALITY ..... . .................. 221 ANCOVA: ANTICIPATED USAGE OF OUTSIDE TRANSPORTATION ........ 223 ANCOVA: ANTICIPATED USAGE OF OUTSIDE UAREHOUSING SERVICES . 223 ANCOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY/PROCESSING 223 ANCOVA: ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT 224 ANCOVA: ANTICIPATED USAGE OF OUTSIDE FREIGHT AUDIT SERVICES 224 ANCOVA: INFLUENCE OF DEREGULATION .......................... 224 ANCOVA: INFLUENCE OF SERVICES AVAILABLE .................... 225 ANCOVA: INFLUENCE OF SERVICE QUALITY ....................... 225 ANCOVA: INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS ........ 225 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY .................... 226 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY .................... 226 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY .................... 226 ANCOVA: INFLUENCE OF CUSTOMER ATTITUDES .................... 227 ANCOVA: INFLUENCE OF DEREGULATION .......................... 227 ANCOVA: INFLUENCE OF SERVICES AVAILABLE .................... 227 ANCOVA: INFLUENCE OF SERVICE QUALITY ....................... 228 ANCOVA: INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS ........ 228 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY .................... 228 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY .................... 229 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY .................... 229 ANCOVA: INFLUENCE OF CUSTOMER ATTITUDES .................... 229 1- 1- 2- LI ST OF FIGURES 1 BUYER - SELLER EXCHANGE TRANSACTIONS 2 AVERAGE NUMBER OF LOGISTICS RESPONSIBILITIES ................. 1 CONTINUUM OF PERCEIVED SERVICE QUALITY ....................... xi CHAPTER ONE - INTRODUCTION NEED FOR LOGISTICAL SUPPORT Organizations today confront the challenge of ef— ficiently managing the flow of goods from point-of-origin to point-of-consumption in an operating environment that in- creases in complexity daily. Product proliferation, mul- tiple location operations, expanded markets, and escalating customer service expectations compound the demands placed upon distribution systems. Logistical support is crucial to meeting the challenge of distributing products and services in a timely, cost-effective manner. The following definition of logistics provided by the Council of Logistics Management offers insight into the mag- nitude of the task. Logistics is the process of planning, imple- menting, and controlling the efficient, cost- effective flow and storage of raw materials, in-process inventory, finished goods, and re- lated information from point-of-origin to point-of-consumption for the purpose of con- forming to customer requirements. Implicit within this definition are logistics activi- ties including transportation, warehousing and storage, 2 facility location, forecasting and order management, inven- tory control, packaging, distribution communications, pur- chasing, and customer service. Each function or activity is vital to the overall quality of the distribution service package. No activity can be eliminated: however, functions can be shifted. To paraphrase McCarthy and Perreault (1987) , responsibility for performing the logistics functions can be shifted and shared in a variety of ways, but no function can be completely eliminated. The decision of whether to use intra-firm resources to perform logistics activities or to outsource the functions via purchase from external vendor, is the focal point of this research. MAKE-OR-BUY DECISION Sourcing encompasses all that is meant by procurement or purchasing. For example, the determination of what to buy, establishing product or service specifications, the identification of potential sources, monitoring supplier performance, and the negotiation of prices and terms are procurement functions. However, sourcing is considerably broader in definition than procurement. Sourcing involves setting matters of policy and broad strategy formulation that are used to guide procurement decisions (Corey, 1978). This research focuses on one principal aspect of sourcing -- the make—or-buy decision. In this research, the make-or-buy decision applies to the provision of logistical services. 3 An organization can produce needed logistical services internally or it can purchase them from external service providers. The feasibility of "making” the service inter- nally is commonly evaluated in terms of cost, convenience, internal capacity and capabilities, and control of qmality (Heinritz and Farrell, 1981). Evaluations in these areas are compared to services available externally. EValuation of externally available services or source selection is a key responsibility of purchasing staffs. Howard Lewis (1943) termed selecting the proper source as ”the most im- portant single factor in purchasing. " More contemporary writers such as Dobler gt a1, (1984): England and Leenders (1975); and Soukup (1987) share Lewis’ viewpoint. The decision need not be an absolute choice between the two extremes. Leenders and Nollett (1984) suggest that in many buying situations a series of intermediate options exist. They refer to these options as the make-or-buy "gray zone.” The gray zone provides a window for testing to see if a change in policy makes sense. Partial make or partial buy alternatives allow time to investigate potential bene- fits, yield greater flexibility, and reduce risk in terms of financial commitment or dependence upon external service providers. Kraljic (1983) concisely summarizes the situa- tion: ”What make-or-buy policies will give the best balance between cost and flexibility?” p.110. Each case must be examined on its merits regarding the make-or-buy decision and partial or intermediate steps (Corey, 1978: Dobler g; 31, 1984: Leenders g3; 11: 1980). Major factors considered in the make-or-buy decision in- clude: cost; qmality; delivery; supply assurance; control: fit with corporate objectives; strategy: social, political, and environmental concerns; secrecy; market conditions; and excess capacity (Leenders and Nollet, 1984). Leenders and Nollet acknowledge the influence of the internal corporate environment as well as external environments upon make-or- buy decisions. Caddick and Dale (1987) offer a somewhat different decision criteria list. Their criteria are product/service specific and do not explicitly consider management philosophy or external environmental elements. They emphasize the uniqueness of individual purchasing situations: As a general statement the purchasing deci- sion will involve securing goods/services with a view to optimal group welfare through each of the criteria such as: quality, price, lead time, lead time reliability, ser- vice, quality of relationships and inventory turnover/performance. There is no ranking which stands as sacrosanct. In certain pur- chasing cases some criteria may be more important than others, as are the conse- quences and risks. (p. 13) A make-or-buy decision should be based upon the antici- pated ”composite effect” of all factors cited above. The dynamic nature of the business environment further compli- cates an already complex decision. Dobler g; :1, (1984) caution against attempting to develop standardized judgment rules: 5 Beware of rigid formulas and rules of thumb that claim to produce easy make-or-buy deci- sions. The make-or-buy decision is influenced by a multitude of diverse factors that are in a constant state of change. Under such conditions, few easy decisions turn out well in both the short and the long run. Moreover, the relevant factors vary im- mensely from one firm to another. For these reasons, every company' should periodically evaluate the effectiveness of its past decisions to generate information helpful in guiding future courses of make-buy action. (p. 373) Many researchers believe the importance of make-or-buy decisions is too often discounted. Ford and Farmer’s 1986 project examined strategic implications of such decisions. They contend "that decisions as to which activities should be carried out within the company and which should be con- tracted out can be crucial to business effectiveness” (p. 54) . Their research indicates the strategic relevance of make-or-buy decisions is often over-looked. Frequently the decision is based upon subjective opinion rather than in- depth strategic analysis. They posit that the make-or-buy option is used to solve immediate problems rather than to take advantage of opportunities with potential for longer- term gain. Ford and Farmer surveyed members of the Institute of Purchasing and Supply. Respondents representing a cross- section of British industry were asked to indicate why they purchased goods and/or services externally. Table 1-1 sum- marizes the reasons cited. 6 Ford and Farmer conclude that external purchasing is often used as an emergency tactic with little or no concern for the real potential for efficiency and effectiveness im- provement. Current operational patterns among United States firms indicate longer term, cooperative relationships between buyers and sellers are becoming more common (Anderson and Calabro, 1987: Bowersox, 1988; Davisson, 1986; Gummeson, 1987: Taylor gt :1, 1987). Recognition of long- term mutual benefits resulting from cooperative alliances may be the most critical aspect of buy decisions. TABLE 1-1 MAJOR REASONS FOR ”BUYING-IN” SERVICES/GOODS Percentage of Respondents To improve efficiency 31 To improve quality 7 Pressure to reduce staff numbers 20 Company policy 7 To increase special expertise available 11 Price advantage 5 Contractors special skills/organization 28 Political pressure 3 Sharper focus of business activity 8 SOURCE: David Ford and David Farmer, Lgng_Bangg_£1anning, October 1986, p. 56. Figure 1-1 provides a representation of the range of buyer-seller relationships prevalent in today’s business en- vironment. Increased formalization and closer relationships between buyers and sellers are illustrated as purchasing ar- rangements move further to the right along the continuum. 7 Discrete transactions are positioned to the extreme left. An example of a discrete transaction would be a one-time purchase. Limited communication is involved. No attempt is made to expand the business transaction to incorporate an on-going relationship. Pure discrete transactions are rare. Dwyer, Schurr, and Oh (1987) note that often "relations creep in:" it becomes a relational exchange. Relational exchange involves repeated interaction and an on-going process. As noted previously, cooperative, longer-term relationships are increasing. Examples of such arrangements are strategic alliances, third party service providers, and contractual arrangements. Each of these will be discussed later in the chapter. FIGURE 1-1 Buyer-Seller Exchange Transactions 21:21:33.2: Eelafionsl Single Repeat Strategic Third Party Contractual Transaction Purchases Alliances Providers Agreement \ / Degree of Formalization/Commitment FACTORS INFLUENCING MAKE-OR-BUY DECISIONS This research focuses on the external purchase of logistics services by United States manufacturing firms. Factors influencing the initial make-or-buy decision for logistics services are examined. The factors include: 1) 8 the characteristics of services: 2) management philosophy: 3) organization structure: 4) environmental factors such as regulatory policy, information/communication technology and the availability of service providers, and 5) economic specialization. W Four characteristics of services are commonly cited to distinguish between purchasing of goods and services. The four characteristics are intangibility, inseparability of production and consumption, heterogeneity, and perishability (Knisely, 1979: Rathmell, 1966: Sasser, 1976; Zeithaml g1; a1, 1985). Intangibility is the one characteristic univer- sally cited as the fundamental difference between goods and services (Bateman, 1979: Berry, 1980: Lovelock, 1981: Shostack, 1977). Judd (1964) notes the imprecise nature of services. In trying to define what constitutes a service, he draws upon a remark made years before -- ”all that is neither solid nor liquid is a service.” More contemporary interpretations continue to rely on the ”if it's not a good, it's a service” approach, Kutscher' and. Mark, (1983) define ‘the service sector as follows. The broadest definition of the service sector encompasses all industries except those in the goodsproducing section -- agriculture, mining, construction, and, :manufacturing. Under this definition, services include transportation, communication, public utili- ties, wholesale and retail trade, finance, insurance, real estate, other personal and business services, and government. (p. 21) Rotler (1984) defines a service as "any activity or benefit that one party can offer to another that is essen- tially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical. product." Pride and. Ferrell (1985) also dis- tinguish between goods (or products) and services based upon tangibility. They note that a good is physical, concrete, something that can be touched while ”you cannot actually put your hands on a service” (p. 11). The nature of services makes the procurement process more nebulous and difficult in comparison to purchasing tangible products. Standard purchasing procedures including definition and specification of requirements, source evalua- tion and selection, bid solicitation and evaluation, price negotiation, and post-purchase control measures must be per- formed. When purchasing physical goods, the problem of defining or specifying requirements typically is handled in a straight-forward manner. Specifications can be stipulated in advance and actual goods can be evaluated against a standard. In contrast, service definition and measurement are more complex. DeRose (1987) expounds upon the complications often ac- companying service purchases. For services, the problem is more difficult. What exactly are we buying? We are buying time, physical presence, and the use of facilities, equipment, know-how, and experience. More to the point, we are buying 10 results. We are buying a completed task, a desired objective. (p. 49) The intangibility, the nonstandardization, and the perish- ability of services all complicate the procurement process. Procurement of services is distinctly different than pur- chasing products. Further consideration of service charac- teristics and their impact upon the evaluation processes is introduced in the following chapter. WW Outsourcing strategies became more dominant among United States firms during the 1980' s. More intense com- petition both domestically and internationally forces firms to modify business practices. Outsourcing provides a new option to gain competitive advantage. Motivation for out- sourcing logistical requirements include reduced capital in- vestment in equipment and/or facilities, access to new tech- nologies, reduced labor costs, greater financial flexibility, entry into new markets, increased flexibility of response to changing market needs, greater economies through consolidation, and freedom to concentrate management skills on core business requirements (Cavinato, 1988: Scribbins, 1988). A 1986 fin§13§§§_fl§gk special report chronicles the out- sourcing trend specifically as it relates to manufacturing and labels the phenomenon the ”hollow corporation." In industry after industry manufacturers are closing up shop or curtailing their 11 operations and becoming marketing organi- zations for other producers, mostly foreign. The result is the evolution of a new kind of company: manufacturers that do little or no manufacturing. They may perform a host of profitmaking functions -- from design to dis- tribution -- but lack their own production base. In contrast to traditional manu- facturers, they are hollow corporations. (p. 57) A prime objective of integrated logistics is to improve productivity by cutting costs and increasing effectiveness while maintaining existing customer service level. Out- sourcing to specialized service providers such as trans- portation or warehouse specialists, offers a viable method for achieving productivity and service improvements. To benefit from such specialization, it is often necessary to change the traditional way of doing business. Often the full. benefits of‘ outsourcing’ only' become available ‘when firms negotiate strategic alliances with service providers. Strategic alliances or partnerships are based on a win/win incentive structure (Bowersox, 1988). Historically the purchase process has been adversarial wherein each party to the negotiation seeks to maximize leverage. Partnerships seek to improve service and profitability for both organiza- tions involved in the negotiation. Taylor gt a1, (1987) describe partnerships: They are characterized by mutual trust, open communications, and top management commitment to success without diminishing the arms- length nature of the transaction. Both parties bring their own expectations and goals to the bargaining table and become partners in providing quality service to customers. Throughout the relationship they 12 share information on performance, operating procedures, and strategy, and continually monitor both positive and negative feedback to ensure partnership success. (p.94) Partnership—type buyer-seller interactions result typically in long-term relationships. The expectation of a long-term relationship is integral to successful partnerships. 9W Organizational factors affecting management’s willing- ness to outsource logistical services can be broadly clas- sified into two categories: 1) those reflecting the personal characteristics of the individual decision-maker: 2) and those representing the unique features of the organization. Organizational characteristics, including size of the organization and managerial authority structure, establish the overall environment within which all decisions are made. For example, personnel in decentralized structures are less likely (than personnel in centralized structures) to be con- strained by organizational procedures and policies. There- fore, they may be more willing to accept outside sources of information and more responsive to outside vendors who can assume the responsibility of providing logistics services (Granzin gt :1, 1986). Size is an important determinant or influencer of the organization environment. Anderson and Calabro (1987) sur- veyed Egttnng_figg companies and conclude, ”Overall, larger companies (greater than $1 billion in annual sales) are more 13 likely to form external alliances . .. . than smaller com- panies" (p. 67). The impact of organizational characteris- tics is examined in greater detail in the following research narrative. We Three factors external to the firm have dramatically influenced the expanded usage of external logistics service. They are: 1) regulatory policy: 2) information/com- munication technology: and 3) the availability of service providers. Bowersox (1986) describes general regulatory policy and how its interpretation by potential users of external logis- tics services worked to constrict growth of such services. Prior to 1980 a dominant regulatory philo- sophy in the United States was to limit for- hire transportation companies to participa- tion in a single mode of service. The pre- vailing philosophy "that each service firm has its niche" carried over to public ware- housing. While not directly regulated, warehouse 'managers were influenced by the fear ‘that aggressive involvement in inte- grated services such as for-hire transporta- tion could subject their total enterprise to Interstate Commerce Commission regulatory scrutiny. . . . Since 1980, transportation. has become in- creasingly less regulated. Contract and in- centive performance rates have become more commonplace. Perhaps one of the most subtle results of deregulation has been the reduc- tion. of adversary attitudes between third party service companies and their customers. Today’s environment is one dominated by collaboration. (p. 2) 14 Data. processing' and communication technological im- provements along with deregulation of communications have greatly influenced logistics operations. Basic technologi- cal improvements translate into increased performance and decreased costs for firms (Voorhees and Coppett, 1986). Available information systems permit comprehensive and timely control of logistics activities. When logistics ser- vices are purchased externally, the coordination of logistics activities and the availability of information be- come even more critical. Finally, there are more logistical services offered "for-hire" today. Deregulation and greater acceptance among potential users have resulted in a proliferation of logis- tics service providers (Wasserman, 1988). These firms offer a broader range of services with the flexibility to cus- tomize services to meet specific user needs. W The basic economic justification for any form of out sourcing is the economy of scale associated with specializa- tion. As Stigler's classic article (1951) elaborated, a firm will experience increasing returns relative to certain processes or functions while other functions are subject to diminishing returns. Logic dictates that firms should choose to specialize in performing functions associated with increasing returns. Functions with increasing costs should be evaluated regarding possible abandonment or restricted usage. In situations where logistical service vendors offer 15 attractive cost options, firms will consider a shift to out- sourcing. Specialized service providers may be positioned to offer lower costs, improve performance quality, and reduce risk (Bowersox, 1986). Contemporary marketers face a wide range of customer demands for specialized services. Meeting those demands can be both costly and time consuming (McKenna, 1985). It is difficult for a company to develop and maintain all compe- tencies independently. Strategic partnerships offer the potential to share the burden. Strategic alliances with external service providers can provide benefits beyond economy of scale. Risks can be shared and absorbed. Risk sharing is inherent to the partnership concept. Respon- sibilities for performing the task and assuming accompanying risks are shared by the external service provider. Benefits are shared, too. Risks may also be reduced by limiting the capital commitment required. For example, a private trans- portation fleet entails considerable investment. External purchase of transportation services mitigates or eliminates the investment. Lounsbury ( 1987) , summarizes the economic foundation for outsourcing: Regarding distribution partnerships, Dr. Kathryn R. Harrigan of Columbia University's Graduate School of Business, and a noted authority on manufacturing strategy, recently concluded, "It used to be considered safe, even necessary, for companies to own their own distribution outfits. But now it's obvious that a lot of so-called ’vertical in- tegration' entails a cost that companies can- not recover in the price of their products. 16 Getting rid of marginal operations that sop up executive time and money can allow the company to focus its energies and resources on those areas in which it has a distinct competitive advantage." To phrase it another way, a company whose primary business is providing distribution services can usually do it better and more cost effectively. (pp. 112-113) OUTSOURCING LOGISTICAL SERVICES The following sections discuss the scope and type of logistical services typically purchased externally. DEFINITION OF OUTSOURCING This research addresses the purchase of services from external service providers. The term outsourcing refers to such external purchase. Outsourcing of logistics services has become increasingly popular (Anderson, 1988: Cooke, 1988: Davisson, 1986: Heskett, 1973: Muller, 1988: Scribbins, 1988). Other terms commonly used to signify specific types of outsourcing arrangements are third-party provider, contract logistics and, as noted earlier, partnerships or alliances. A third party logistics service provider might offer all or a selec- tion of a range of services such as order entry and proces- sing, transportation, handling and storage, inventory management, or any specifically requested service. The trend has been toward expanded offerings that provide com- prehensive, integrated logistics support. The performance of multiple business activities often results in i7 ”responsibility of performing activities that have not traditionally been considered part of logistics" (Bowersox, p. 2, 1986). Muller (1988) concurs that third party providers will continue to broaden the scope of their offerings. What exactly is a third party? Many ship- pers still think of them as suppliers of a single, specific function: truck brokerage, for instance, or freight bill auditing and payment. Today, these services are merely the tip of the iceberg. In the coming years, third party logistics suppliers will offer, under a single contract, every imaginable type of transportation and distribution ser- vice. (p. 28) It should be noted that the use of the term third party in this context is significantly broader than the historical use of the term to describe the activities of transportation brokers. Contract logistics is the use of an outside vendor to perform all or a portion of a company's distribution function. Typical contract logistics offerings include transportation, warehousing, inventory control, communica- tion services, and customer service. Contract and third party logistics are more formalized than strategic logistical partnerships. Contract and third party logistics involve legally binding contracts. The buyer and seller negotiate a service contract specifying exact services to be provided, fee structure, performance measures, and penalty/default clauses (Anderson, 1988). 18 Strategic partnerships are cooperative arrangements, not contractual. Farmer (1978) describes the role of buyer- seller partnerships in manufacturing organizations: ". . . most manufacturing companies are ’partners' in a system which involves them with two markets rather than one. In the first of these they sell their products. The second is that from which they obtain the components or’ materials (or services) re- quired to manufacture these products. . . . most companies deal with numerous 'partners' either as customers or suppliers. These partners are independent entities over whom the company has no legal or managerial juris- diction. Thus they have to be persuaded, motivated, or otherwise encouraged to collaborate with the company concerned. Cus- tomers or suppliers, they all operate in mar- ket environments which encompass the same types of uncertainties . . ." (p. 7) The outsourcing referred to in this research differs from Heskett's (1973) "interorganizational solutions" to im- prove logistics productivity. Heskett advocated cooperative inter-organizational approaches in the form of joint ven- tures or third parties to provide the management needed when a product or service requires inputs from multiple partici- pating companies. Two or more existing business entities jointly create a new business to provide needed services. Heskett cites as examples shippers' cooperatives for the consolidation of merchandise purchased by several companies and the creation of a distribution center shared jointly by manufacturers and their chain-store customers. Outsourcing referred to in this research involves the purchase of ser- vices from vendors/suppliers external to the firm rather than "making" them internally. 19 LOGISTICAL SERVICES The scope of logistical functional responsibilities within United States firms has steadily increased in the past two decades. A. T. Kearney Management Consultants and W magazine conducted research in 1973, 1981, and 1985. Michigan State University researchers ex- panded on the earlier examination of logistical functional trends in the survey that generated the data base of this dissertation (Bowersox gt a1, 1987) . As illustrated in Figure 1-2, the average number of logistical responsibili- ties per firm has progressively increased from the base line of the initial 1973 survey. Data was collected on overall line and staff functional responsibility and line only responsibility. The average number of overall functions grew from 2.24 to 8.82 over the fourteen year period. The two most recent research endeavors also collected informa- tion on direct line responsibilities. Average line respon- sibilities per firm increased from 4.01 in 1985 to 6.57 in 1987 (see Table 1-2). Previous research has identified a group of basic or traditional logistical functions (A. T. Kearney, 1981 and 1985: Bowersox and Daugherty, 1987: Gustin 1984). Table 1-3 lists fifteen logistical functions commonly accepted as re- presenting the ideal span of control. This list is consis- tent with the Council of Logistics Management definition of logistics. 20 FIGURE 1-2 AVERAGE NUMBER OF LOGISTICS RESPONSIBILITIES 1973 - 1981 - 1985 - 1987 Number 10 - of 9- Responsibilities 8- 7.— 6- 5— 4r- 3)- 2 l 0 I I l I Average Number Logistics of Functions 1973 1981 1985 1987 (Year Data Collected) TABLE 1-2 AVERAGE NUMBER OF LOGISTICS RESPONSIBILITIES Year Oxerall .Line 1973 2.24 -- 1981 3.62 -- 1935 6.99 4.01 1937 8.82 6.57 As indicated above, actual logistical responsibilities within United States manufacturing firms have expanded during the past two decades. Confronted with additional re- sponsibilities and increasing demands, logistics management could be expected to be more involved presently and antici- pate greater involvement in the future in outsourcing. 21 TABLE 1-3 TRADITIONAL LOGISTICS FUNCTIONS Outbound Transportation Logistics Administration Intra-Company Transportation Finished Goods Field Warehousing Logistics Systems Planning Order Processing Customer Service Finished Goods Inventory Management Inbound Transportation Logistics Engineering Production Planning Sourcing/Purchasing Raw Materials/Work-In-Process Inventory Sales Forecasting International Logistics PURPOSE AND SCOPE OF THE RESEARCH This research examines the anticipated usage of external logistical services by United States manufacturing firms, factors influencing the outsourcing decision, and firm specific usage patterns. The outsourcing of five logistical services -- transportation, warehousing, order entry and processing, inventory' management, and freight audit and payment -- is investigated. Data collection was designed to determine the opinions of logistics executives concerning anticipated future usage of outside logistical service providers regarding each type of service. The factors influencing the outsourcing deci- sion (deregulation: types of services available: quality of service: data processing/communication services provided by vendors: vendor management quality: and customer service or 22 attitude of the vendor) were analyzed to assess their relative importance. A primary objective of the research was to identify the impact of specific decision criteria upon the ultimate pur- chase decision. This required identification of factors considered important when making the decision to outsource logistics services. The results were anticipated to have considerable value to service providers. If service providers are cognizant of buyer evaluation criteria, infor- mation can be utilized to tailor services to customer demands and to position or promote the service to best ad- vantage. Most importantly, services can be strategically positioned to provide the value added most desired by poten- tial buyers. Data analysis also centered on identifying potential procurement behavior among firms studied based upon logisti- cal attributes and behaviors. The specific variables were centralized versus decentralized organization structure, strategic orientation, degree of formalization, size, industry, and Common Attributes Index (CAI) classification. While all of the above variables are discussed in greater detail in Chapter Three, a brief discussion is ap- propriate concerning CAI. The CAI classification was developed to provide an index that identifies leading edge logistical practices. The CAI distinguished between ad- vanced or leading edge firms in terms of logistical per- formance and firms exhibiting average or below average 23 logistical performance. Examination of buying patterns and identification of firm specific characteristics associated with those buying patterns is an initial step toward under- standing how the purchase decisions are made. Specific re- search questions are presented in Chapter Three. A mail questionnaire was developed to collect data. A total of 380 responses were analyzed. Analysis of variance was the primary procedure used to identify and evaluate out- sourcing behavioral patterns. The research makes a contribution by comparing intra- firm characteristics and identifying profiles of external logistical service users. Previous research efforts identi- fied general trends toward outsourcing and cooperative alliances. Data analysis and interpretation of this re- search provides greater understanding of logistical out- sourcing behavior and user characteristics among a select group of United States manufacturers. CHAPTER TWO - SURVEY OF THE LITERATURE The following is a review of the relevant literature covering the areas of evaluating services, buyer-seller re- lationships, and internal factors which frequently influence outsourcing decisions. The discussion of the evaluation of services focuses on the primary differences between goods and services, on the determinants of service quality, and on how buyers assess service quality. Because of difficulties involved with insuring consis- tent service quality and delivery, buyers often enter into long-term interactive relationships. Cooperative behavior is common. Network/ interaction, the political economy ap- proach, and credible commitments provide theory based explanations for the formation of long-term buyer—seller re- lationships. Six internal factors or firm specific characteristics were selected for' examination as ‘to their influence on strategic business decisions. The six factors are: 1) organization structure: 2) strategic orientation: 3) extent of formalization: 4) size: 5) industry type: and 6) overall performance index. Previous research as cited below indi- cated the factors investigated may influence the behavior of decision makers within the organization. 24 25 SERVICE EVALUATION PROCESS Service quality has been defined as conformance to specifications (Crosby, 1979). This definition implies standardization and precise specification of requirements in advance. The very nature of services complicates exact specification of standards which could be used in the evaluation of service quality. Fundamental differences between services and goods have been identified as intangibility, inseparability of produc- tion and consumption, heterogeneity (non-standardization) , and perishability (Berry, 1980: Knisely, 1979: Rathmell, 1966: Zeithaml gt g1, 1985). Services are intangible: they are performances rather than physical objects. Services often are simultaneously produced and consumed. The quality of a service is not "engineered at the manufacturing plant, then delivered intact to the consumer. " Quality occurs during service delivery and, therefore, the service provider has less managerial control over quality for services than for manufactured goods. Services are heterogeneous -- ”their performance often varies from producer to producer, from customer to customer, and from day to day. " (Parasuraman gt 51, p.42, 1985) Because of these unique characteristics, it is more difficult to evaluate and assess the quality of services than to evaluate goods. As noted by Schonberger (1980) , "Measuring quality of intangibles purchases is the central 26 problem that makes purchasing intangibles a special chal- lenge” (p. 25). When no tangible evidence exists to evaluate quality, users or potential users must depend on other cues or surrogates for quality. Levitt (1983) noted intangible products or services "can seldom be tried out, inspected, or tested in advance. Prospective buyers are generally forced to depend on surrogates to assess what they're likely to get" (p.94). DETERMINANTS OF SERVICE QUALITY Service quality is a comparison between expectations and performance (Lewis and Booms, 1983): Service quality is a measure of how well the service level delivered matches customer ex- pectations. Delivering quality service means conforming to customer expectations on a con- sistent basis. (p. 99) Groonroos (1983) contends that consumers compare ex- pected service level with perceptions of the service re- ceived to evaluate quality. Smith and Houston (1982) be- lieve satisfaction with services is related to confirmation or disconfirmation of expectations. Their work is based upon the disconfirmation paradigm -- satisfaction is related to the magnitude and direction of the disconfirmation experienced in relation to the initial expectations. In the services literature, the concept of quality is generally conceptualized as involving perceived quality (Parasuraman gt 1)., 1985: Sasser gt 31, 1978). Service quality for consumers ”stems from a comparison of what they 27 feel service firms should offer (i.e., from their expecta- tions) with their perceptions of the performance of firms providing the services. Perceived service quality is there- fore viewed as the degree and direction of discrepancy be- tween consumers' perceptions and expectations" (Parasuraman gt g1, pp. 16-17, 1988). In order to explore quality evaluations in greater de- tail, it is necessary to determine exactly what expectations consumers form in advance of service purchase. Berry, Zeithaml, and Parasuraman have researched this area exten- sively. They used focus group interviews in 1985 to iden- tify determinants of quality. Their findings (detailed below) represent a comprehensive enumeration of consumer ex- pectations. 1. Reliability - the consistency of performance and dependability. 2. Responsiveness - the willingness readiness to pro- vide service in a timely manner. 3. Competence - possession of the required skills and knowledge. 4. Access - approachability and ease of contact. 5. Courtesy - politeness, respect, consideration, and friendliness of contact personnel. 6. Communication - keeping customers informed in language they can understand. 7. Credibility - trustworthiness, believability, honesty. 8. Security - the freedom from danger, risk, or doubt. 9. Understanding the customer - making the effort to understand the customer’s needs. 10. Tangibles - the physical evidence of the service such as physical facilities or appearance of per- sonnel. (pp. 45-46) 28 EVALUATION OF THE SERVICE PROCESS Shostack (1987) emphasizes that services are not things: they are processes. "The use of nouns obscures the fundamental nature of services, which are processes, not ob- jects” (p. 34). Service users' quality evaluations are based upon outcomes as well as processes. For example, the manner in which a service is performed is an integral part of the service. Behaviors such as willingness to help and trustworthiness are considered in overall service evalua- tion. Sasser gt_gl, (1978) define three dimensions of service performance: levels of material, facilities, and personnel. Their trichotomy recognizes that service involves outcomes. It also includes the manner (process) of delivery. Gronroos (1983) posits there are two types of service quality: technical quality and functional quality. Techni- cal quality involves what the customer actually receives. Functional quality involves the manner in which the service is delivered. The above noted research reinforces the importance of the quality of the service delivered (outcome) as well as the manner in which the service is delivered (process). The interaction between the service organization and the customer is critical to overall service evaluation. Quality assessments are not made solely on outcomes. Berry, Zeithaml, and Parasuraman's (1985) representation of the in- teraction is detailed in Figure 2-1. 29 FIGURE 2-1 CONTINUUM OF PERCEIVED SERVICE QUALITY Perceived Prepurchase x Process x Output 8 Expectations Quality Quality l”””;a Unacceptable Quality Expectations Not met Expectations Met >Satisfactory Quality ~\\\\~.‘j>ldeal Quality Expectations Exceeded Adapted from: Leonard L. Berry, Valarie A. Zeithaml, and A. Parasuraman, ”Quality Counts in Services, Too," finginggg_figtizgng, May- June, 1985, p. 47. Because of the imprecise nature of services and the difficulty in assuring consistent quality, service pur- chasers often form on-going relationships with service providers. The on-going relationships are formed in an ef- fort to better specify service requirements and desired quality levels. LONG-TERM INTERACTIVE RELATIONSHIPS Marketing emphasizes the process of buyer-seller inter— actions as a key feature of exchange. It is possible to 30 model buyer-seller interactions along two principal dimen- sions -- integrative and distributive (Angelmar and Stern, 1978: Clopton, 1984: Schurr and Ozanne, 1985). Integrative interactions are characterized by coopera- tive behavior. Buyers and sellers seek ways to achieve mutual objectives while bargaining (Pruitt, 1981). Die- tributive interactions evidence competitive behavior moti- vated by self-gain at the expense of the other party (Schurr and Ozanne, 1985: Walton and MCKersie, 1965). Firms demon- strating integrative behaviors are likely to achieve mutual goals. Thus integrative interactions can form a base for long—term relationship. Next, theories of services and industrial marketing stressing supplier-customer interactive relationships are examined in order to understand the growing trend toward long-term outsourcing arrangements. DYADIC INTERACTIONS Whereas traditional marketing theory (Arndt, 1979) often examines one unit (buyer or seller), a short-term per- spective, and a stimulus-response mechanism, the "dyadic paradigm" (Johnston and Bonoma, 1977) focuses on transac- tional relationships. Rather than concentrating on either the buyer or the seller alone, exchange relationships are emphasized. The relationships involve interdependencies, interactions, and reciprocities. Levitt (1983) likens the relational exchange to a marriage. 31 . . . the sale merely consummates the court- ship. Then the marriage begins. How good the marriage is depends on how well the rela- tionships is managed . . .' (p. 111) Arndt (1979) extends the dyadic approach by introducing the concept of market domestication. Market domestication encompasses "all exchanges between an organization and its environment (not only to relations between personnel in sales and in purchasing positions) . . . focuses on the long-term relationship in which each transaction is embedded (rather than on each individual transaction)” (p. 72). Domesticated markets remove or reduce the boundaries between a firm and its environment encouraging voluntary, long-term commitments. NETWORK/INTERACTION THEORY Gummesson (1987-a) defines a relatively new theory of industrial marketing, network/interaction theory, as ”all activities by the firm to build, maintain, and develop cus- tomer relations.” He cites the Scandinavian influence from the areas of services marketing and industrial marketing on the development of the network/interaction approach. Empha- sis is placed upon a long-term perspective: "it takes time for buyers and sellers to establish a smooth working relationship” (p. 12). MCKenna (1985) reiterates the need for building rela- tionships, stating that it is necessary to ”gain under- standing of the market structure, then develop strategic relationships with other key companies and people in the 32 markets. They must build relationships with suppliers and distributors, investors and customers. Changes in the mar- ket can alter prices and technologies, but close relation- ships can last a lifetime, if not longer“ (p. 68). According to Ford gt 31, ( 1986) , "A company can be viewed as a node in an ever-widening pattern of inter- actions, in some of which it is a direct participant, some of which affect it indirectly and some of which occur in- dependently of it. The web of interactions is so complex and multifarious as to deny full description or analysis" (p. 1). The web of interaction is arguably even more important for services than for physical products. Customer participation during the planning and produc- tion process creates the potential for a "shared experience (that will) cement long lasting relationships” (Gummesson, p. 14, 1987-a). The buyer's contribution or input increases the likelihood that service quality will be commensurate with previously determined expectations. Gummesson (1987-b) coined the term ”relational quality“ to underscore the fact that relations or interactions are part of customer per- ceived quality. This is consistent with services marketing studies which indicate users evaluate the functional quality of service -- i.e., how a service is delivered, as well as the technical quality of the service (Gronroos, 1983: Gummesson, 1987-a). 33 POLITICAL ECONOMY APPROACH The political economy approach draws from organiza- tional theory, political science, and sociology. Social exchange, behavioral theory of the firm, and transaction cost economics constructs provide conceptual bases (Arndt, 1981, 1983). ”The political economy framework illuminates interplay between the internal and external sociopolitical and economic forces of marketing channels” (Dwyer and Welsh, p. 397, 1985). Emphasis is placed upon authority and con- trol patterns, conflict and conflict management procedures, and external and internal determinants of institutional change. Political economy views organizations as assuming responsibility for rationing and directing scarce resources. Central to this tenet are basic decisions as to how to structure inter-organizational exchanges. Polity or the power of individual organizations is a primary determinant of the structuring of the relationships. Pfeffer and Salancik (1978) assert that organizations seek to form ad- vantageous external alliances with other organizations in the lateral environment and attempt to structure or administer vertical relations with suppliers or customers in order to have direct contacts with the most powerful parts of the regulatory environment. Political economy offers in- sight as to how and why relationships are formed. Strategic planning for the firm incorporates management of such interorganizational relationships (Frazier, 1983: 34 Porter, 1980: Stern and El-Ansary, 1982). Marketing is viewed as exchange behavior with the organization being a coalition of internal and external interest groups having common as well as conflicting goals. Acceptable "exchange ratios" must be arrived at to facilitate acquisition of critical resources. Transaction costs analysis offers a method of evaluating relative advantages of the different internal and external organization forms for handling trans- actions. Transaction costs are ”the costs of running the economic system.” Williamson (1985) frames the concept as follows. Transaction cost economics poses the problem of economic organization as a problem of con- tracting. A particular task is to be ac- complished. It can be organized in any of several alternative ways. Transaction costs are economized by assigning transactions (which differ in their at- tributes) to governance structures (the adap- tive capacities and associated costs of which differ) in a discriminating way. (pp. 18, 20) Interorganizational relationships can be at least par- tially explained by the following three aspects -- 1) the extent of dependence: 2) interorganizational structuring forms: and 3) control mechanisms. Arndt (1983) describes the dependence relations: The power of the focal social unit (organization) vis-a-vis a part of the exter- nal polity is inversely related to its depen- dence on that part for a given scarce re- source. Hence, if there is only one supplier of a given critically needed specialized machine used in the production process, and 35 there are no easy substitutes or alterna- tives, the distribution of power is heavily in favor of that supplier because of his/ her monopoly position. While the distribution of power determines the potential influence of the external polity, the actual influence de- pends on the extent to which the power is used. (p. 49) Structuring of interorganizational relations can assume a variety of forms ranging from totally separate, competi- tive market relations to 'vertically integrated systems. "Quasi-integrated" or intermediate interorganizational forms have become more popular in the last few decades (Stern and El-Ansary, 1982). One example of an intermediate form would be the establishment and maintenance of routine, on-going transactions with suppliers, i.e., long-term strategic al- liances. The political economy framework has relevance for explaining the formation and operation of strategic al- liances by employing the concepts of goals of the parties involved, power bases, conflict management, and resource al- location rules. Political economy offers capabilities be- yond traditional industrial buying process models empha- sizing shorter-term situation or event oriented approaches (Johnston, 1981) by taking a longer-term, relational per- spective. Control mechanisms are "external means of influence for affecting internal decisions and actions" (Arndt, p. 49, 1983). Social norms or pressure campaigns are illustrative of potential control mechanisms (Mintzberg, 1979) . Control 36 mechanisms have the potential for influencing the struc- turing of interorganizational relations. Particularly im- portant is the influence of key stakeholder groups, such as stockholders or owners. CREDIBLE COMMITMENTS Williamson (1984) distinguishes between credible com- mitments and credible threats (or market dominance) as follows. Credible commitments and credible threats share the following common attribute: both appear mainly in conjunction with irrever- sible, specialized investments. But whereas credible commitments are undertaken in sup- port of alliances and to promote exchange, credible threats appear in the context of conflict and rivalry. The former involve re- ciprocal acts designed to safeguard a relationship, while the latter are unilateral efforts to pre-empt an advantage. Efforts to support exchange generally operate in the service of efficiency: preemptive invest- ments, by contrast, are commonly antisocial. Both are plainly important to politics and economics, but the study of credible commit- ments is arguably the more fundamental of the two. (pp. 33-34) These strategies directly impact relations between buyers and sellers and can be applied to the purchase of either goods or services. The followed example is cited in the services area. Marcus (1987) applies the concepts to motor carrier transportation services. Deregulation (of trucking or other industries) is likely to be followed by market dominance strategies. Over time, they will evolve into credible commitments. He attributes this occurrence to the likelihood that ”shippers and carriers have a mutual 37 interest in sustaining a long-term relationship based on the efficiency advantages that arise from the co-specialization of assets" (p. 4). Organization theory provides insight into the evolution of credible commitments. The concept of power is fundamen- tal to explaining market transactions (Crozier, 1964: Thompson, 1967) . Firms operate in uncertain environments with individual firms leveraging their power bases to manage uncertainty and gain competitive advantage where possible. Porter (1980) relates this directLy to buyer-seller inter- actions in the purchasing process. ”Increase bargaining power in purchasing by keeping the number of sources suffi- cient to ensure competition, but small enough to be an important buyer to each source" (p. 106). Economists offer an alternative perspective, implicit contracts (Klein gt al, 1978: Marcus, 1987). Implicit con- tracts are unwritten contracts to an exchange enforced not by formal/legal authority and power, but by the "market for reputations." Ouchi (1980) defines this as a "governance arrangement" based upon shared values and trust as well as power. The concept of contract governance through credible commitments has its origins in Williamson's classic work on transaction costs economics. In time, market dominance will be replaced by informal contracting of credible commitments yielding efficiency gains for both parties. Unilateral ex- change is supplanted by bilateral exchange. Contemporary 38 strategic partnerships are illustrative of credible commit- ments. Partnerships which are characterized by implicit contracts not legal documents are formed for mutual gain. The above discussion centered on buyer-seller interac- tions and theories explaining why long-term relationships are formed. Next, discussion is focused upon factors inter- nal to the firm affecting the decision to outsource (whether the outsourcing involves a one-time purchase or an on-going exchange). INTERNAL FACTORS AFFECTING OUTSOURCING Firm specific organizational characteristics directly influence strategic decisions, including make-or-buy (outsourcing) decisions. The following firm specific characteristics have been identified and selected for closer examination -- 1) organization structure: 2) strategic orientation: 3) formalization: 4) size: 5) industry type: and 6) overall performance index. ORGANIZATION STRUCTURE Organizational structure is widely believed to affect behavior of organization members as well as the performance of the organization (Dalton gt g1, 1980: Hall 1977). Com- monly cited dimensions of organization structure include: 1) specialization: 2) standardization: 3) centralization: and 4) configuration (Pugh gt g1, 1968). The dimension of 39 centralization was selected for closer examination and direct applicability to the research. Centralization refers to the locus of decision making authority and control within an organization (Carter and Cullen, 1984: Van de Ven, 1976: Walker and Ruekert, 1987). Highly centralized organizations concentrate decision making authority with one or a very few top managers. This con- trasts with decentralized organizations where middle and lower level managers have more autonomy and participate in decision making. Centralization can result in better coordination and control of activities which can lead to more effective organization performance (Ruekert gt g1, 1985). Fredrickson ( 1986) proposed the following explanations for the linkage between. centralized organization structures and improved organization performance. As the level of centralization increases, so does the probability that -- 1) the strategic decision process will be initiated only by the dominant few, and that it will be the result of proactive, opportunity-seeking behavior: 2) the decision process will be oriented toward achieving ”positive“ goals (i.e. intended future domains) that will persist in spite of significant changes in means: 3) strategic action will be the result of intendedly rational, "strategic choice,” and that moves will be major departures from the existing strategy: and 4) top management's cognitive limitations will be the primary constraint on the comprehensiveness of the strategic process. The integration of decisions will be relatively high. (p. 284) 4O Fredickson acknowledged that while a “high level of cen- tralization is the most obvious way to coordinate organiza- tion decision making, . . . it places significant cognitive demands on those managers who retain authority” (p. 292) . Mintzberg (1979) suggested that an individual may not have either the ”cognitive capacity or information" necessary to understand all decisions facing a complex organization. The high level of complexity which often accompanies centralized structures makes it difficult to coordinate and control decision activities (Lawrence and Lorsch, 1967). Two different perspectives, the system-structural per- spective and the transaction-cost perspective, have been used to gain understanding into the relationship between structure and performance. The system-structural perspective is founded in Weber's notion of bureaucracy which "suggests that the structure of an organization determines the performance of the system" (Ruekert gt g1, p. 15, 1985). Centralization, formalization, and specialization or differentiation explain how the system functions. In particular, centralization is held to lead to greater effectiveness within the system be- cause of the ability of the decision maker to plan, coordi- nate, and control activities. The transaction-cost perspec- tive posits that decisions should be made based upon the relative efficiency of internal versus external efficiencies (Williamson, 1975). While having value for guiding decision making, the transaction-cost perspective is somewhat limited. 41 Performance outcomes are evaluated on the basis of effi- ciency. Incorporating other measures such as effectiveness or adaptiveness to specific situations would be desirable. A structure-contingency approach combines traditional organizational theory and transaction-cost approaches. This approach holds that the structure of an organization is de- pendent upon its context (Bobbitt and Ford, 1980: Ruekert gt g1, 1985). Performance is dependent upon the nature of the task, the way in which the task is organized, and the nature of its environment. Context includes such things as size, technology, and environment. A review of the structure-con- tingency l iterature revealed confl icting opinions . Researchers such as Ford and Slocum (1977) have demonstrated support while others question the structure-context theories (Mohr, 1971). Bobbitt and Ford (1980) note: The relationship between context and struc- ture is not necessarily direct and logical. Contextual factors provide one source of in- formation. to decision ‘makers, who process that information according to their cognitive and motivational orientations and, given existing constraints, design structures con- sistent with these orientations. It is pos- sible, therefore, that the relationship be- tween structure and context may not be con- sistent because decision makers vary. (p. 19) Structure and centralization provide insight into organizational operations and decision-making although that insight is somewhat limited. Therefore, other organiza- tional characteristics such as strategy were also selected 42 for examination. Structure and strategy are inter-related with strategy playing a significant role in determining organizational structure. Structure. involves lines of authority/decision making and the flow of information along those lines of authority (Hall and Salas, 1980). Structure and the centralization or decentralization of authority de- termines who is involved in strategic planning and to what degree. STRATEGIC ORIENTATION Strategy is the determination of the basic long-term goals and objectives of an enterprise and adoption of courses of action and the allocation of resources necessary for carrying out those goals. Strategy refers to a set of guidelines that determine decisions made in the future. Thus, strategy involves a stream of decisions over a period of time (Mintzberg, 1978). Recognizing that organization effectiveness is dependent upon adaptation of organizational characteristics to the en- vironment, management theory has conceptualized the relation- ship between the organization and the external environment (Porter, 1980: Zeithaml and Zeithaml, 1984). Organizations need not passively react to the external environment: they can implement strategies designed to modify or manage environmental conditions. Three strategic models, 1) resource dependence: 2) business pol icy/strategic management: and 3) environmental management, were selected for closer examination as to the 43 role they play in an organization's strategic choices re- garding the outsourcing of services. The resource dependence model argues that organizations have varying degrees of dependence upon external entities (Pfeffer and Salancik, 1978: Zeithaml and Zeithaml, 1984). Ulrich and Barney (1984) contend that organizations alter their structures and behaviors to acquire and maintain needed resources . They attempt to decrease their own dependence upon others or increase other’s dependence upon them. Such a strategy would be evidenced in an organization not having needed resources internally and, therefore, purchasing the services externally. The firm is likely to attempt to form a mutually beneficial coalition. An attempt would be made to control the behavior of the external service provider and to obtain the essential service. ”For example, a firm can mini- mize its uncertainty in supply relationships by engaging in coalition activities such as forming links with influential individuals in supplier firms, becoming partners with such firms in joint ventures, or acquiring key supplier firms" (Ulrich and Barney, p. 472, 1984). Business policy or strategic management advocates a proactive, opportunistic management approach to the organization-environment relationships. Instead of reacting to events, managers "are the creators of change and uncer- tainty to which competitors must respond" (Miles and Snow, p. 29, 1978). Porter (1979) is a leading proponent of strategically managing environmental forces, including the 44 threat of new competitor's entry into the market and the bargaining power of buyers and suppliers. Galbraith (1977) proposed a concept termed "environmental management" which integrates the above per- spectives . Environmental management strategies are grouped into three categories: 1) independent strategies: 2) cooperative strategies: and 3) strategic maneuvering. Independent strategies are means by which the organization can reduce environmental uncer- tainty and dependence by drawing on its own resources and ingenuity. Cooperative strategies involve implicit or explicit cooperation with other elements in the environment. Strategic maneuvering includes strategies de- signed to change or alter the task environ- ment of the organization. (Zeithaml and Zeithaml, p. 49, 1984) The second type of environmental management strategy, cooperative strategies, has direct relevance to this re- search. Cooperative strategies, also referred to as boundary spanning strategies (Bowersox gt g1, 1988) , are representative of innovative management practices. Boundary spanning acknowledges that channel members must assign role responsibility and develop strategies to effectively inter- face with channel constituencies and the external environ- ment (Leifer' and. Delbecq, 1978: Spekman 1979: Thompson, 1967). Zeithaml (and. Zeithaml (1984) note, ”cooperative strategies are selected by many firms on the assumption that combined action reduces risks and costs to individual organizations while increasing their power" (p. 49). 45 FORMALIZATION Formalization is the degree to which decisions and working relationships are governed by formal rules and stan- dard policies and procedures (Pugh gt 31, 1968: Walker and Ruekert, 1987). In terms of strategic control, formalization includes "the existence of rules or procedures, whether or not they are codified, and the degree of variation allowed therein" (Ford and Slocum, p. 562, 1977). Empirical investigations (Dalton gt 91, 1980: Pugh gt g1, 1968) into the relationship between organizational for- malization and performance support the contention that formalized organizations tend to be more efficient, but less innovative and adaptive than organizations less formally organized. Formalization increases the likelihood that the "strategic process will . . . reactive (e.g., solving problems or crises), as opposed to proactive (e.g., searching for opportunities)” (Fredickson, p. 287, 1986). Other researchers (Steinbruner, 1974: White (gt .g1, 1980) also argue 'that. organizations. and. their’ strategic planning systems can become so formalized that they obstruct creative, proactive behavior and the evaluation of alterna- tive problem solutions or strategies. The underlying premise is that formalized structures have the inherent ability to discourage the pursuit of opportunities. Decisions and search procedures may be restricted to examination of previously utilized solutions. 46 Fredickson (1986) offered the following propositions summarizing the impact of formalization within an organiza- tion. As the level of formalization increases, so does the probability that -- 1) the strategic decision process will be initiated only in response to problems or crises that appear in variables that are monitored by the formal system: 2) decisions will be made to achieve precise, yet re- medial goals, and that means will displace ends (goals): 3) strategic action will be the result of standardized.lorganizational processes: and that moves will be incremental: and 4) the level of detail that is achieved in the standardized organizational process will be the primary constraint on the comprehensiveness of the strategic decision process. The integration of decisions will be intermediate. (p. 284) SIZE Extensive research has been conducted on the influence of size of an organization on its structure and performance. However, a great deal of controversy surrounds much of the research results (Goldman, 1973: Kimberly, 1976). According to Blau and Schoenherr (1976), size increases lead to struc- tural differentiation. Larger size necessitates the existence of a more complex structure (Meyer, 1972). Other researchers have found no significant relationship between size and structure (Ford and Slocum, 1977: Hall gt Q1, 1967: Rushing, 1967). 47 The controversial nature of the structural influence of contingency variables (specifically size, technology, and environment) was summarized by Ford and Slocum 1977. They noted: With size, technology and environment all re- lated to various aspects of structure, which is the more dominant variable affecting structure? . . . although there are some areas of com- monal ity or convergence, there is also con- siderable room for improvement. Additional research might be directed toward better un- derstanding the relationship between con- tingency variables and structure, and toward understanding the interrelationships among the contingency variables themselves. (p. 572) Dalton gt g1, (1980) published a review article on the relationship between organizational structure and perfor- mance. Although noting divergent results, they concluded: In summary, at the subunit level of analysis, there is evidence of an inverse association between size and performance. At the organi- zation level, all available evidence suggests there is no clear, systematic relationship between organization size and performance. (P- 53) Additionally, no consensus exists as to how size should be measured. Utilization of different measures of size may, at least in part, explain the disparate findings regarding the influence of an organization's size. Size has been defined in terms of the number of members (employees) in an organization. Others have used output factors such as total assets or sales as measures of size. One typology (Schmidt and Cummings, 1976) distinguishes between two types 48 of size: 1) size of the organization and 2) size of the domain or task environment. Kimberly (1976) suggested four "substantively important aspects of organizational size.“ They are: 1) the physical capacity of an organization: 2) the personnel available to an organization: 3) organizational inputs and outputs: and 4) discretionary resources available to an organization. Conflicting opinions exist regarding the influence of a firm's size on its operations. Because of this, size was chosen for inclusion in this research in an effort to better understand how it affects firms' outsourcing behavior if at all. INDUSTRY TYPE Characteristics of industry environments or competitive settings dictate appropriate strategies and impact perfor- mance (Montanari, 1978) . Organizations operating within specific industries are influenced by the level of competi- tion, structure of the industry, technologies in existence or planned, barriers to entry and exit, and the dynamic or stable nature of the industry. These contextual factors along with size, previously discussed, influence general patterns of business organization and operations. Lenz and Engledow (1986) , in discussing the industry structure model, provided support for the necessity of examining individual industries or industry groupings to de- termine variations in strategic orientations. 49 The dominant aspects of an organization's en- vironment are assumed to exist in and around the industry, or industries, in which a firm competes. Thus, for strategic decision- making there is no such thing as "the" environment -- if the work “environment” is taken to mean a single, holistic entity. . . An industry environment consists of a particular' set. of competitive ‘tgrgggk that establish both opportunities and threats. (p. 330) Porter (1980), too, advocated assessing the impact of industry conditions and relative strategic positions and capabilities of competing organizations. Underlying struc- tural features of an industry have strategic implications. PERFORMANCE INDEX According to Blalock (1979), the term index usually im- plies that the procedure used gives only an imperfect indicator of some underlying variable which is not directly measurable. For example, a concept as complex as perfor- mance cannot be adequately measured utilizing only one vari- able. Therefore, indices are often developed which incor- porate a number of different variables or factors. Index construction involves identification of the relevant vari- ables and assignment of relative weights to the individual variables. Babbie (1986) also advocates the use of composite measures. Composite measures are frequently used . . (because) despite the care taken in designing studies so as to provide valid and reliable measurements of variables, the researcher seldom is able to develop in advance single indicators of complex concepts. (p. 361) 50 Key steps in index construction include item selection, index scoring or assignment of values to the items, and validation of the index. Items for inclusion in an index are typically chosen based upon face validity or logical validity. Each item should appear to indicate the construct under evaluation. After selection of individual items, the bivariate relation- ships among the items selected should be examined. If the individual items have face validity (and are considered to indicate a common construct), then they should be related to one another empirically. Index scoring involves the deter- mination of the range of index scores and actual assignment of scores. Index validation attempts to determine if the index actually measures the construct. Several options are available to validate composite indices. They include internal validation such as item analysis (the relationship between individual items included) and external validation (consideration of the relationships between the composite measure and other indicators of the variable not included in the measure) . SUMMARY This chapter introduced relevant sources in the areas of service evaluation, buyer-seller relationships, and factors internal to the firm which influence outsourcing decisions. The review of pertinent literature provided a 51 framework from which research questions and hypotheses could be developed. CHAPTER THREE - RESEARCH DESIGN Chapter Three presents the research design. In the first portion of the chapter, the independent and dependent variables are explained, the research questions are intro- duced, and the research hypotheses are listed. A discus- sion follows covering the sample design and procedures used to collect and analyze data. A complete copy of the ques- tionnaire used in the research is presented as Appendix A. RESEARCH DESIGN FRAMEWORK IDENTIFICATION OF VARIABLES The methodology was designed to achieve the research objective of examining firm-specific usage patterns for ex- ternal logistical services and isolating the factors influ- encing decisions to outsource logistical services. The re- search was limited to United States manufacturing firms. Firm-specific characteristics were identified as independent variables. Anticipated usage of outside logistical services and factors influencing the purchase decision were treated as dependent variables. The independent and dependent variables are discussed below. A summary of the independent variables is included in Table 3-1. 51a 52 TABLE 3-1 INDEPENDENT VARIABLES Yariahla Miran Level of Centralization Question #14 Strategic Orientation Question #15 Formalization: Level of Senior Logistics Executive Question #S-A Logistics Mission Statement Question #7-A Logistics Strategic Plan Question #8-A Frequency of Strategic Plan Update Question #8-C Logistics Executive Participates in Overall Strategic Planning Question 4 9 Logistical Re-Organizations Question #10-A Years Formally Organized Question #11 Number of Logistical Functions Question #13 Size (Annual Sales) Question 4 1 Industry Group Question # 2 Common Attributes Index Group Composite Score WM Five. categories of firm-specific characteristics and Common Attributes Index (CAI) groupings were the independent variables investigated. The firm-specific characteristics are detailed below. Lgyg1_gt_ggnttg11zgt1gn. In Question 14, Types A and C are centralized firms, while Types B and D are decentralized firms . Respondents were asked to indicate the degree of centralization within their firms by choosing from a series of graphic organizational representations. Centralized organizations, Type B and D, reflect the consolidation of 53 logistical responsibility. In decentralized firm struc- tures, Type A and C, each business unit retains respon- sibility for logistics functions. Organization structure is believed to directly affect the behavior of organization members (Dalton gt g1, 1980: Hall, 1970). Structure as operationalized by centralization in this research influences how decisions are made, by whom, and where (for example, at the organization or subunit level). The previous research reporting the relationships between structure and both organization performance and be- haviors provided empirical support for selection of cen- tralization as one of the independent variables examined in this research. W. Logistics strategies were cate- gorized as process, market, or channel. Question 15 pro- vided a definition of each strategy. Respondents were asked to select the strategic option which most accurately de- scribed their firms’ primary orientation. Mall and Saias (1980) define strategy as ”a statement of the vital missions of an organization, the goals which must be attained, and the principal ways in which the re- sources available are to be used” (p. 151). The firm's overall goals and the strategies directed towards those goals impact day-to-day operating decisions. Outsourcing decisions fall within the realm of strategic decisions. Therefore, a relationship was hypothesized between strategic 54 orientation and anticipated outsourcing usage and decision criteria. WW- Fomlization was operationalized by utilizing Questions 5-A, 7-A, 8-A, 8-C, 9, 10-A, 11, and 13. Question 5-A collected data describing the structural level of the firms' senior logistics execu- tives. The following levels were identified: 1. President 2. Executive Vice President 3. Vice President 4. Director 5. Manager 6. Supervisor Higher levels of executive reportability‘ generally' mean higher visibility of the logistics organization within the organization. High levels of reportability are generally indicative of more formalized logistics structures. More formalized logistical organization are expected to have formal rules, procedures, and planning guidelines. Questions 7-A and 8-A determined whether the respondents have formal logistics mission statements and formal logis- tics strategic plans. Question 8-C was concerned with fre- quency of strategic plan update interval. Responses were categorized as follows: 1) reviewed more often than annually (for example, quarterly or semi-annually) 2) annually 3) more than one year between reviews Question 9 asked if logistics executives formally par- ticipate in overall strategic planning for their business. 55 This is a significant aspect of formalization because it re- flects the degree to which logistics is represented in the overall culture of the enterprise. Question 10-A. was concerned with the frequency of logistical reorganization during the previous five year period. This frequency indicates the dynamic adaption of logistics structure to ‘mission. The frequency of re- organization is a reflection of formalization dynamics. Responses were grouped as follows: 1) no reorganization 2) 1 or 2 reorganizations 3) 3 or 4 reorganizations 4) 5 or more reorganizations Question 11 measured the years logistics has been a formal organization. This longevity is a direct reflection of formalization. Responses were grouped as follows: 1) 3 years or less 2) over 3 years to 6 years 3) over 6 years to 10 years 4) over 10 years Functional responsibility’ was the final measure of formalization. Responsibility for a larger number of functions was selected as a measure of greater formaliza- tion. Question 13 listed the fifteen logistics functions discussed in Chapter One. Respondents were asked how many of the functions were a part of formal responsibility of logistics on either a line or staff basis. Responses were 56 categorized as follows: 1) 5 or less 2) 6-9 3) 10-13 4) 14 or more Formalization provides an indication of the extent to which rules, policies, or procedures specify behavior patterns for handling organization activities. Highly formalized organi- zations establish guidelines in advance, leaving little to the discretion of individual decision makers (Van De Ven, 1976). Organization performance has been related to formalization (Dalton gt Q1, 1980). Previous work provided a rationale for proposing the level of formalization within an organization would influence operating patterns. Formalization provides an indication of the degree of lati- tude allocated to individuals within the organization. Sizg. Question I requested the business unit and total enterprise annual dollar sales. For purposes of analysis, business unit sales were used. Enterprise annual dollar sales represent total dollar sales for very large, diversi- fied businesses. Aggregating the sales volumes of a number of widely divergent businesses into a total for the parent or holding company makes comparisons difficult if not impos- sible. Therefore, business unit sales were used. Responses were classified into six groups: 57 Annual Sales 1. Less than $50 million 2. Over $50 million to $200 million 3. Over $200 million to $500 million 4. Over $500 million to $1 billion 5. Over $1 billion to $2 billion 6. Over $2 billion Blau's theory (1970) states that increasing size generates structural differentiation in organizations along various dimensions at decelerating rates. He identified a number of dimensions which would be influenced including su- pervisory span of control and the ratio of administrative personnel. Blau's work as well as Goldman’s (1973) and Kimberly's (1976) review article provide a basis for pro- posing firms will exhibit different patterns concerning anticipated outsourcing according to their organization size. Industry. Question 2 identified the primary products manufactured by individual firms. Standard Industrial Clas- sification (SIC) categories were established based on this response. In total, respondent firms represent twenty dif- ferent SIC groups. To facilitate analysis, the twenty respondent categories were consolidated into the following seven groupings: 1. Mining 2. Food 3. Textiles 4. Forest Related 5. Electronics/Computers 6. Motor/Transportation Equipment 7. Pharmaceuticals 58 Contextual factors and a f irm' s environment influence decision makers within the firm. Direct competition or in- dustry grouping is one of the most important environmental factors impacting the firms' operations. The firms' environments affect the strategy mix (Montanari, 1978) . Therefore, industry type was chosen as one of the indepen- dent variables for analysis. A 211211 it was hypothesized that different anticipated outsourcing patterns would emerge based upon industry affiliation. W. The final independent vari- able was the Common Attributes Index (CAI) grouping. The CAI is comprised of 15 behavioral attributes measured by specific management practices. Appendix B lists the individual components. Index score was used to assign respondents to one of three groups which were labeled emerging, norm, and leading edge. The index reflects poten- tial performance capabilities of firms. A higher score reflects the managerial practices that are generally ac- cepted as being most apt to result in superior performance. Firms with higher CAI scores place a greater emphasis on those practices that result in superior performance. The CAI was chosen for analysis because it provides a comprehensive measure of performance. It identifies firms adhering to superior management practices and, therefore, provided justification for proposing those leading edge firms would be more likely to use innovative strategies. 59 More specifically, it was proposed they would exploit out— sourcing opportunities to a greater extent than would the norm or emerging groups. W Two sets of dependent variables were structured based on survey Questions 24 and 25. The first set were indicators of anticipated usage within three to five years of outside logistical services in five areas: 1) trans- portation: 2) warehousing: 3) order entry and processing: 4) inventory management: and 5) freight audit and payment. Anticipated future usage was measured by a 5-point scale ranging from "will not use" to "will use many more" outside logistical services. Responses were employed to quantify anticipated usage by specific service. The second set of dependent variables were structured around six factors influential in the decision to use out- side service vendors. Respondents were asked to indicate the importance of: 1) deregulation: 2) services available: 3) quality of service: 4) data processing/communications services: 5) management quality: and 6) customer attitudes. Importance of each factor was measured on a 4-point scale ranging from "not important" to "very important." RESEARCH QUESTIONS The following research questions were designed to operationalize the research objectives. The first set of 60 questions relate to usage of the five types of logistical service. The external factors are examined by the second set of questions. I. i-’ e. ‘e :.Ae‘_ e .1 s s; ‘ee : a ;‘ A. Question 1-a: Will centralized manufacturing firms indicate lower levels of anticipated usage of outside logistical services than de- centralized manufacturing firms? Berg (1973) and Pitts (1977) described the relationships between organization structure and internal or external diversification. Examples of external diversification are mergers and acquisitions as well as alliances with suppliers or vendors. Berg and Pitts indicate diversification growth from internal expansion is most likely within centralized organization structures. Such internal diversification is typically accompanied by extensive resource-sharing. large numbers of top level personnel and support staff are required for effective diversification. Decentralized firms are more likely to diversify externally. Such external diversifica- tion is the desired form of growth because fewer senior managers are available and functional responsibility is dis- persed throughout divisions. Hall and Saias (1980) supported the Berg and Pitts research. If internal diversification is to succeed, it must have the full support of all the firm's resources. On the other hand, the success of external diver- sification requires an organization culture that places a premium on individual business autonomy (Hall and Saias, 1980). 61 Question I-b: Will manufacturing firms with process -based strategic orientation indicate lower levels of anticipated usage of outside logistical services than manufacturing firms with market or channel-based strategies? The research sought to identify outside logistical ser- vice usage patterns for firms based on strategic preference. Definitions of the strategic choices are provided below. Process Strategy: A process-based strategy is concerned with managing a broad range of logistics activities as a value added chain. Emphasis is on achieving efficiency from managing purchasing, manufacturing, sche- duling, and physical distribution as an inte- grated system. Market Strategy: A market-based strategy is concerned with managing a limited group of logistics activities for a multidivision single business unit or across multiple busi- ness units. The logistics organization seeks to make joint product shipments to common customers for different product groups and seeks to facilitate sales and logistical co- ordination by a single order-invoice. Often the senior sales and logistics executives report to the same manager. Channel Strategy: A channel-based strategy is concerned with managing logistics activi- ties performed jointly with dealers and dis- tributors. The strategic orientation places a great deal of attention on external con- trol. Significant amounts of finished in- ventories are typically maintained forward or downstream in the distribution channel. Environmental management strategies, which would include market and channel strategies, posit that firms at- tempt to reduce risk by managing external environment as ex- tensiveky as possible (Galbraith, 1977: Zeithaml and Zeithaml, 1984) . The market and channel-based strategies place emphasis upon the management and control of external 62 relationships. Therefore, it was hypothesized that firms with such strategies would be more likely to outsource logistical services than firms with process strategies. Additional support for this general belief is based on the boundary spanning literature. Channel-based strategies, in particular, are representative of such boundary spanning. Boundary spanning strategies include contracting, coopting, functional absorption, coalescing, and boundary expansion (Achrol gt g1, 1983: Bowersox gt :1, 1988: Dwyer gt Q1, 1987) . Question 1-c: Will more formalized manufac- turing firms indicate lower levels of antici- pated usage of outside logistical services than less formalized manufacturing firms? Previous research supports the contention that firms with highly formalized organizational structures are more apt to restrict their business operations to previously utilized patterns and strategies (Fredrickson, 1986: Lenz and Lyles, 1983: White gt g1, 1980). Steinbruner (1974) characterized formalized organizational decision-making as servo-mechanisms that structure decision ranges. A typical situation would need to exceed some specified range of ac- ceptable behavior before alternatives are considered. Fredrickson reinforced that formalization produces what Merton (1940) earlier labeled a “bureaucratic personality." Prescribed and accepted behavior becomes an end in itself. The means, for example, become more important than the ends or accomplishments. Managers become more interested in the 63 process than goal attainment. To put it another way, to do things right becomes more important than doing the right things. Such reliance upon standardized procedures limits innovation and creativity. Organizations with formalized processes ”tend to institutionalize incrementalism because they produce actions that are only marginal departures from the existing state” (Fredrickson, p. 287, 1986). Radical departures from standard procedures and the evaluation of new opportunities are unlikely ‘within. highly formalized organizations” Therefore, more formalized ‘manufacturing firms may be less likely to outsource logistical services than less formalized manufacturing firms. Question l-d: Will larger manufacturing firms indicate lower levels of anticipated usage of outside logistical services than smaller manufacturing firms? Kimberly (1976) identified the following four size aspects as important to organizational capability: 1) physical capacity: 2) available personnel: 3) organizational inputs and outputs: and 4) discretionary resources avail- able. Each of these aspects represent a potential con- straint upon operational performance. Inasmuch as larger firms typically have more physical capacity, more personnel, and greater discretionary re- sources than smaller firms, it was hypothesized that larger firms would plan lower anticipated usage of outside logisti- cal services. Question 1-e: Will manufacturing firms indi- cate variations in levels of anticipated 64 usage of outside logistical services ac- cording to industry type? Environmental characteristics such as industry affilia- tion (Child, 1972: Montanari, 1978) directly influence strategic alternatives. It is a well established principle that business practices and management behavior vary by industry. According to Lenz and Engledow (1986) , industry en- vironment results from a unique combination of competitive forces that result in both opportunities and threats. Strategic forces within the industry are expected to influence an individual firm's operating patterns and their reactions to opportunities and threats. It is hypothesized that firms operating in different industries, confronted with distinct competitive situations would exhibit distinc- tively different patterns in the anticipated usage of out- side logistical services. Question 1-f: Will Leading Edge manu- facturing firms indicate higher’ levels of anticipated usage of outside logistical ser- vices than Emerging or Norm manufacturing firms? The Common Attributes Index (CAI) has been previously discussed as the index used to group respondents for analysis. The CAI groupings were used to determine if different anticipated usage patterns or decision criteria with respect to procurement of external logistical services were related to respondent behavior. A ptigti it was expected that the 65 higher the CAI score firms, the greater the level of anticipated usage of outside logistical services. Justification for this hypotheses was the proposition that leading edge firms would be more innovative and more likely to utilize outsourcing based upon economic specialization. For example, all other things being equal leading edge firms will only perform specific functions when cost justified. 1 - ’K 7" :. e~ '1‘3OI', '- e : ee’ O~ 3', .0 Daeiaian Rationale for the second set of questions was based upon the same theoretical arguments as those employed in con- junction with the first set of research questions and, there- fore, will not be repeated. As an example of the justifica- tion for the research focus, degree of centralization was as- sumed to influence the impact of external factors in the make-or-buy decision. Because decentralized structures dele- gate authority or assign greater autonomy to individual operating units, the individual decision makers are likely to be influenced by the external factors (deregulation: services available: service quality: data processing/communications services: management quality: and customer attitudes). Question 2-a: Will external factors influence the decision to use outside logistical service vendors to a greater extent among decentralized manufac- turing firms than among centralized manufacturing firms? Question 2-b: Will external factors influence the decision to use outside logistical service vendors to a greater extent among manufacturing firms with market and channel-based strategic orientation than among manufacturing firms with process based strategies? 66 Question 2-c: Will external factors influence the decision to use outside logistical service vendors less among more formalized manufacturing firms than among less formalized manufacturing firms? Question 2-d: Will external factors influence the decision to use outside logistical service vendors to a lesser extent among larger manufacturing firms than among smaller manufacturing firms? Question 2-e: Will external factors influence the decision to use outside logistical service vendors to varying degrees based upon industry affiliation of the manufacturing firms? Question 2-f: Will external factors influence the decision to use outside logistical services more among Leading Edge manufacturing firms than among Emerging or Norm manufacturing firms? SAMPLE SELECTION Data were collected during March-June of 1987. To ini- tiate the process of data collection, letters requesting participation in the research were sent to 3,002 logistics selected executives from united States manufacturing firms. Mailing lists were secured from three sources: 1) Council of Logistics Management: 2) W magazine sub- scribers, and 3) the mailing list of A.T. Kearney Management Consultants. A concentrated effort was made to eliminate duplicate names. The group mailed represented logistically sensitive manufacturing firms. Names identified by these three sources were assumed to reflect a desire upon the part of a firm’s management to develop and maintain awareness of logistical trends and current practices. From the initial mailing, 668 managers indicated a willingness to participate in the research. A questionnaire 67 and a postage-paid return envelope was mailed to the list of 668. A total of 380 usable questionnaires approximating a 57% response rate were received and used in the analysis. THE RESEARCH INSTRUMENT The questionnaire was initially developed based on per- sonal interviews with logistics executives at twenty-five firms. Prior to finalization, the questionnaire was pre- tested by selected logistics practitioners and reviewed in detail by the Research Advisory Board. The final question- naire contained twenty-six questions. A copy of the ques- tionnaire is presented in Appendix A. The Advisory Board members are listed in Appendix C. PROFILE OF RES PONDENTS Tables 3-2 through 3-6 provide a respondent profile. Table 3-2 classifies respondents according to annual dollar sales. Individual sales figures reflect total annual dollar sales of the business unit or, if no business unit was in- volved, corporate sales. The average sales figure per respondent firm was $1,852,050,908. Respondents firms represented a total of twenty different Standard Industrial Classifications. To facili- tate analysis, the twenty industries were grouped into seven categories. Table 3-3 lists the seven groups, respondents and percentage representation. 68 TABLE 3-2 ANNUAL SALES FOR RESPONDENT FIRMS Sales (in Millions) Number Bergen; Under $50 67 18.6 $50 to $200 49 13.5 Over $200 to $500 36 9.9 Over $500 to $1,000 45 12.5 Over $1,000 to $2,000 53 14.7 Over $2,000 111 30.3 351 TABLE 3-3 RESPONDENTS BY INDUSTRY GROUP 9:932 Number EEIQQDL Mining 39 10.5 Food 89 23.9 TextiIes 21 5.6 Forest Related 55 14.8 Electronics/Computers 50 13.4 Motor/Transportation Equipment 45 12.1 Pharmaceuticals _11 19.6 372 Table 3-4 presents the data concerning senior logistics executives. The senior logistics executives within the participating firms have achieved relatively high reporting levels within the overall organization structure. Nearly 80 percent of the senior logistics executives have attained the level of Director or above. Table 3-5 indicates the length of time logistics has been formally organized. Table 3-6 reflects the dynamic nature of logistics by indicating the frequency of reorganization. Approximately 40 percent of the respondent firms reported logistics had been formally organized within 69 their firm for’ 10 years or' longer; These firms also reported extensive re-organization within the previous five years. Only 18 percent of the firms had not undergone logistical reorganization during that period. TABLE 3-4 DESCRIPTION OF THE SENIOR LOGISTICS EXECUTIVES Position Number Parson; President 7 1.9 Executive Vice President 14 3.8 Vice President 141 38.2 Director 128 34.7 Manager 77 2 0 . 9 Supervisor __2 0.5 369 Department CEO/COO a 2 . 2 Operations/Manufacturing 45 12.2 Logistics 59 16.0 Physical Distribution 123 33.4 Traffic/Transportation 36 9.8 Materials Management 62 16.8 Inventory 1 0.3 Purchasing 4 1.1 Other _§Q 8.2 368 70 TABLE 3-5 NUMBER OF YEARS LOGISTICS HAS BEEN FORMALLY ORGANIZED Yeare_Eormallx_oroanizeo Number Eeroent 0 or missing 20 5.3 less than 1 4 1.1 1 year 24 6.3 2 or 3 years 50 13.2 4 or 5 years 58 15.3 6 or 7 years 28 7.4 8 or 9 years 26 6.8 10 years 44 11.6 11 - 14 years 22 5.9 15 years 24 6.3 16 - 19 years 15 4.1 20 years 30 7.9 over 20 years 35 9.2 n a 380 mean a 10.90 years (mean excludes '0' responses) TABLE 3-6 LOGISTICAL REORGANIZATIONS WITHIN LAST FIVE YEARS Timee_Reorsanized Number Peroent 0 63 13.0 1 114 32.6 2 36 24.6 3 53 15.1 4 13 3.7 5 6 1.7 6 5 1.4 7 3 0.9 3 3 0.9 10 or more 4 1.2 n - 350 mean - 1.89 (mean excludes '0” responses) standard deviation - 2.15 71 DATA ANALYSIS The research questions presented in Sets I and II were structured into a series of null hypotheses. The null hypotheses are included in Appendix D. The basic analysis procedures selected were one-way analysis of variance (ANOVA) and t-tests. The objective was to identify significant anticipated usage and decision influence patterns concerning outsourcing of specific logis- tical services. One-way analysis of variance was completed to identify variation within the data groups. T-tests were used for the dichotomous independent variables (See Tables 3-7 and 3-8). The basic analysis was supplemented with two-way analy- sis of variance or analysis of covariance. The two-way analysis of variance allowed investigation of potential interaction between the independent variables which had been found to be significant previously or when there was theory- based support for hypothesizing an interrelationship that might impact the dependent variables. Analysis of covariance was utilized to increase the precision of the analysis by removing bias due to variations in significant independent variables having continuous measures (Wildt and Ahtola, 1978) . The three independent variables of size, functional responsibility, and number of years organized were selected for covariance analysis. 72 TTUILE EP-7 ANTICIPATED USAGE OF OUTSIDE LOGISTICAL SERVICES Dependent Variables: Anticipated Outsourcing of Order Inven- Trans- Ware Entry/ tory Freight porta- hous- Process- Manage- Audit/ tion in: in: mentzment Independent Variables: Centralization T T T T T Strategic Orientation A A A A A Formalization: Level of Senior Logistics Executive A A A A A Logistics Mis- sion Statement T T T T T Logistics Stra- tegic Plan T T T T T Frequency of Strategic Plan Update A A A A A Logistics Execu- tive Partici- pates in Over- all Strategic Planning T T T T T Years Formally Organized A A A A Logistical Reorganizations A A. A A A Number of Logist- ical Functions A A. A A. A Size A A A A A Industry Group A A A A A Common Attributes Index Group A A A A A Statistical Procedure: A - one-way ANOVA T - t-test 73 TTUELE EP-B INFLUENCE OF EXTERNAL FACTORS ON OUTSOURCING DECISIONS Dependent Variables: Influence of Serv- Serv- Data Deregu- ices ice Processing/ 13.212!) Avail- Qual- Comuni - 5121.9. in min: Independent Variables: Centralization T T T T Strategic Orientation A A A A Formalization: Level of Senior Logistics Executive A A A A Logistics Mission Statement T T T T Logistics Strategic Plan T T T T Frequency of Strategic Plan Update A A A A Logistics Executive Participates in Overall Strategic Planning T T T T Years Formally Organized A A A A Logistical Reorganization A. A A A Number of Logistical Functions A A A A Size A A A A Industry Group A A A A Common Attributes Index Group A A A A Statistical Procedure: A - one-way ANOVA T - t—test Manage- Cust- ment ‘ omer Qual- Atti- mm T T A A A A T T T T A A T T A A A A A A A A A A A 74 For analysis purposes, .05 was used to make the deter- ‘mination as to statistical significance. Examination of the literature discloses that common levels of significance are .10, .05, and .01. Skipper g; 51, (1967) note that .05 is the "most sacred” or most universally used. There are no explicit rules specifying the level of significance to be used. The decision should be made based on the problem under study. Based on convention, it was decided to use the .05 rule to state whether the results are significant or not. Typically, .01 is used to indicate highly significant and .10 somewhat significant. The .05 is believed to be the most appropriate criterion being neither too conservative nor too liberal. SUMMARY In summary, Chapter Three has presented the overall re- search design. Independent and dependent variables, re- search hypotheses, sample selection, and data analysis pro- cedures were discussed. Statistical techniques used to analyze the data include t-tests, analysis of variance, and analysis of covariance. CHAPTER FOUR - RESULTS This chapter will present the research results. The chapter' is structured into the following sections: 1) overview of the findings: 2) analysis of variance results: and 3) evaluation of research questions. OVERVIEW OF FINDINGS Tables 4-1 and. 4-2 present. the means .and standard deviation of key dependent variables from Questions #24 and #25. (Refer to Appendix A, Questionnaire.) TABLE 4-1 ANTICIPATED USE OF OUTSIDE LOGISTICAL SERVICES Response Rating*: Outside Service: Egan Transportation 3.05 1.07 Warehousing 2.75 1.20 Order Entry/Processing 1.92 1.15 Inventory Management 1.96 1.17 Freight Audit/Payment 2.68 1.14 *Scale used: 1 s will not use outside logistical services 2 - will use less than current levels 3 a usage will remain constant 4 8 will use more outside logistical services 5 =- will use many more outside logistical services 75 76 Question #24 asked respondents what they anticipate will happen regarding their company's use of outside logis- tics service vendors in the next three to five years. The greatest anticipated usage was reported for the outsourcing of transportation services. Respondents expect their usage of outside warehousing and freight audit/payment services to remain constant to decreasing slightly. Here dramatic changes were reported concerning outside order entry/processing and inventory management services. Over- all, respondents anticipate their usage of these two ser- vices will decrease in the future. TABLE 4-2 EXTERNAL FACTORS INFLUENCING OUTSOURCING Response Rating*: Number of Std. Factor Affecting the Decision: flyag Mean Dex; Deregulation 69 2.64 0.99 Services Available 13 3.23 0.78 Quality of Services 10 3.57 0.70 Data Processing/Communication Services 27 2.87 0.85 Management Quality 25 3.14 0.79 Customer Attitudes 31 3.13 0.88 *Scale was: N.A. - Not Applicable 1 - not important 2 - neutral 3 - somewhat important 4 = very important *Mean is based on those who answered 1 to 4. Question #25 was utilized to determine importance ratings for selected factors influencing the decision to use 77 outside logistical service vendors. The most important cri- terion was found to be quality of the service. This was followed by services available, vendor management quality, and customer attitudes. The least important factors were data processing/communication services and deregulation. The primary service package, service and the quality of that service, were found to be critical influencers in out- sourcing decisions. Channel-related factors, one related to the vendor and one related to the customer, were also viewed as important. Data processing/communications were rated somewhat lower than had been expected. The relatively low importance rating on transportation deregulation may be a function of the time elapsed since major transportation regulation reform in 1980. The respondents accept the availability of new service options as standard at this point in time. This chapter will present the results of the data anal- ysis procedures and discussion of support for specific re- search questions. The primary analysis procedure, analysis of variance, is presented first. ANALYSIS OF VARIANCE Initial research analysis utilized one-way analysis of variance (ANOVA) in order to identify and measure sources of variation within the data that can attributed to the inde- pendent variables previously described. The decision rule used to assess the significance of individual main effects 78 was 0.05. Instances in which p a 0.05 or less were examined further to determine if interactions among indepen- dent variables were noted. In addition, other relation- ships were analyzed in cases where theoretical support justified further investigation of interactions. For example, both structure and strategy were examined because of their direct impact upon decision-making processes (Hobbit and Ford, 1980: Fredrickson, 1986: Hall and Saias, 1980). Discussion of significant relationships and inter- actions is included in the Evaluation of Research Questions section of the chapter. Tables 4-3 and 4-4 present the one-way ANOVA results. Statistically significant findings are underlined. T-tests were used to assess the significance of dif- ferences in the four remaining independent variables: 1) centralization: 2) logistics strategic plan: 3) partici- pation of logistics executives in overall business unit strategic planning: and 4) logistics mission statement. Re- sults are presented in Table 4-5 and 4-6. Statistically significant findings are underlined. 79 TIEHHE 4'4! ANOVA: ANTICIPATED USAGE OF OUTSIDE LOGISTICAL SERVICES Logistical Services Order Freight Independent Trans- were- Entry Inventory Audit Variables: pertains .hmins mans Management lumen; (p-Values) Strategic , Orientation .875 .749 .727 .508 .332 Formalization: Years Organized .754 .334 .084 ‘929_ .874 Times Reorganized .573 .630 ‘919 .234 .881 Functional Respon- sibilities .830 .271 .694 . .928 .108 Level Senior Logistics Executive .912 1991 Lflél 1951 .IQQl Frequency of Strategic Plan Up-date .242 .287 .974 .855 .852 Size .451 .513 .936 .872 .923 Industry .891 .520 .412 .434 .072 Common Attributes Index .553 $922 .325 .519 .339 p 3 .05 are underlined 80 IHUEEE lwfll ANOVA: FACTORS INFLUENCING OUTSOURCING External Factors Transpor- Data tation Services Processing Hanage- Customer Independent Deregu- Avail- Service Colmauni- ment Atti- Variables: 13.91.20 able 93311131 autism 93.151131 3:002: (p-Values) Strategic . Orientation ‘QZQ .477 -.630 .210 ' ‘Qifl .882 Formalization: Years Organized .648 .343 .694 .700 .172 .270 Times Reorganized .707 .327 .180 .053 .333 .798 Functional Respon- sibilities .294 .794 .820 .221 .109 .621 Level Senior Logistics Executive .412 .778 .514 .564 .171 .596 Frequency of Strategic Plan Up-date .335 .532 .438 .089 .085 .816 S126 .696 .434 .295 .385 ' .370 .729 Industry .767 .001 199: .164 ‘99; ‘91; Common Attri- butes Index .876 .109 .118 ‘00: 1901 ..199 p s .05 are underlined 81 TUNILE:Il-5 T-TESTS: ANTICIPATED USAGE OF OUTSIDE LOGISTICAL SERVICES Outsourcing of: Order Freight Independent Trans- Vare- Entry/ Inventory Audit Variables: 921535.120 119318.108 Imaging assumes; Ememt Centralization Centralized* 3.07 2.77 1.95 1.97 2.58 Decentralized* 3.08 2.83 1.91 1.95 2.82 t .07 .35 .22 .14 1.66 p .94 .73 .83 .89 .10 Logistics Strategic Plan No* 3.07 2.68 1.88 1.95 2.65 Yes* 3.05 2.85 1.98 1.99 2.73 t .17 1.38 .79 .30 .73 p .86 .17 .43 .76 .47 Participating in Overall Strategic Planning No* ‘ 2.88 2.62 1.69 1.79 2.62 Yes* 3.11 2.79 2.00 2.03 2.70 t 1.77 1.19 2.27 1.68 .58 p .08 .23 ‘92 .09 .56 Logistics Mission Statement No* 3.06 2.71 1.91 2.00 2.67 Yes* 3.03 2.84 1.91 1.84 2.71 t .26 .93 .004 1.27 .25 p ' .80 .35 .99 .20 .80 p 3;.05-are underlined *Scale categories for each item ranged from 1 - will not use to 5 - will use many more. 82 {EABIJBIA-G T-TESTS: FACTORS INFLUENCING OUTSOURCING External Factors Transpor- Data tation Services Processing Manage- Customer Independent Deregu- Avail- Service Comuni- ment Atti- Variables: 183.120 able Min minim Quality rude: Centralization Centralized* 2.69 3.30 3.62 2.94 3.27 3.24 Decentralized* 2.54 3.19 3.56 2.86 ' 3.07 3.03 t 1.14 . 1.11 .65 .76 1.88 1.78 p .26 .27 .52 .45 .064 .08 Logistics Strategic Plan No* 2.60 3.16 3.51 2.77 3.05 3.11 Yes* 2.67 3.30 3.63 2.97 3.23 3.14 t .59 1.71 1.64 2.13 1.98 .27 p .56 .09 .10 .91 .05 .79 Participation in Overall Strategic Planning No* 2.61 3.18 3.47 2.75 2.94 2.91 Yes* 2.64 3.23 3.60 2.92 3.20 3.20 t _ .25 .52 1.43 1.59 2.64 2.49 p .81 .60 .15 .11 ‘91 ‘91 Logistics Mission Statement NO* 2.57 3.20 3.51 2.80 3.04 3.08 966* 2.83 3.30 3.72 2.99 3.32 3.24 c 2.09 1.15 2.60 1.91 2.99 1.59 p .94 .25 ‘01 .06 1003 .11 p 5.05 are underlined *Scale categories for each item ranged from 1 - not important to 4 - very important. .- 83 EVALUATION OF RESEARCH QUESTIONS The research questions will be discussed individually with reference made to corresponding null hypotheses. Dis- cussion will first center on Set I of the research questions which relate to the anticipated usage of outside logistical services. Set I W Centralization Question l-a: Will centralized manufacturing firms indicate lower levels of anticipated usage of outside logistical services than de- centralized manufacturing firms? Based upon the results of the t-tests (see Table 4-5), the null hypotheses cannot. be rejected. There 'was no indication that centralized manufacturing firms would report different usage patterns for the services than decentralized manufacturing firms. Null hypotheses HO:l-a.1: HO:l-a.2: H0:1-a.3: H0:l-a.4: and H0:1-a.5 were used to test this re- search question. Prior empirical work suggested additional relationships might occur. The constructs of centralization and strategy were selected for investigation. Even though no main ef- fects were noted during earlier analysis, further analysis was believed to be warranted. Two-way ANOVA's were also completed incorporating variables which had been found sta— tistically significant in the one-way analysis. For 84 example, level of the senior logistics executive was in— cluded. Table 4-7 details the two-way ANOVA procedures per- formed to determine if any significant main effects or interactions were present. Two significant relationships were found. These are presented in Tables 4-8 and 4-9. The other results are in- cluded in Appendix E (Tables E-l through E-12). The results for the ANOVA for centralization and strategic orientation on anticipated usage of outside order entry/processing reveal no significant main effects. How- ever, there is a significant interaction between centraliza- tion and strategic orientation. Strategy in conjunction with centralization or the allocation of decision-making authority work together to significantly influence the usage of outside order entry/processing services. Overall centralized and decentralized firms reported similar anticipated usage for order entry/processing ser- vices with means of 1.95 and 1.91 respectively. Strategy was not found to be a significant predictor of usage of out- side order services. Firms with channel-based strategies indicated slightly greater anticipated usage. However, the differences between the three types are not statistically significant. The interaction between the two main effects is a significant predictor (.04) of the anticipated usage of outside order entry/processing services. Strategies define 85 TABLE 4-7 TWO-WAY ANOVA PROCEDURES - CENTRALIZATION Independent variables: Centralization x Strategic Orientation Centralization x Strategic Orientation Centralization x Strategic Orientation Centralization x Strategic Orientation Centralization x Strategic Orientation Centralization x Level of Senior Logistics Executive Centralization x Level of Senior Logistics Executive Centralization x Level of Senior Logistics Executive Centralization x Level of Senior Logistics Executive Centralization X Level of Senior Logistics Executive Centralization X Number of Logistical Reorganizations Centralization x Number of Logistical Reorganizations Centralization x Participa- tion in Overall Strategic Planning Centralization x CAI Group Dependent Variables: (Anticipated Outsourcing) Transportation Warehousing Order Entry/Processing Inventory Management Freight Audit/Payment Transportation Warehousing Order Entry/Processing Inventory Management Freight Audit/Payment Order Entry/Processing Inventory Management Order Entry/Processing Warehousing 86 TABLE 4-8 ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Centralization 1 0.12 .728 Strategic Orientation 2 0.02 .977 Interaction 2 3.28 .040 TABLE 4-9 ANOVA: ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation df F p Main Effects Centralization l 0.10 .750 Level of Senior Logistics Executive 5 3.90 .002 Interaction 5 1.46 .217 firm objectives and prescribe operating patterns. While strategy may not be sufficient to significantly affect out- sourcing, a difference is noted when the firm's centraliza- tion level is also included. Centralization or decen- tralization determine where strategic decisions will be made. ANOVA results for the test of a significant relation- ship between centralization and the level of the senior logistics executive in regard to anticipated usage of out- side warehousing services revealed no significant inter- action. There is a significant main effect for level of the 87 senior logistics executive. The level of the senior logis- tics executive within the firm is indicative of relative authority and influence on strategic decisions such as out- sourcing. Strategic Orientation Question l-b: Will manufacturing firms with process strategic orientation indicate lower levels of anticipated usage of outside logis- tical services than manufacturing firms with market or channel based strategies? The one-way analysis of variance procedure (Table 4-3) did not provide support for the belief that usage of outside logistical services would be dependent upon the strategic orientation of the firm. No significant differences were found between respondent groups reporting different manage- ment strategies. Null hypotheses MO:l-b.1: HO:l-b.2: HO:1- b.3: HO:l-b.4: and HO:1-b.5 cannot be rejected. The following two-way ANOVA's were utilized to test hy- pothesized relationships developed based upon theoretical support and/or statistically significant findings from the initial analysis. Significant results were found when analyzing the relationship between strategic orientation and level of the senior logistics executive for the anticipated usage of transportation, warehousing, and freight audit/payment ser- vices. No significant results were associated with either order' entry/processing' or inventory' management services. 88 (See Tables E-13 and E-14 in Appendix E.) Significant re- sults were found during analysis of 1) strategic orientation and number of years logistics formally organized on antici- pated usage of outside inventory management services: 2) strategic orientation and number of logistical reorganiza- tions on outside order entry/processing services: and 3) strategic orientation and participation in overall strategic planning on outside order entry/processing services. The following tables detail significant findings. TABLE 4-10 TWO-WAY ANOVA PROCEDURES - STRATEGIC ORIENTATION Independent Variables: Dependent Variables: (Anticipated Outsourcing) Strategic Orientation X Level of Senior Logistics Executive Transportation Strategic Orientation X Level of Senior Logistics Executive Warehousing Strategic Orientation X Level of Senior Logistics Executive Order Entry/Processing Strategic Orientation X Level of Senior Logistics Executive Inventory Management Strategic Orientation X Level of Senior Logistics Executive Freight Audit/Payment Strategic Orientation X Number of Years Logistics Formally Organized Inventory Management Strategic Orientation X Number of Logistical Reorganizations Order Entry/Processing Strategic Orientation X Partici- pation in Overall Strategic Planning Order Entry/Processing Tables ‘4-11, 4-12, and 4-13 report the :results of analysis of the influence of strategic orientation and the level of the senior logistics executive on outsourcing 89 transportation, warehousing, and freight audit/payment ser- vices. No significant interactions were found. In all three instances, there was a significant main effect for level of the senior logistics executive. The level of the senior logistics executive appears to have a very strong in- fluence on outsourcing decisions. A discussion of the nature of this influence is included in the "Formalization" section. TABLE 4-11 ANOVA: ANTICIPATED USAGE OF OUTSIDE TRANSPORTATION SERVICES Source of Variation df F p Main Effects Strategic Orientation 2 0.05 .947 Level of Senior Logistics Executive 5 3.86 .002 Interaction 10 1.46 .181 TABLE 4-12 ANOVA: ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation 'df F p Main Effects Strategic Orientation 2 0.37 .693 Level of Senior Logistics Executive 5 3.21 .008 Interaction 10 1.53 .156 90 TABLE 4-13 ANOVA: ANTICIPATED USAGE OF OUTSIDE FREIGHT AUDIT SERVICES Source of Variation df F p Main Effects Strategic Orientation 2 0.77 .463 Level of Senior Logistics Executive 5 3.25 .007 Interaction 10 1.07 .383 TABLE 4-14 ANOVA: ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT Source of Variation df F p Main Effects Strategic Orientation 2 0.69 .504 Level of Senior Logistics Executive 3 2.64 .050 Interaction 6 0.77 .594 As shown in Table 4-14, no significant interaction was found for strategic orientation and number of years logis- tics has been formally organized in relation to the antici- pated usage of outside inventory management services. A significant main effect was found for number of years logis- tics. has been organized. The age of a firm and the associated human and financial resources are more influen- tial than overall strategic orientation. Resource limita- tions or capabilities play a major role in the outsourcing decision. Average ratings for respondent firms are shown below. 91 Mean Rating Mimi" Wises 1.613 7-10 1.986 3- 6 2.032 More than 10 2.134 Less than 3 *Means reported in relation to dependent variables Set I - Anticipated Usage of Outside Logistical Services are based on a 5-point scale. A 1 indicates will not use outside logistical services: 5 indicates will use many more outside logistical services. Firms organized in the mid-range (3 to 10 years) anticipate less outsourcing of inventory management ser- vices. By comparison, firms organized less than 3 years or more than 10 years will outsource more for inventory manage- ment. The newer firms may not be capable of handling their service needs internally. Older, well established firms may be more innovative and in a better position to evaluate al- ternative opportunities. TABLE 4-15 ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Strategic Orientation 2 0.63 .533 Number of Logistical Reorganizations 3 3.62 .014 Interaction 6 0.37 .900 92 While no significant interaction, was found. between strategic orientation and the number of logistical reorgani- zations for the outsourcing of order entry/processing ser- vices, a main effect was found for the number of logistical reorganizations (Table 4—15). Many firms have re-evaluated operations and instituted restructuring or reorganization. A key area of concern is "make or buy" for logistical ser- vices. Reorganizations may involve the reassessment of logistical service sourcing. TABLE 4-16 ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Strategic Orientation 2 0.28 .753 Participation in Overall Strategic Planning 1 4.74 .030 Interaction 2 2.16 .117 As shown in Table 4-16, no significant interaction was noted between strategic orientation and participation in overall strategic planning. There was a significant main effect for participation in overall strategic planning in relation to anticipated usage of outside order entry/processing services. When logistics executives are included in the overall planning, they have an opportunity to influence corporate policy. Logistics strategies are often shaped from overall organization strategy. Initial outsourcing decisions and evaluation of capital requirements 93 may be made at a higher level and thus directly influence anticipated outsourcing levels. Formalization Question 1-c: Will more formalized manufac- turing firms indicate lower levels of antici- pated usage of outside logistical services than less formalized manufacturing firms? Eight different measures were used to operationalize the construct "formalization.” The measures are: 1) number of years logistics has been formally organized: 2) number of logistical reorganizations within the previous five years; 3) number of logistical. functional responsibilities: 4) level of the senior logistics executive: 5) whether the firm has a logistics strategic plan or not: 6) how often the logistics strategic plan is up-dated: 7) whether the logis- tics executives provide input into overall strategic plan- ning for the business unit: and 8) whether the firm has a formal logistics mission statement or not. Results of the initial analysis indicated that one of the measures, level of the senior logistics executive, evi- denced distinctly different patterns than the other measures of formalization. Specifically, the level of the senior logistics executive was found to be related to the usage of outside services for all five of the specified logistical services. Therefore, this variable, level of the senior logistics executive, will be evaluated separately from the other formalization measures. 94 Table 4-17 presents the results of the one-way ANOVA's for differences in usage of outside logistical services by level of the senior logistics executives. Overall the level of the senior logistics executive was shown to influence the usage of outside logistical services. When the individual services were examined, no strong sup- port was found for stating that more formalized manufac- turing firms would indicate lower levels of anticipated usage than would less formalized manufacturing firms. Examination of the different level groups (President, Execu- tive Vice President, etc.) as they relate to the usage of order entry and processing and inventory management services showed no difference in their mean usage rates. Regarding transportation and ‘warehousing, the lowest level group, Supervisors, had significantly lower mean scores. However, the group size (N - 2) is so low that caution must be taken when making inferences based upon their scores. For the re- maining service, freight audit and payment, the mean scores for logistics executives at the levels of President and Supervisor were significantly different than the offer groups. Once again, sample size was small, 7 and 2 respec- tively. 95 TABLE 4-17 ANOVA: INFLUENCE OF EXECUTIVE LEVEL ON USAGE I. Transportation of - 5 F - 2.80 p = .0169 Duncan Multiple Range Test: (alpha = .05) Bean 8 Erase firesnins* 3.1679 137 Vice President A 3.1575 127 Director A 2.8701 77 Manager A 2.7143 7 President A 2.5000 14 Exec. Vice President B A 1.5000 2 Supervisor B Least Significant Differences (T/LSD): Significant Comparisons:** (alpha .05) Difference Between Means Vice President - Manager .298 Vice President - Executive Vice President .668 Vice President - Supervisor 1.668 Director - Executive Vice President . .658 Director - President 1.658 96 Table 4-17 (cont'd.) II. Warehousing at - 5 F - 4.25 p = .0009 Duncan Multiple Range Test (alpha - .05) Been N Green firesnins* 2.9440 125 Director A 2.8478 138 Vice President A 2.5325 77 Manager A 2.1429 7 President B A 1.8571 14 Exec. Vice President B A 1.0000 2 Supervisor B Least Significant Differences (T/LSD): Significant Comparisons:** Difference Between Means (alpha - .05) Director - Manager .412 Director - Executive Vice President 1.087 Director - Supervisor 1.944 Vice President - Executive Vice President .991 Vice President - Supervisor 1.85 Manager - Executive Vice President .675 III. Order Entry and Processing 02 - 5 P - 2.35 p = .0407 Duncan Multiple Range Test (alpha - .05) Bean H Green Greenins* 2.0658 76 Manager A 1.9638 138 Vice President A 1.9106 _ 123 Director A 1.2857 14 Exec. Vice President A 1.0000 7 President A 1.0000 2 Supervisor A 97 Table 4-17 (cont’d.) Least Significant Differences (T/LSD): Significant Comparisons:** Difference Between Means (alpha - .05) Manager - Executive Vice President .131 Manager - President 1.066 Vice President - Executive Vice President .678 Vice President - President .964 Director - President .911 IV. Inventory Management df - 5 F = 2.34 p = .0413 Duncan Multiple Range Test (alpha = .05) Bean :1 Sims Greening 2 . 1053 76 Manager A 2.0400 125 Director A 1.9424 139 Vice President A 1.3571 14 Exec. Vice President A 1.0000 7 President A 1.0000 2 Supervisor A Least Significant Differences (T/LSD): Significant Comparisons:** Difference Between Means (alpha - .05) Manager - Executive Vice President .748 Manager - President 1.105 Director - Executive Vice President .683 Director - President 1.040 Executive Vice President - President .942 98 Table 4-17 (cont'd.) V. Freight Audit and Payment df - 5 r - 4.49 p = .0006 Duncan Multiple Range Test (alpha - .05) Mean 8 Green greenins* 2.8345 139 Vice President A 2.7087 127 Director A 2.5325 77 Manager A 2.4286 14 Exec. Vice President A 1.1429 7 President B 1.0000 2 Supervisor B Least Significant Differences (T/LSD): Significant Comparisons:** Difference Between Means (alpha = .05) Vice President - President 1.692 Vice President - Supervisor 1 835 Director - President 1.566 Director - Supervisor 1.709 Manager - President 1.390 Executive Vice President - President 1.29 * Means with the same letter are not significantly dif- ferent. ** All cases reporting least Significant Differences means test used an alpha of .05. In each case, all possible combinations were analyzed. However, gnly the statistically significant comparisons are reported. 99 These results indicate that the level of the senior logistics executive does have an influence on the usage of outside logistics services. No clear patterns emerged as to the nature of that influence. In order to investigate the relationship further, data was regrouped into two categories: 1) President, Executive Vice President and Vice President: and 2) Director, Manager, and Supervisor. T-tests were used to determine if signifi- cant differences occurred between the two groups in terms of their anticipated usage of specific outside logistical ser- vices. No significant differences were found. Results are presented in Table 4-18. TABLE 4-18 T-TESTS: INFLUENCE OF EXECUTIVE LEVEL ON USAGE Outsourcing of: Order Freight Trans- ware- Entry Inventory Audit WWWWW Senior Logistics Executive: Upper level* 3.07 2.72 ' 1.86 1.85 2.74 Lower level* 3.03 2.77 1.96 2.05 2.63 t .39 .38 .80 1.71 .98 p .70 .70 .42 .09 .33 *Scale categories for each item ranged from 1 - will not use to 5 - will use many more. 100 No statement can be made as to extent and direction of that influence. However, the hypothesis that there is no difference in the extent of usage of outside logistical ser- vices based upon the degree of formalization of the firm as evidenced by the level of the senior logistics executive can be rejected. Potential interaction effects involving level of the senior logistics executive were also investigated. Interac- tion between this variable and 1) centralization and 2) strategic orientation were reported previously. Table 4-19 lists additional relationships investigated. TABLE 4-19 TWO-WAY ANOVA PROCEDURES - EXECUTIVE LEVEL Independent Variables: Dependent Variables: (Anticipated Outsourcing) Level of Senior Logistics Executive X Number of Years Logistics Formally Organized Inventory Management Level of Senior Logistics Executive X Number of Logistical Reorganizations Order Entry/Processing Level of Senior Logistics Executive X Participation in Overall Strategic Planning Order Entry/Processing Level of Senior Logistics Executive X CAI Group Warehousing Each of the four relationships defined in Table 4-19 ‘was found to have at least one significant main effect. No significant interactions were found. Results are provided in Tables 4-20 through 23. 101 Two significant main effects were found concerning the anticipated usage of outside inventory management services: 1) the level of the senior logistics executive and 2) number of years logistics has been formally organized (see Table 4- 16). Once again the level of the logistics executive was significantly related to outsourcing. The level of execu- tive is reflective of the individual's influence within the firm and extent of decision-making authority. The longevity of formal logistics within organizations was related to anticipated outsourcing. TABLE 4-20 ANOVA: ANTICIPATED USAGE OF INVENTORY MANAGEMENT SERVICES Source of Variation df F p Main Effects Level of Senior Logistics Executives 3 3.53 .015 Number of Years Organized 5 2.36 .040 Interaction 15 0.55 .872 As shown in Table 4-21, a significant main effect was found concerning the number of logistical reorganizations and anticipated usage of outside order entry/processing ser- ‘vices. It appears that reorganization activity may involve Idecisions as to whether logistical order services should be purchased or provided from intra-company resources. 102 TABLE 4-21 ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Level of Senior Logistics Executives 3 3.36 .019 Number of Logistical Reorganizations 5 1.91 .093 Interaction 15 0.57 .854 TABLE 4-22 ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Level of Senior Logistics Executives 5 2.08 .068 Participation in Overall Strategic Planning 1 5.65 .018 Interaction 5 0.66 .657 Participation in overall business unit strategic plan- ning enables logistics executives to provide input in out- sourcing decisions. As reported in Table 4-22, research findings provide support for this. Participation in overall strategic planning was significantly related to anticipated outsourcing of order entry/processing services. Firms who include their logistics executives in overall strategic planning had higher average scores concerning outsourcing of 103 order entry/processing services than the firms' whose logis- tical executives did not participate in overall strategic planning. Mean Rating Participate 2.004 Yes 1.689 No TABLE 4-23 ANOVA: ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation df F p Main Effects Level of Senior Logistics Executives 5 4.30 .001 CAI Group 2 3.70 .026 Interaction 10 0.80 .590 Significant main effects were found for both level of the senior logistics executive and CAI group (Table 4-23) regarding anticipated usage of outside warehousing services. Among the CAI groups, leading edge firms anticipate greater utilization of outside warehousing services. Mean Rating Green 3.097 Leading Edge 2.708‘ Norm 2.560 Emerging Next, discussion will focus on the examination of the other"measures utilized to operationalize formalization. Three of the independent variables showed a statistically 104 significant relationship with specific outside logistical services. Usage of outside inventory management services is dependent upon the number of years logistics has been formally organized: outside order entry and processing services is dependent upon the number of reorganizations a firm experiences and the senior logistics executive's participation in overall strategic planning for the business unit. Results of the one-way ANOVA's and t-tests are shown in Table 4-24. The number of reorganizations of logistical operations within the previous five years was found to influence the usage of outside order entry and processing services. Examination of usage by the categories or levels of reorganization revealed significant differences in anticipated usage between firms who had experienced 3 or 4 reorganizations and those firms reporting an even greater number of reorganizations than that. Firms with 5 or more reorganizations had the lowest mean scores indicating lowest anticipated usage. Assuming that a greater number of reorganizations is representative of greater formalization, the implication is that more formalized firms use fewer outside services. This provides support for rejecting the null hypothesis (HO:1-c.3) that no difference in the usage of outside order entry and processing services would be noted based upon degree of formalization. Other significant 105 differences were found as shown by the T/LSD results. In general, groups at the extremes either with no reorganiza- tions or with 5 or more reorganizations were significantly different than the two moderate groups having either 1 or 2 or 3 or 4 reorganizations. The usage of outside order entry and processing ser- vices was also found to be dependent upon formalization as operationalized by participation of logistics executives in overall business unit strategic planning. Firms with logistics executives who are involved in overall business unit strategic planning will use more outside order entry and processing services than firms in which logistics execu- tives do not participate in overall business unit strategic planning. Based upon these results which indicate more formalized firms will use more outside order-related ser- vices than less formalized firms the null hypothesis (HO:1- c.3) can be rejected. Finally, analysis indicated the usage of outside inven- tory management services was dependent upon the third formalization measure, number of years logistics has been formally organized. As shown in Table 4-20, firms organized a moderate amount of time or in the mid-range of 7 to 10 years were significantly different than both firms organized 106 TABLE 4-24 ANOVA AND T-TEST: INFLUENCE OF FORMALIZATION ON USAGE I. Order Entry and Processing A. Number of Times Logistics Has Been Reorganized df - 3 F - 3.87 p - .010 Duncan Multiple Range Test (alpha - .05) Mean H Green Greenins* 2.1563 64 3 or 4 A 1.9948 194 1 or 2 s A 1.6190 63 none 8 c 1.4500 20 5 or more C Least Significant Difference (T/LSD): Difference Significant Comparisons:** Between Means (alpha = .05) 3 or 4 - none .537 3 or 4 - 5 .706 1 or 2 - none .376 1 or 2 - 5 .545 B. Participation in Overall Strategic Planning t-test t s 2.27 p - .024 Mean H Green Greenine* 2.0037 273 yes A 1.6889 90 no 8 II. Inventory Management A. Number of Years Logistics Formally Organized df - 3 r - 3.30 p - .020 Duncan Multiple Range Test (alpha = .05) Mean H Green Greenins* 2.1340 97 less than 3 A 2.0323 124 more than 10 A 1.9861 72 3 to 6 A 1.6125 80 7 to 10 B 107 Table 4-24 (cont'd.) Least Significant Difference (T/LSD): Difference Significant Comparisons:** Between Means (alpha - .05) <3 - 7-10 .522 >10 - 7-10 .420 3-6 - 7-10 .378 *Means with the same letter are not significantly different. **Only comparisons with statistically significant dif- ferences are reported. 108 for longer periods, over 10 years, or for a shorter period. While the firms organized for the shortest period of time, less than 3 years, had the highest mean score regarding usage of outside inventory management services, their mean usage score was not significantly different from firms in the 3-6 range or those organized over 10 years. The relationship between formalization and usage of specified outside logistics services was found to be consis- tent regarding both number of times logistics had been re- organized and number of years formally organized. A U- shaped relationship was noted for each. Firms at the extremes, for example those reporting either no reorganiza- tions or a great number of reorganizations, were found to have different usage patterns than the groups in the mid- range. A firm undergoing a low to moderate rate of re- organization, between 1 and 4 times during the previous five years, appears to be open to considering new strategic options. The firms with no reorganizations apparently are not receptive to new service options or new ways of doing business. Firms reorganizing 5 times or more may not have procedures in place to formally evaluate or consider new options because of their constant restructuring. Significant relationships were found between the level of the senior logistics executives within the firms and the anticipated usage of outside logistical services. Because of the dramatically different pattern compared to the other measures of formalization/outside logistical service usage 109 patterns, this particular’ variable was singled out for individual discussion. Further analysis centered on the potential two-way interaction between the number of logistical reorganizations and participation in overall strategic planning in relation to anticipated usage of outside order entry/processing ser- vices. Results are presented in Table 4-25. TABLE 4-25 ANOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation ' df F p Main Effects Number of Logistical Reorganizations . 3 3.95 .009 Participation in Overall Strategic Planning 1 5.17 .028 Interaction 3 0.98 .403 No significant interaction was found between the number of logistical reorganizations and participation in overall strategic planning. However, as detailed in Table 4-25, significant main effects were found for both variables re- garding anticipated usage of outside order entry/processing services. One possible explanation is that reorganizations may create a business environment favorably disposed to the consideration of outsourcing. As stated previously, firms whose logistics executives participate in overall strategic planning, report higher anticipated usage of outside order 110 entry/processing services. The executives have the opportu- nity to impact outsourcing decisions through their input to overall corporate planning. Size Question 1-d: Will larger manufacturing firms indicate lower levels of anticipated usage of outside logistical services than smaller manufacturing firms? Annual sales was used to determine the relative size of the respondent firms. As indicated in Table 4-3, no difference was noted in the usage of outside logistical ser- vices when firms were classified into size categories ac- cording to annual sales volume. Null hypotheses HO:1-d.1: HO:1-d.2: HO:1-d.3: HO:1-d.4: and HO:1-d.5 cannot be re- jected based upon these results. Prior empirical work provided justification for inves- tigating the influence of firm size further. Because of the significant findings discussed previously related to antici- pated outsourcing usage and level of the logistics execu- tive, ANCOVA analyses as detailed in Table 4-26 were con- ducted. Size was not found to be significant when tested as a covariate for any of the above noted relationships. Results are presented in Appendix F, Tables F-l through F-5. 111 TABLE 4-26 ANCOVA ANALXSIS - SALES COVARIATE Independent variables: Dependent Variables: (Anticipated Usage of Outside Services) Level of Senior Logistics Executive Transportation Level of Senior Logistics Executive . warehousing Level of Senior Logistics Executive Order Entry/Processing Level of Senior Logistics Executive Inventory Management Level of Senior Logistics Executive Freight Audit/Payment Industry Question l-e: Will manufacturing firms indi- cate variations in levels of anticipated usage of outside logistical services according to industry type? No significant differences were noted in the usage of outside logistical services when the respondents were analyzed based upon their industry grouping (Table 4-3) . Therefore, null hypotheses HO:1-e.l: HO:1-e.2: HO:1-e.3: HO:1-e.4: and HO:1-e.5 cannot be rejected. Common Attributes Index Question 1-f: Will leading Edge manufac- turing firms indicate higher levels of anticipated usage of outside logistical ser- vices than Emerging or' Norm ‘manufacturing firms? Data were analyzed in order to determine the relation- ship between Common Attribute Index group and the usage of 112 outside logistical services. The usage of outside ware- housing services was found to be dependent upon the Common Attributes Index (Table 4-27). No significant relationships were found between CAI group and any of the other outside logistical services. Null hypotheses HO:1-f.1: HO:1-f.3: HO:1-f.4: and HO:1-f.5 cannot be rejected. Data in Table 4-27 shows there is a significant difference between the usage of outside warehousing services by leading edge firms as compared to norm or emerging firms. The null hypothesis, HO:1-f .2, stating there would be no difference in levels of anticipated usage of outside ware- housing services based upon CAI group can be rejected. Leading edge firms reported they anticipated significantly greater usage than did the norm and emerging firms. Leading edge firms appear to be more sophisticated about considering outsourcing options and shifting logistical requirements to outside vendor when justified by cost and/or service bene- fits. Two relationships were examined for possible inter- action effects involving the CAI grouping variable. The two areas selected are shown in Table 4-28. 113 TABLE 4-27 ANOVA: INFLUENCE OF COMMON ATTRIBUTE INDEX GROUP ON USAGE I. Warehousing df - 2 F - 3.57 p = .0291 Duncan Multiple Range Test (alpha - .05) Nean H Green Greenins* 3.097 62 Leading Edge A 2.708 250 Norm B 2.557 61 Emerging B Least Significant Difference (T/LSD): Difference Significant Comparison:** Between Means (alpha - .05) Leading Edge - Norm .389 Leading Edge - Emerging .539 *Means with the same letter are not significantly different. **Only comparisons with statistically significant dif- ferences are reported. 114 TABLE 4-28 TWO-WAY ANOVA PROCEDURES - CAI GROUP Independent Variables: Dependent Variables: (Anticipated Outsourcing) CAI Group X Centralization Warehousing CAI Group X Strategic Orientation - Warehousing No significant relationship were found in either situa- tion. Results are presented in Appendix E (Tables E-12 and E-15 respectively). Set II WWW Deeieiene Centralization Question 2-a: Will external factors influence the decision to use outside logis- tical service vendors to a greater extent among decentralized manufacturing firms than among centralized manufacturing firms? As indicated in Table 4-5, no significant relationships were found regarding the level of centralization of the respondent firms and the importance of any of the six exter- nal factors: deregulation: services available: quality of service: data processing/communications services: management quality: and customer attitudes, hypothesized to influence the outsourcing decision. Therefore, null hypotheses HO:2- a.1: HO:2-a.2: HO:2-a.3: HO:2-a.4: HO:2-a.5: and HO:2-a.6 cannot be rejected. Even though no main effects were noted, sufficient theoretical support exists to hypothesize relationships 115 between centralization and strategic orientation which would impact the factors influencing outsourcing decisions. Two- way ANOVA's were used to test these relationships as well as to examine potential relationships between centralization and the variables found to be statistically significant in the one-way .ANOVA analysis (illustrated in Table 4-4). Table 4-29 lists the two-way ANOVA’s. Six significant relationships were found. These are presented in Tables 4-30 through 4-35. No other significant results were found regarding centralization. The results are included in Appendix E (Tables E-16 through E-28). 116 TABLE 4-29 TWO-WAY ANOVA PROCEDURES - CENTRALIZATION Independent variables: Centralization X Strategic Orientation Centralization X Strategic Orientation Centralization X Strategic Orientation Centralization X Strategic Orientation Centralization X Strategic Orientation Centralization X strategic Orientation Centralization X Logistics Strategic Plan Centralization X Logistics Strategic Plan Centralization X Partici- pation in Overall Strategic Planning Centralization X Partici- pation in Overall Strategic Planning Centralization X Logistics Mission Statement Centralization X Logistics Mission Statement Centralization X Logistics Mission Statement Centralization X Industry Group Centralization X Industry Group Centralization X Industry Group Centralization X Industry Group Centralization X CAI Group Centralization X CAI Group Dependent Variables: (Factors Influencing Outsourcing) Deregulation Services Available Service Quality Data Processing/Communications Management Quality Customer Attitudes Data Processing/Communications Management Quality Management Quality Customer Attitudes Deregulation Service Quality Management Quality Services Available Service Quality Management Quality Customer Attitudes Data Processing/Communications Management Quality 117 TABLE 4-30 ANOVA: INFLUENCE OF DEREGULATION Source of Variation df F p Main Effects Centralization 1 1.09 .299 Strategic Orientation 2 3.17 .044 Interaction 2 1.13 .325 No significant interaction was found between centralization and strategic orientation regarding the in- fluence of deregulation upon outsourcing decisions. As shown in Table 4-30 there was a significant main effect for strategic orientation. Depending on the strategic orienta- tion of the respondent firms, they reported variations in the influence of deregulation on outsourcing decisions. Average ratings for firms with each of the three strategies are 3 Mean* Importance Rating EQLDeregelenen agreement: 2.868 Market 2.549 Channel 2.506 Process *Averages reported in conjunction with Set II variables, those factors influencing the outsourcing decision, are based upon a 4-point scale where 1 - not important and 4 = very important. Firms with market-based strategies reported deregulation in- fluences outsourcing decisions to a greater extent than did firms with channel or process strategies. Market-based strategies emphasize consolidation of shipments and 118 coordination of logistical efforts. They appear to be more cognizant of the availability of new services resulting from deregulation than do the channel and process-based firms. TABLE 4-31 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Centralization 1 4.06 .045 Strategic Orientation 2 3.04 .050 Interaction 2 0.35 .708 Two significant main effects were found regarding the influence of vendor management quality on outsourcing decisions: 1) centralization and 2) strategic orientation. No significant interactions were noted (see Table 4-31) . Centralization or allocation of decision making power makes a difference in the influence of vendor management quality. The quality of vendor management is rated as less important to the purchase decision among centralized firms. A main effect was also noted for strategic orientation. Average importance ratings are shown below: Mean Importance Rating mm 3.323 . Channel 3.263 Market 3.039 Process Channel strategy firms found vendor management quality as more important to the outsourcing decision than did firms 119 with market and’process strategies. Channel firms are con- cerned with external control of inventories located down- stream in the distribution channel. High quality management within the outside vendor's operations, from a transporta- tion carrier or warehousing firm for example, can assist the logistics service purchaser by assuming responsibility and reducing risk associated with day-to-day operations. TABLE 4-32 ANOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F p Main Effects Centralization 1 4.80 .030 Strategic Orientation 2 0.44 .646 Interaction 2 2.62 .076 A significant main effect was found for centralization and the influence of customer attitudes on a firm's decision to outsource logistical services. The degree of centraliza- tion is indicative of how close strategic decision makers are to the firm's customers. In decentralized firms, the decision makers are likely to be in closer contact with customers than in centralized firms with decision making carried out at the corporate level. Therefore, the execu- tives within decentralized firms may be more aware of the importance of a customer orientation and communications. 120 TABLE 4-33 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Centralization 1 3.25 .073 Participation in Overall Strategic Planning 1 10.90 .001 Interaction 1 0.00 1.000 The influence of vendor management quality to the logistical outsourcing decision varies in relation to the extent of logistics executive participation in overall business unit strategic planning. As shown in Table 4-33, no significant interaction was found between centralization and participa- tion in overall strategic planning. Firms whose logistics executives participate in overall strategic planning reported vendor management quality is more important to the outsourcing decision. Mean Importance Rating Participation in Overall 3.204 Yes 2.941 NO The executives may be more aware of overall corporate objec- tives and the importance of customer service. Outside ven- dors with higher quality management are likely to maintain the requisite service levels and monitor the service relationships. 121 TABLE 4-34 ANOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F p Main Effects Centralization 1 2.90 .090 Participation in Overall Strategic Planning 1 5.54 .020 Interaction 1 0.00 1.000 While no significant interaction was found, two significant main effects were found related to the influence of customer attitudes on outsourcing decisions. The main effects as shown in Table 4-30 were: 1) centralization and 2) participation in overall strategic planning. Explana- tions for these findings are very similar to those discussed in connection with Table 4-32. Firms whose logistics execu- tives participate in overall strategic planning found customer attitudes more important than firms whose execu- tives don't participate: they averaged 3.195 versus 2.913 on a 4-point scale. TABLE 4-35 ANOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of variation df F p Main Effects Centralization 1 3.55 .061 CAI Group 2 3.11 .046 Interaction 2 0.00 1.000 122 No significant interaction was found between centralization and CAI group regarding the influence of management quality on outsourcing decisions . As presented in Table 4-35, a significant main effect was found for CAI group. Leading edge firms rated vendor management quality as more important to the outsourcing decision than did emerging and norm firms. Mean Importance Rating QAI_§IQEB 3.379 Leading Edge 3.140 ' Norm 2.873 Emerging Leading Edge firms are more efficient and generalIy better performers than norm and emerging firms. They recognize the importance of vendor management quality in maintaining ser- vice levels. Strategic Orientation Question 2-b: ‘Will external factors influence the decision to use outside logis- tical service vendors to a greater extent among manufacturing firms with process-based strategic orientation than among manufac- turing firms ‘with channel or ‘market-based strategies? Data were analyzed in order to determine the relation- ships between strategic orientation of the respondent firms and the influence of external factors on the decision to outsource logistical services. The influence of deregula- tion and management quality were found to vary based upon 123 the strategic orientation of the respondent firms (Table 4- 36). The results of the one-way ANOVA examining variations in the influence of deregulation based upon strategic orien- tation of the firm provides support for rejecting HO:2-b.1. The extent of the influence does vary in relation to strategic orientation. Results of the Duncan Multiple Range test show that firms with market-based strategies reported deregulation to be more influential that did firms with channel or process-based strategies. However, there was no statistically significant differences among the mean scores for firms reporting market, channel, or process strategies. The T/LSD results indicated a significant difference between firms with market and process-based strategies. Market- based firms found deregulation as more important in out- sourcing decisions than did process-based firms. The original research question asked whether firms with process-based strategies would be influenced more by external factors regarding the outsourcing decision. This was not found to be true regarding deregulation, however support was developed that variations occur due to strategic orientation. 124 TABLE 4-36 ANOVA: INFLUENCE OF STRATEGIC ORIENTATION I. Deregulation at - 2 F - 4.00 p - .0195 Duncan Multiple Range Test (alpha - .05) Mean H, Green Greenins* 2.8675 83 Market A 2.5385 26 Channel A 2.5062 162 Process A Least Significant Differences (T/LSD): Significant Comparison:** Difference Between Means (alpha a .05) Market - Process .361 II. Management Quality df - 2 F I 3.43 p = .0337 Duncan Multiple Range Test (alpha - .05) Been H Green Greenins* 3.3226 31 _ Channel A 3.2632 95 Market A 3.0387 181 Process A Least Significant Differences (T/LSD): Significant Comparison:** Difference Between Means (alpha - .05) None *Means with the same letter are not significantly different. **Only comparisons with statistically significant dif- ferences are reported. 125 Strategic orientation was also found to be significant in regard to the influence that management quality has upon outsourcing decisions. Overall variation was shown based upon strategic orientation. No ' further statement can be made as to the nature of that- influence because the mean scores as shown in Table 4-37 for firms with the three strategies are not significantly different. In absolute terms, management quality is most influential in the out- sourcing decision among firms with channel-based strategies. The following variables were analyzed in order to iden- tify interactions involving strategic orientation and other independent variables. Significant results, either main effect or interaction, were found for all the relationships listed in Table 4-37. Those results are discussed below in Tables 4-38 through 4- 48. As shown in Tables 4-38 through 4-41, a significant main effect was found for industry group in relation to the influence of specific factors on outsourcing decisions. The factors are services available, service quality, management quality, and customer attitudes. The influence of the external factors was found to be industry specific. The various industry groups view the factors differently when making outsourcing decisions indicating they have different evaluative criteria and procedures. 126 TABLE 4-37 TWO-WAY ANOVA PROCEDURES - CENTRALIZATION Independent Variables: Strategic Orientation X Industry Group Strategic Orientation X Industry Group Strategic Orientation X Industry Group Strategic Orientation X Industry Group Strategic orientation X Logistics Strategic Plan Strategic orientation X Participation in Overall Strategic Planning Strategic Orientation X Logistics Mission Statement Strategic Orientation X Logistics Mission Statement Strategic Orientation X Logistics Mission Statement Strategic Orientation X CAI Group Strategic Orientation X CAI Group Dependent Variables: (Factors Influencing Outsourcing) Services Available Service Quality Management Quality Customer Attitudes Data Processing/Communication Customer Attitudes Deregulation Service Quality Management Quality Data Processing/Communication Management Quality 127 TABLE 4-38 ANOVA: INFLUENCE OF SERVICES AVAILABLE Source of variation df F p Main Effects Strategic Orientation 2 0.79 .456 Industry Group 6 2.88 .010 Interaction 12 0.77 .672 TABLE 4-39 ANOVA: INFLUENCE OF SERVICE QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 0.55 .577 Industry Group 6 2.71 .014 Interaction 12 0.48 .914 TABLE 4-40 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 3.27 .040 Industry Group 6 3.12 .006 Interaction 12 0.94 .499 128 TABLE 4'41 ANOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F p Main Effects Strategic Orientation 2 0.10 .901 Industry Group 6 2.82 .011 Interaction ' 12 1.74 .064 Concerning the influence of vendor management quality on outsourcing decisions (Table 4-40), a significant main effect was also found for strategic orientation. Firms place greater or lesser importance on vendor management quality dependent upon .their strategic orientation. Channel-based firms emphasize vendor management quality more than market or process-based firms. Channel-based stra- tegies emphasize external control. Dependable outside ven- dors can help to maintain necessary logistics service quality levels and reduce the buyer's involvement in the service delivery. TABLE 4-42 ANOVA: INFLUENCE OF DATA PROCESSING/COMMUNICATIONS Source of Variation df F p Main Effects Strategic Orientation 2 1.66 .192 Logistics Strategic Plan 1 4.92 .027 Interaction 2 0.48 .620 129 A significant effect was found concerning logistics strategic plans. Firms with a formal logistics strategic plan reported vendor's data processing/communications ser- vices are influential regarding outsourcing decisions. Firms without formal logistics plans are less concerned about the data processing/communication services. Average ratings are shown below: Mean Importance Rating Leeieries_errareeie_zlan 2.968 Yes 2.772 No Formal strategic plans detail corporate objectives and pro- vide guidelines for achieving those goals. This may include the evaluation of ancillary services such as data processing when making outsourcing decisions. Table 4-43 presents findings regarding the potential interaction between strategic orientation and participation in overall stsrategic planning. No significant interaction was found. A main effect was found for participation of logistics executives in overall strategic planning regarding the influence of customer attitudes on outsourcing decisions. In instances where logistics executives participate, they report being more influenced by customer attitudes, average 3.20 versus 2.913, than do firms who do not include their logistics executives in the overall strategic planning process. 130 TABLE 4-43 ANOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F p Main Effects Strategic Orientation 2 0.16 .854 Participation in Overall Strategic Planning 1 10.01 .002 Interaction 2 0.79 .453 TABLE 4-44 ANOVA: INFLUENCE OF DEREGULATION Source of Variation df F p Main Effects Strategic Orientation 2 3.63 .028 Logistics Mission Statement 1 4.18 .042 Interaction 1 1.20 .030 As shown in Table 4-44, significant main effects and interaction were found between strategic orientation and logistics mission statement. concerning the influence of deregulation on outsourcing decisions. The strategies of a firm are selected to help achieve the corporate goals and mission. Deregulation and accompanying changes in outside logistical service offerings have provided firms with new strategic options. 131 TABLE 4-45 ANOVA: INFLUENCE OF SERVICE QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 0.44 .645 Logistics Mission Statement 1 7.59 .006 Interaction 2 0.20 .818 A significant main effect was found for logistics mis- sion statement regarding the influence of vendor service quality on outsourcing decisions (Table 4-45). Firms with logistics mission statements reported service quality as more influential in their outsourcing decisions. Mean Importance Rating Leeieriee_Nieeien_§reeemenr 3.716 Yes 3.515 No The mission statement provides a framework for guiding operational decisions. For example, the statement may em- phasize the importance of reliable customer service. This would reinforce the need for using dependable vendors with high quality services. 132 TABLE 4-46 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 3.94 .020 Logistics Mission Statement 1 7.58 .006 Interaction 2 1.50 .226 Significant main effects were found for strategic orientation and logistics mission statement regarding the influence of vendor management quality on the outsourcing decision. No significant interaction was found (Table 4- 46). Variations in the influence of vendor management quality was found according to strategic orientation of the respondent firms. Channel-based firms, averaging 3.323 on a 4-point scale, are more influenced by management quality than market (3.263) or process (3.039) firms. Channel-based strategies place greater emphasis upon external control and external relationships than do market or process strategies. TABLE 4-47 ANOVA: INFLUENCE OF DATA PROCESSINC/COMMUNICATIONS Source of Variation 'df F p Main Effects Strategic Orientation 2 6.67 .001 CAI Group 2 1.64 .195 Interaction 4 1.40 .233 133 A significant main effect was found for CAI group re- garding the influence of 'vendor' data proces- sing/communications services on outsourcing decisions. No significant interaction was noted. Leading edge firms ap- pear to be more aware of the importance of data processing services to support outsourcing relationships. Mean Importance Rating GAI_§IQQB 3.117 Leading Edge 2 . 868 Norm 2.600 Emerging TABLE 4-48 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 3.51 .031 CAI Group 2 5.15 .006 Interaction 4 0.63 .638 While no significant interaction was found, significant main effects were found for strategic orientation and CAI group as related to the influence of vendor management quality on outsourcing decisions (Table 4-48). Analysis centering on strategic orientation revealed, as has been discussed previously, firms with channel-based strategies are more aware of the importance of vendor management quality than are market and process-based firms. 134 Similarly, leading edge firms emphasize vendor management quality more than do norm and emerging firms. To conclude the analysis of potentially significant in- teractions involving strategic orientation and other inde- pendent variables, a limited series of three-way ANOVA's were evaluated. Specific relationships examined are pre- sented in Table 4-49. Significant main effects were found: however, inasmuch as explanations for main effects relationships have been discussed at length above, it would be repetitious to re- state them. No significant three-way interactions were found. Results are presented in Appendix E (Tables E-29 through E-34). 135 TABLE 4-49 THREE-WAY ANOVA PROCEDURE Dependent Variable: Influence of Vendor Management Quality on Outsourcing Independent Variables: Strategic Orientation X Industry Group X Participation in Overall Strategic Planning Strategic Orientation X Industry Group X Logistics Mission Statement Strategic Orientation X Industry Group x CAI Group Industry Group X Logistics Strategic Plan X CAI Group Industry Group X Logistics Strategic Plan X Participation in Overall Strategic Planning Participation in Overall Strategic Planning X Logistics Mission Statement X Strategic Orientation 136 Formalization Question 2-c: Will external factors influence the decision to use outside logis- tical service vendors less among more formalized manufacturing firms than among less formalized manufacturing firms? Formalization as operationalized by the existence of a formal logistics strategic plan: participation in overall strategic planning for the business unit: and the existence of a formal logistics mission statement were found to make a difference in the level of influence the external factors had upon the decision to outsource logistical services. Significant relationships are illustrated in Table 4-6: a review of the information is provided in Table 4-50 below. Based on the results presented in Table 4-45, at least partial support exists for rejecting HO:2-c.1: HO:2-c.3: HO:2-c.4: HO:2-c.5: and HO:2-c.6. The remaining null hy- potheses, HO:2-c.2, cannot be rejected. Significant dif- ferences are discussed below. More formalized firms as indicated by the existence of a formal mission statement reported deregulation was significantly more important in outsourcing decisions than did firms without formal mission statements. These firms appear to be more aware of the impact of deregulation upon their operations. Similar results were found regarding ven- dor management quality. Firms with formal logistics mission statements place significantly more importance on service quality than do firms not having formal logistics mission statements. 137 TABLE 4-50 T-TESTS: INFLUENCE OF EXTERNAL FACTORS ON OUTSOURCING II. III. IV. Deregulation A. Logistics Mission Statement t - 2.09 p - .04 Mean N. Green 2.57 198 No 2.83 92 Yes Quality of Service A. Logistics Mission Statement t - 3.51 p - .01 Mean N 92992 3.51 237 No 3.72 116 Yes Data Processing/Communications Services A. Logistics Strategic Plan t - 2.13 p - .03 Mean M. Green 2.77 180 No 2.97 157 Yes Management Quality A. Logistics Strategic Plan t a 1.98 p - .05 Mean M Green 3.05 183 No 3.23 155 Yes 138 Table 4-50 (cont'd.) B. Participation in Overall Strategic Planning t - 2.64 p - .01 Mean N Green 2.94 85 No 3.20 250 Yes C. Logistics Mission Statement t - 2.99 p - .003 MEAD N GIQNB 3.04 228 No 3.32 106 Yes V. Customer Attitudes A. Participate in Overall Strategic Planning t - 2.49 p - .01 Mean M Green 2.91 80 No 3.20 241 Yes 139 This pattern holds for each of the significant relationships in Table 4-50. In each instance, more formalized firms reported the external factors as signifi- cantly more important in influencing outsourcing decisions than did less formalized firms. The original research ques- tion asked if external factors influence outsourcing deci- sions less among more formalized manufacturing firms than among less formalized manufacturing firms. This was not found to be true. Formalized procedures and structures had been hypothesized to reduce decision-makers reliance upon external factors. It appears as those formalized rules and procedures may encourage logistics executives to consider the potential importance of selected external factors when making outsourcing decisions. Prescribed rules and proce- dures set in advance are likely to result in more thorough examination of options and fewer arbitrary decisions. Additional analysis utilizing two-way ANOVA’s was undertaken to determine if significant interactions existed involving selected formalization measures. The relation- ships investigated are presented in Table 4-51. 140 TABLE 4-51 TWO-WAY ANOVA PROCEDURES - FORMALIZATION Independent Variables: Dependent Variables: (Factors Influencing Outsourcing) Logistics Strategic Plan X Logistics Mission State- ment Management Quality Logistics Strategic Plan X CAI Group Management Quality Logistics Mission State- . ment X Industry Group Service Quality Logistics Mission State- ment X CAI Group Management Quality Participation in Overall Strategic Planning X Industry Group ' Customer Attitudes No significant interactions were found concerning the five relationships. Individual significant main effects are discussed below. . TABLE 4-52 ANOVA: INFLUENCE OF MANAGEMENT QUALITY q Source of Variation df F p Main Effects Logistics Strategic Plan ’ 1 3.33 .069 Logistics Mission Statement 1 8.04 .005 Interaction 1 0.00 1.000 A significant main effect was found for logistics mis- sion statement regarding the importance of vendor management quality to the outsourcing decision. Mere formalized firms report vendor management quality is a significantly more 141 important decision factor for outsourcing than do less formalized firms. Mean Importance Rating Leeiariea_Misaien_Sreremenr 3.321 Yes 3.044 No More formalized firm recognize the importance of evaluating various aspects of outside vendor's "service package.” The quality of the vendors management and, by extension, their ability to provide premium or high quality service is more important to firms with higher levels of formalization. TABLE 4-53 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Logistics Strategic Plan 1 4.00 .046 CAI Group 2 6.34 .002 Interaction 2 0.00 1.000 Significant main effects were found for both logistics strategic plan and CAI group concerning the influence of vendor management quality on logistical outsourcing deci- sions (Table 4-53). Firms with a logistics strategic plan rate the influence of vendor management quality as significantly more 142 important than do firms not having a formal plan, 3.23 com- pared to 3.05 on a 4-point scale. Formalized rules or pro- cedures may prescribe an appropriate service evaluation pro- cess which would incorporate an assessment of the perfor- mance capabilities of outside vendors' management. Variations were found in the importance of vendor management quality based upon CAI group of respondents. In absolute terms, leading edge firms report vendor management quality has more influence upon outsourcing decisions than do norm or emerging firms. However, there were no statisti- cally significant differences between the average ratings for leading edge and norm. A significant difference was found between leading edge and emerging. Mean Importance Rating 251.92922 3.379 Leading Edge 3.140 Norm 2.873 Emerging Leading edge firms appear to place more importance upon com- prehensive service evaluation and consideration of the buyer-seller interface than do the norm and emerging firms. This is reflective of a trend toward maintaining longer-term interactive relationships. 143 TABLE 4-54 ANOVA: INFLUENCE OF SERVICE QUALITY Source of variation df F p Main Effects Logistics Mission Statement 6 2.27 .037 Industry Group 1 8.65 .004 Interaction 6 1.55 .160 Significant main effects were noted for logistics mis- sion statement and industry group regarding the inportance of service quality when making outsourcing decisions. Firms with formal logistics mission statements reported service quality is significantly more important in influencing out- sourcing decisions than did firms without formal logistics mission statements, average importance rating 3.716 compared to 3.515. Formal logistics mission statements provide a general orientation for firm decision makers. The emphasis on planning and formal procedures encourages careful evalua- tion of outsourcing options. The influence of service quality on the outsourcing decision was found to be industry-specific. Firms in the electronics/computers and food groups were more likely to indicate service quality was important in the outsourcing decision than were respondents in the other industry groups. The only statistically significant difference was found between firms in the motor/transportation equipment group and all of the other groups. The motor/transportation 144 equipment firms reported service quality was significantly less important than the other groups did. The logistical needs of firms within the motor/transportation ‘equipment industry' are less complex than the other industries in that shipments are more homo- geneous. Firms in industries such as electronics/computers and food handle many more products, more frequent shipments, and require additional services such as temperature control or special handling to avoid damage or contamination com- pared to the motor/transportation equipment industry. Because of product proliferation, the volume of merchandise shipped, and. generally’ short. order' cycles 'with frequent deliveries, service quality is crucial. Shipments within the motor/transportation equipment segment are more uniform and needs are easier to specify in advance. . Mean Importance Rating MW We 3.708 Electronics/Computers 3.707 Food 3.619 Textiles 3.596 Forest Related 3.549 Pharmaceuticals 3.432 Mining 3.310 Motor/Transportation Equipment 145 TABLE 4-55 ANOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Logistics Mission Statement 1 8.99 .003 Industry Group 2 5.49 .005 Interaction 2 0.00 1.000 As presented in Table 4-55, significant main effects were found for logistics mission statement and CAI group. The relevance of these main effects have been discussed pre- viously. TABLE 4-56 ANOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F p Main Effects Participation in Overall Strategic Planning 1 6.06 .014 Industry Group 6 3.02 .007 Interaction 6 1.68 .126 Significant main effects were found for participation in overall strategic planning and industry group in relation to the importance of customer attitudes in influencing out- sourcing decisions (Table 4-56). 146 More formalized firms, those with logistics executives participate in overall strategic planning, rate customer at- titudes as significantly more important in influencing out- sourcing. These firms may have formal control and perfor- mance measurement procedures in place and are, therefore, more aware of customer reactions. Industry specific variations in the importance of cus- tomer attitude influence on outsourcing decisions were found. Firms with the forest-related and elec- tronics/computers groups rate the influence of customer at- titudes on outsourcing decisions as significantly more im- portant than do firms in the other industry groups. This may indicate more of a customer orientation. Distribution costs for these two groups are relatively high compared to the other groups. Forest-related products, furniture for example, are ‘bulky resulting in high transportation costs and specialized handling. Electronics/computer equipment also incur higher transportation costs, but for a different reasons. This industry is characterized by small shipments often requiring expedited deliveries resulting in premium freight charges. Because service is so important in these industries, the service vendor is a key link. However, the buyers must be favorably disposed to relationships involving a third party provider. 147 Mean Importance Rating WW We 3.432 Forest-Related 3.348 Electronics/Computers 3.132 Food 3.060 Pharmaceuticals 3.000 Textiles 2.941 Mining 2.784 Motor/Transportation Equipment In conclusion, many instances. of significant differences were noted when respondents were examined based upon degree of formalization. The results presented show respondents from more formalized manufacturing firms found selected external factors to be more influential regarding logistical outsourcing decision than did respondents from less formalized manufacturing firms. One additional area of analysis was investigated in relation to formalization. It was theorized that firms' at- titudes toward outsourcing and the evaluative criteria used could vary based upon: 1) the number of years logistics had been organized and/or 2) the number of responsibilities as- signed to the logistical organization. Each of these was tested, separately, as a covariate. The specific relation- ships examined are reported in Table 4-57. Results are presented in Appendix F, Tables F-6 through F-21. 148 TABLE 4-57 ANCOVA ANALYSIS Independent Variables: Dependent Variables: (Factors Influencing Outsourcing) Strategic Orientation Deregulation Industry Group Services Available Industry Group Service Quality CAI Group Data Processing/Communications Strategic Orientation Management Quality Industry Group Management Quality CAI Group Management Quality Industry Group Customer Attitudes The number of years logistics has been formally organized was not found to be significant when tested as a covariate for any of the above noted relationships. The number of logistical responsibilities covariate was found to have a significant effect (F - 4.84, p a .029) only regarding the impact of strategic orientation related to the influence of vendor management quality on outsourcing deci- sions. Strategic orientation and the scope of in-house logistical coverage in combination result in variations in influence of vendor management quality. Size Question 2-d: Will external factors influence the decision to use outside logis- tical service vendors to a lesser extent among larger manufacturing firms than among smaller manufacturing firms? Annual sales was used to determine the relative size of the respondent firms. As indicated in Table 4-2, no dif- ference. was noted regarding the influence of external 149 factors on the logistical outsourcing decision when firms were classified into size categories according to annual sales volume. Null hypotheses HO:2-d.1: HO:2-d.2: HO:2-d.3: HO:2-d.4: HO:2-d.5: and HO:2-d.6 cannot be rejected based upon these results. Because previous researchers have found differences in firms' performance and behavior (Dalton at al, 1980), size was tested as a covariate. Specific relationships examined are the same as those reported in Table 4-57. The size covariate was found to have a significant ef- fect (F 8 4.21, p -.041) only in the case of industry group regarding the influence of service quality on logistical outsourcing decisions. It appears that firms' reliance upon service quality for evaluating outsourcing decisions varies not only by industry affiliation, but also by size of firm as defined by annual sales. Industry Question 2-e: Will external factors influence the decision to use outside logis- tical service vendors to varying degrees based upon industry affiliation of the manu- facturing firms? Data were analyzed in order to determine the relation- ship between industry grouping and the factors influencing logistical outsourcing decisions. The influence of service quality, management quality, and customer attitudes were found to be dependent upon industry group (Table 4-58). No significant relationships were found between industry group 150 and any of the other external factors. Null hypotheses HO:2-e.1: HO:2-e.2, and HO:2-e.4 cannot be rejected. Significant main effects were found for each of exter- nal factors listed above: service quality, management quality, and customer attitudes. The influence of the spe- cific factors varies by industry. Further analysis of the mean scores by industry group revealed statistically significant differences as noted in the T/LSD tests. Common Attributes Index 0 Question 2-f: Will external factors influence the decision to use outside logis- tical services more among Leading Edge manu- facturing firms than among Emerging or Norm manufacturing firms? Data were analyzed 'to investigate the potential relationship between Common Attributes Index group and the factors influencing logistical outsourcing decisions. The influence of data processing/communications and vendor management quality upon outsourcing decisions was found to be dependent upon CAI group (Table 4-59) . No significant relationships were found between CAI group and any of the other external factors. Null hypotheses HO:2-f.1: HO:2-f.2: HO:2-f.3: and HO:2-f.6 cannot be rejected. 151 TABLE 4-58 ANOVA: IMPORTANCE OF INDUSTRY GROUP I. Service Quality df = 6 F - 2.17 p = .045 Duncan Multiple Range Test (alpha - .05) Mean M Green Greenins* 3.708 48 Electronics/Computers A 3.707 82 Food A 3.619 21 Textiles B A 3.596 52 Forest-Related B A 3.549 71 Pharmaceuticals B A 3.432 37 Mining B A 3.310 42 Motor/Transportation Equipment B Least Significant Difference (T/LSD): Difference Significant Comparisons:** Between Means (alpha - .05) Electronics/Computers - Motor Transportation .3988 Food - Mining .2749 Food - Motor Transportation .3978 Forest Related - Motor Transportation .2866 II. Management Quality at - 6 F - 3.47 p = .002 Duncan Multiple Range Test (alpha 8 .05) Mesa M Green Greenins* 3.350 80 Food A 3.292 48 Forest Related A 3.188 69 Pharmaceuticals B A 3.136 44 Electronics/Computers B A C 3.053 19 Textiles B A C 2.878 41 Motor Transportation Equipment B C 2.768 34 Mining C 152 Table 4-58 (cont’d.) Least Significant Difference (T/LSD): Difference Significant Comparisons:** Between Means (alpha - .05) Food - Motor Transportation .472 Food - Mining .585 Forest Related - Motor Transportation .414 Forest Related - Mining .527 Pharmaceuticals - Motor Transportation .310 Pharmaceuticals - Mining .424 Electronics/Computers - Mining .372 III. Customer Attitudes df - 6 F - 2.76 p = .013 Duncan Multiple Range Test (alpha - .05) Men M Green Greenine* 3.432 44 Forest-Related A 3.348 46 Electronic/Computers B A 3.132 76 Food B A C 3.060 67 Pharmaceuticals B A C 3.000 19 Textiles B A C 2.941 34 Mining 8 c 2.784 37 Motor/Transportation Equipment C Least Significant Difference (T/LSD): Difference Significant Comparisons:** Between Means (alpha - .05) Forest Related - Pharmaceuticals .372 Forest Related - Mining .491 Forest Related - Motor Transportation .648 Electronics/Computers - Mining .407 Electronics/Computers - Motor Transportation .564 Food - Motor Transportation .348 *Means with the same letter are not significantly different. ** Only comparisons with statistically significant dif- ferences are reported. 153 TABLE 4-59 ANOVA: IMPORTANCE OF COMMON ATTRIBUTES INDEX GROUP I. Data Processing/Communications df - 2 F - 5.37 p = .005 Duncan Multiple Range Test (alpha - .05) Mean M Green Greenins* 3.117 . 60 Leading Edge A 2.868 228 Norm B A 2.596 52 Emerging B Least Significant Differences (T/LSD): Significant Comparisons:** Difference Between Means (alpha - .05) Leading Edge - Norm .248 Leading Edge - Emerging .521 Norm - Emerging .272 II. 'Management Quality df - 2 F - 5.91 p = .003 Duncan Multiple Range Test (alpha 2 .05) Mean M Green Greenins* 3.379 58 Leading Edge A 3.140 228 Norm A 2.873 55 Emerging B Least Significant Differences (T/LSD): Significant Comparisons:** Difference Between Means (alpha - .05) Leading Edge - Emerging .506 Norm - Emerging .267 *Means with the same letter are not significantly different. **Only comparisons with statistically significant dif- ferences are reported. 154 Significant. main effects were found for data pro- cessing/communications and vendor management quality. The influence of these factors in logistical outsourcing deci- sions is dependent upon CAI group. In each case, leading edge firms were found to place more importance on these factors than did norm and emerging firms. There was a significant difference between leading edge and emerging firm importance ratings as well as between norm and emerging firm's importance ratings. Leading edge firms appear to be more aware of the importance of communications and main- taining close relations with outside vendors. SUMMARY Statistically significant findings have been presented in this chapter. With regard to the anticipated usage of outside logistical services, significant relationships were found for 1) the years logistics has been formally organized and inventory management services: 2) number of logistical reorganizations and order entry/processing services: 3) the level of the senior logistics executive and all five logis- tical services: 4) participation in overall strategic plan- ning and order entry/processing services: and 5) Common At- tributes Index group and warehousing services. The first four items listed are measures of formalization. The initial one-way ANOVA procedures did not reveal significant relationships between anticipated outsourcing levels and the 155 remaining independent ‘variables: 1) centralization: 2) strategic orientation: 3) size: and 4) industry group. Further analyses centering on possible significant inter- actions among the independent variables have been discussed in this chapter. For the external factors influencing outsourcing deci- sions, significant relationships were found involving: 10 strategic orientation for deregulation and vendor management quality: 2) logistics strategic plan for data pro- cessing/communications and *vendor"management quality: 3) participation in overall strategic planning and vendor management quality and customer attitudes: 4) logistics mis- sion statement and deregulation, service quality, and vendor management quality: 5) industry group and service quality, vendor management quality, and customer attitudes: and 6) Common Attributes Index and data processing/communications and vendor management quality. No significant relationships were found between the external factors and centralization or size in the initial one-way ANOVA procedures. Results of additional analysis procedures were presented in this chapter. CHAPTER FIVE - SUMMARY AND CONCLUSIONS This concluding chapter has three objectives. The first is to summarize research findings and conclusions. The second objective is to discuss managerial implications of the research. The final objective is to suggest areas for future research concerning outsourcing of services. The chapter is structured into four sections: 1) a summary of the research: 2) conclusions: 3) managerial im- plications: and 4) suggestions for future research. RESEARCH SUMMARY The research examined the anticipated usage of external logistical services by United States manufacturing firms, factors influencing the outsourcing decisions, and firm spe- cific usage patterns. Significant findings are summarized in this section. The discussion is organized into two parts. The first is concerned with anticipated usage. The second part summarizes research concerning factors influenc- ing the outsourcing decision. For ease of reading, findings are summarized in reference to the applicable research questions. 156 157 set I - W Question l-a: Centralization . No significant differences were noted in the antici- pated use of outside logistical services when respondents were analyzed according to degree of centralization. Based upon this research, centralized and decentralized firms are equally as likely to outsource logistical services. One exception was noted. A significant interaction was found in relation to centralization and strategic orienta- tion (p - .04) influencing the outsourcing of order entry/processing services. Centralization refers to the locus of decision making authority and control within an organization. The implication of this interaction is that strategy is going to influence decisions concerning the out- sourcing of order entry/process services in both centralized and decentralized structures. Decision makers are influenced and guided by the firm’s strategies. The research was limited to the examination of centralized versus decentralized firms, structures B and D versus A and C illustrated in Appendix A, Question #14. Additional analyses testing different groupings, for example A versus B or the addition of structure E to the analyses, could provide greater insight into the influence of struc- ture. Structure E, a combination of centralized and decen- tralized logistical organization, was not included in the current analyses. Data was also collected as to whether the organization was functional or divisional. Functional 158 organization refers to firms organized at the corporate level by functional areas such as manufacturing or sales/marketing. Divisional organization involves organizing at the corporate level by business units. Relationships based upon functional versus divisionalized structuring may provide greater insight into outsourcing patterns. Question 1-b: Strategic Orientation No significant differences were noted in the antici- pated usage of outside logistical services based upon strategic orientation. The sole exception was noted above. Based upon this research, firms who favored either channel, market, or process-based strategies were equally likely to outsource logistics services. Question 1-c: Formalization The formalization within a firm was found to influence the anticipated usage of outside logistical services as follows. Significant relationships were isolated between: 1) the average years a firm had been formally organized and anticipated outsourcing of inventory management services: 2) the number of logistical reorganizations and anticipated outsourcing of order entry/processing services: 3) partici- pation of logistics executives in overall business unit strategic planning and the anticipated level of outsourcing of order entry/processing services. The specific relationship between aspects of formaliza- tion and the anticipated usage of outsourcing varied. Firms 159 organized for the shortest time, less than 3 years, antici- pated greater usage of outside inventory management ser- vices. These firms, still in the start-up phase of their operations, would seem to be likely candidates for out- sourcing. New enterprises often lack the resources needed to handle all phases of business operations and, therefore, purchase selected services from external providers. Although. not statistically significant different .in terms of group means, firms who have reorganized from 3 to 4 times in the previous five years reported the greatest anticipated usage of outside order entry/processing ser- vices. Possible explanations include the fact that out- sourcing permits the handling of daily operations without interruption during reorganization periods. The reorganiza- tions could also be the result of comparison of make-or-buy culminating in a decision to either reduce or eliminate internal handling of selected logistics services. Out- sourcing can be expected to be selected when cost and/or service benefits can be realized from external purchase. Firms with logistics executives participating in over- all business unit strategic planning anticipated using significantly more outside order entry/processing services than firms whose logistics executives do not participate in corporate strategic planning. These logistics executives have the opportunity to influence corporate philosophy and are strategically positioned. Input into overall strategic planning influences operating decisions made throughout the 160 organization. Large-scale utilization of outsourcing ser- vices does not become a reality 'without top-management support. A significant relationship was found between level of the senior logistics executive and anticipated usage of each of the five logistical services. The nature of the influence varied by type of service. The overall finding is that degree of formalization has little or no impact on the likelihood that a firm will pro- cure outside logistical services. Question l-d: Size No significant differences were noted in the antici- pated usage of outside logistical services when firms were analyzed according to size. Size was operationalized by an- nual sales volume. Based upon research findings, larger firms and smaller firms are equally as likely to outsource logistical services. Additional research investigating the influence of size is needed to better understand the relationship. Question 1-e: Industry Group No significant differences were noted in the antici- pated usage of outside logistical services based upon industry affiliation. Firms in different industries are equally likely to outsource logistical services. 161 Question 1-f: Common Attributes Index Group A significant relationship was found between Common Attribute Index group and anticipated usage of outside ware- housing services. Leading edge firms are significantly more likely to use outside warehousing services than are norm and emerging firms. Analysis based upon Common Attributes Index classifica- tion did not find significant differences in the anticipated usage of the other outside services: transportation: order entry/processing: inventory management: and freight audit/payment. Based upon this research, leading edge, norm, and emerging firms are equally as likely to outsource these four logistical services. Set II - WWW Deeieiene Question 2-a: Centralization The firm's level of centralization was found to be significant in relation to the influence of external factors on outsourcing decisions in two instances. When potential interactions were checked between centralization and strategic orientation regarding influence of 1) vendor management quality and 2) customer attitudes, significant main effects were found for centralization (p - .045 and .030 respectively). No significant differences were found regarding level of centralization and the influence of the other external factors such as deregulation: services available: service 162 quality: and data processing/communications service. The influence of those factors on the outsourcing decision is likely to be similar regardless of level of centralization. Question 2-b: Strategic Orientation Significant relationships were found between strategic orientation and the influence of : 1) deregulation and 2) vendor management quality to outsourcing decisions. Analy- sis of the mean importance rating for firms having a spe- cific strategic preference did not support significant dif- ferences in the influence of the two factors. However, firms with market-based strategies rated deregulation as more important than did firms with either channel or process strategies. Firms with channel strategies rated vendor management quality as more important in outsourcing decisions than did the market and process-based firms. No significant relationships were found between strate- gic orientation and the external factors of services avail- able: quality of service: data processing/communications: and customer attitudes. The findings suggest that the im- pact of these external factors is likely to be similar regardless of a firm's logistics strategy. Question 2-c: Formalization Significant relationships were found involving three measures of formalization and external factors. Firms that have a formal logistics strategic plan are more likely to consider vendor management quality as significant when evaluating outsourcing. Formal strategic 163 plans enumerate corporate objectives and provide guidelines for achieving those objectives. Typically corporate objec- tives include specification of service level goals. The service vendor' s management plays a vital role in main- taining desired service levels. The nonstandard nature of services encourages close relationship between buyers and vendors. Firms with formal logistics strategic plans were found significantly more likely to consider data pro- cessing/communications: services important to outsourcing than firms without formal logistics strategic plans. Firms whose logistics executives participate in overall business unit strategic planning place significantly more importance on both vendor management quality and customer attitudes than do firms who do not include their logistics executives in this activity. This illustrates recognition of the relational nature of buyer-seller interactions. Customers must be receptive or favorably disposed toward the use of outside service vendors. They must feel secure that adequate control can be maintained over the goods they are purchasing. If customers are receptive to the use of out- side logistics vendors, the purchasing firm must then evaluate the capabilities of the available external service providers. The quality of vendor management and their ability to provide reliable service are important sourcing criteria. The vendor's management is responsible for both defining and maintaining quality levels. 164 Firms with formal logistics mission statements were significantly more likely to rate deregulation, service quality, and vendor management quality as important in influencing decisions to outsource logistical services than firms without formal logistics mission statements. Mission statements emphasize end results and focus on what business goals do. For example, the mission may be to maintain the position of . a premier service company providing guaranteed two-day delivery. By formally stating the firm' s mission, attention is focused on means of achieving the mission and evaluating performance. Consideration of new options and a quality orientation become more a matter of standard proce- dure for these firms. ‘ Each of the results cited above provide support for the conclusions that formalized firms will be influenced more by external factors when making outsourcing decisions. The research question had suggested that more formalized firms would be influenced less by the external factors. No significant differences were found with respect to formalization regarding the influence of: services avail- able; data processing/communications services: and customer attitudes on outsourcing decisions. The findings suggest that the impact of these factors is likely to be similar 165 regardless of firms' level of formalization. As an example, service availability is a primary determinant of the desir- ability of outsourcing. All firms, regardless of formaliza- tion levels, will evaluate range of service availability when making an outsourcing decision. Question 2-d: size No significant differences were found regarding the influence of the external factors upon outsourcing according to size;' This research supports the conclusion that large and small firms are likely to behave similarly regarding the impact of external factors on outsourcing decisions. Question 2-e: Industry significant relationships were found between industry group and the influence of service quality, vendor manage- ment quality; and customer attitudes on outsourcing decisions. No consistent pattern was found as to the nature of the influence. No significant differences were found in the influence of deregulation, services available, and data. pro- cessing/communications upon the outsourcing decisions based upon industry affiliation. Regardless of industry group firms are likely to be influenced similarly by the three external factors. Question 2-e: Common Attributes Index Group significant differences were found regarding the influence of both data processing/communications and vendor management quality upon outsourcing decisions when firms 166 were analyzed based upon their Common Attributes Index group. Leading edge firms are significantly more likely to rate those two factors as important than are emerging firms. There was no significant differences between leading edge and norm firms. No significant differences were found concerning: deregulation: services available; service quality; and customer attitudes based upon Common Attributes Index grouping. LIMITATIONS . This research has a number of limitations. The research was restricted' to United States manufacturing firms. The firms selected were believed to be logistically sensitive in that they were members of a logistics profes- sional association. Their willingness to participate in the survey is also indicative of an awareness of the importance of logistics. These two restrictions tend to limit generalizability of the results. The responses reported might differ from results obtained from a randomly drawn sample of manufacturing firm logistics executives. To contain the scope of the research to manageable pro- portions, a limited number of variables were selected for analysis. Expansion to include more and different variables in future efforts may increase understanding in the area of outsourcing. The variables selected for the research could be operationalized differently. For example, the controversy 167 involving measurement of firm size has been discussed previously. Further work could investigate the impact of size by defining size in terms of number of employees or total assets. As another example, respondents were assigned to one of seven industry groups. Disaggregation or regrouping into other configurations may provide relevant information. Finally, an alpha of .05 was used for determination of statistical significance. This is a conventionally used and conservative significance level. Analysis of results using a more liberal .10 significance level would reveal somewhat different usage and influence patterns which might be of greater explanatory value. CONCLUSIONS Conclusions are generalized in three areas: 1) usage levels of outsourced logistical services; 2) firm-specific usage patterns; and 3) the influence of external factors upon outsourcing. USAGE LEVELS Different patterns of anticipated usage levels for logistical services were found by type of service. Trans- portation and warehousing and, to a somewhat lesser degree, freight audit/payment services are more apt to be outsourced more than order entry/processing and inventory management services. 168 Transportation and warehousing both involve consider- able capital commitment. Hany firms have well-established management practices which place emphasis upon taking advan- tage of readily available external services especially for peak or overflow demand situations. Outsourcing of these services allows firms to maximize flexibility. They can gain almost immediate entrance into new markets and can tailor their services to customer needs. Transportation and warehousing also present ideal can- didates for outsourcing because they are easily divisible or capable of being partitioned. For example, a portion of a firm's transportation needs can be obtained externally as needed. It is much more difficult to secure information- related needs on a piecemeal basis. Information must be coordinated and integrated throughout operations. It is projected that firms will outsource fewer infor- mation-related services. The anticipated usage of order entry/processing and inventory management services supports this projection. The data indicates firms desire to main- tain close control over information requirements for both strategic planning and daily operations. Order cycle infor- mation and inventory information are the lifeblood of a logistics system. Freight audit/payment services are different in that they represent "after the fact” data. Order and inventory information are needed to provide product to customers in a 169 timely manner. Freight audit and payment are post-trans- action activities. Firms appear more willing to outsource freight audit/payment services than order and inventory information because there is less urgency or immediate need for information. Additionally, some firms resist out- sourcing of order entry/processing and inventory management needs because of security concerns regarding sensitive, pro- prietary data. In general, information-related needs will be out- sourced less than transportation and warehousing require- ments. Security concerns and a need for close control and immediate access influence the strategic decisions on the outsourcing of information-related services. Also, lower cost of computing and information services will encourage more firms to develop systems internally. New service options, accompanying increased flexibility and capability, and reduced capital commitment work in concert to provide more favorable attitudes toward the external purchase of transportation and warehousing services. The increase of outsourcing of these two services is expected to keep pace with overall business growth. FIRM-SPECIFIC USAGE PATTERNS Overall few patterns emerged as to the relationships between the firm-specific characteristics such as central- ization; strategic orientation: formalization: size: industry; and Common Attributes Index group and anticipated usage of outside logistical services. While there is no 170 obvious pattern, it appears unlikely theoretically that structure has no effect. Additional investigation may pro- vide insight into the influence of both structure and strategy upon logistical outsourcing. Size and industry were not found to be important deter- minants of outsourcing. Common Attributes Index group was significant in only one instance. Leading edge firms were more receptive to outsourcing warehousing services than were norm and emerging firms. Leading edge firms are more inno- vative and generally better performing firms. They would be more likely to take advantage of shifting functional needs when economic and/or service benefits can be realized. The formalization ‘measures, specifically numbers of years organized: time reorganized: and. participation in overall business unit strategic planning, had limited value for predicting planned usage of outside services. Regard- less of formalization level, firms are likely to exhibit similar patterns for usage of outside logistical services. The strongest relationship was between level of the senior logistics executive and a firm's anticipated usage of outside logistical services. Significant relationships were found for all five of the logistical services. No one pattern emerged as to the nature of the relationships. Transportation, warehousing, and freight audit/payment services will be outsourced to a greater extent than order entry/processing and inventory management services. For the first three services, logistics executives at the levels of 171 Vice President and Director, reported the greatest antici- pated usage. These two levels are strategically positioned within the corporation. They are close enough to daily operations to assess needs and at a sufficiently high level to have authority to implement strategic decisions. Aware- ness of needs and power in combination can influence out- sourcing decisions. In contrast, anticipated usage of order entry/processing and inventory management services is expected to decline. The highest rating, on a 5-point scale with l - will not use and 5 - will use many more, was noted for the manager level . Even though manager's ratings were highest compared to executives at other levels, managers anticipate lower usage. Strong support for outsourcing these two services was not found among upper level logistics executives. Justification -for handling these services in- ternally include need for immediate access to information and security concerns. Outsourcing appears to be related more to managerial behavior than structure. Management style as well as strategic and tactical decisions influence a firm's usage of outside logistical services. Usage was found to be indepen- dent of structural characteristics such as centralization, size, and industry in many instances. INFLUENCE OF EXTERNAL FACTORS External factors having the most influence on out- sourcing decisions are associated with quality. Firms have moved beyond cost-based evaluation of service offerings. 172 Emphasis is on value-added in terms of what distinguishes one service from another. They are concerned with the ser- vice options available, the quality of those services, and the vendor's management quality. This last factor reflects a recognition of the need for closer interaction or buyer- seller interface in service transactions. Firms have become involved in more partnership exchange relationships. Ser- vice quality is difficult to specify in advance and diffi- cult to evaluate upon delivery. Close relationships can increase the probability of customer satisfaction. Firms are reducing the number of vendors they use. The trend is toward closer ‘working relationships ‘with fewer vendors. Generally, influence of the external factors was independent of level of centralization and size of firms. Differences were found according to industry type. MANAGERIAL IMPLICATION The research has a number of implications for manage- ment. These include: 1) types of services to be used: 2) quality' orientation: 3) strategic alliances: and. 4) the potential users. TYPES or SERVICES The potential demand for outsourcing of ”physical” ser- vices, namely transportation and warehousing, is anticipated to be greater than for information-related services. Firms will be more likely to outsource for transportation and 173 warehousing while maintaining closer control over informa- tion-related needs. Logistics executives are favorably dis- posed toward the outsourcing of transportation and ware- housing. If service providers can put together the right service package emphasizing quality, levels of outsourcing for these services will remain strong and, in all likeli- hood, expand in the future. Firms are likely to become more favorably disposed toward outsourcing logistical service as they come to realize the full range of cost and service-related benefits. Outsourcing permits flexibility and the ability to exploit new opportunities. Firms can use outside vendors to handle excess demand during peak periods or as a means of gaining access to new markets or new technologies. Outsourcing also results in greater financial flexibility. When the capital investment in equipment and/or facilities is reduced, other opportunities can be pursued. By utilizing external specialists, managers can concen- trate on core business requirements. They can focus on what they do best. Efficiencies are also gained by shifting functional needs to outside providers. As stigler empha- sized, firms should specialize in doing what they do best, the functions or processes with increasing returns. Functions subject to diminishing returns are candidates for outsourcing. 174 QUALITY ORIENTATION The emphasis on quality and dependability of service will continue in the future. Service quality is crucial. Today's competitive environment allows little if any tolerance regarding specified delivery appointments. Ser- vice providers who meet quality requirements in a consistent manner are most likely to be selected as preferred sup- pliers. A customer focus is needed and that must start with a determination of the requisite service level. The most successful service providers will offer customized or tailored logistical services rather than mass producing their services. High quality distribution may be the key to gaining competitive advantage. Other elements of the marketing mix, namely product, price, and promotion, are more easily dupli- cated or even improved. When competitors are offering virtually identical products, evaluation of logistical cap- abilities becomes a primary selection criterion. This is reflected in the increasing emphasis placed upon customer service. More firms are formally measuring and monitoring customer service levels. Availability, capability, and quality of the service become critical in evaluating out- sourcing decisions. STRATEGIC ALLIANCES Because of the difficulty in maintaining service quality, the logistical area is an ideal opportunity for setting up longer-term partnership or strategic alliance 175 relationships. Purchasers of outside service are likely to continue a relationship that has proven to be reliable. Logistical services offer excellent opportunities for cooperative relationships or partnerships with both parties sharing benefits and risks. Strategic alliances offer immediate benefits. By utilizing external specialists, logistics operating costs can be reduced. At the same time, quality of customer ser- vice can be dramatically improved. Other potential benefits include shared risk and shared creativity. Financial and service risk related to logistical operations can be significant. Failure or poor performance result in increased costs and negatively impact customer relations. When firms form a logistics alliance, they share the risk. The specialists focus on what they do best thus reducing the chance for error. When two firms join into an alliance, each views the logistics value added process from a dramatically different perspective. The new perspective can result in creative solutions to problems or innovative approaches to business operations. The likelihood of pro- ductivity improvements is greatly increased. POTENTIAL USERS The lack of a well-defined pattern of usage is indica- tive of almost ‘unlimited. jpossibilities for service providers. There is no one profile or typical user of out- side logistical services. For example, usage is not restricted to only centralized firms or only large firms. 176 All firms are potential users providing the "right” services are offered. The logistical service providers with highest quality services, tailored to meet specific needs will be in an excellent position to establish longer-term interactive relationships with service users. Individual management style may play a significant role in outsourcing decisions. Some logistics executives are more favorably' disposed toward outsourcing than others. Further research and analysis is needed to explore the significance of managerial.behavior or individual management style. Firms in the start-up phase, logistics formally organized less than three years, should be targeted by logistical service providers. .These firms are likely to utilize outsourcing due to constraints involving financial and managerial resources. Outsourcing relationships established during the start-up phase have the potential to evolve into long-term arrangements. Firms who have under- gone moderate to high levels of reorganization appear to be likely candidates for outsourcing. They may rely upon out- side vendors during reorganization transitions or, the use of outsourcing may reflect a general receptivity to the con- sideration of new business options. An assessment of a firm's overall performance can provide insight into attitudes toward outsourcing. The leading edge or better performing firms are more receptive to outsourcing than the norm and emerging firms. leading 177 edge firms are open to consideration of new options. They place emphasis upon formal planning, monitoring performance, the necessity for remaining flexible and taking advantage of new opportunities. QUESTIONS FOR FUTURE RESEARCH The questions for future research are based upon the findings and limitations of the research. The following areas for future research have been identified. The research investigated outsourcing practices among United States manufacturing firms. This suggests two imme- diate avenues for expansion. A more global perspective could provide more insight for understanding outsourcing practices. Also, examination of other channel members such as retailers and wholesalers would be desirable. A replica- tion of these findings utilizing different channel members would make a significant contribution. The research focused on the outsourcing of logistical services. Future research could test the applicability of these findings to other services such as professional ser- vices. Insight could be gained as to the transferability of these findings. New research could expand these findings by identifying and testing additional independent variables. There may be other firm-specific characteristics that offer greater ability to develop profiles of users of outside logistical services and identify the factors which influence those out- 178 sourcing decisions. The selected firm-specific characteris- tics can be re-examined to. gain greater' insight. For example, analyses of structure based upon functional and divisional firms or analyses of size based upon assets, could make an additional contribution. The above are of- fered as examples of the range of additional analyses rather than as a comprehensive list for further examination. In a number of instances, formalization was found to be significantly related to anticipated usage of outside logistical services and the influence of external factors upon outsourcing decisions. An extension of this research could explore the relationship between formalization of the firm and outsourcing practices. APPENDICES APPENDIX A QUESTIONNAIRE APPENDIX A QUESTIONNAIRE 179 180 Thank You We sincerely appreciate your advance agreement to complete this questionnaire. Your rapid response is critical to completing this research and will help develop a better understanding ot rapidly changing logistics organization. Logistics Organization and Strategy Research A third survey of factors and trends influencing logistics organizations Conducted by Michigan State University in cooperation with: A. T. Kearney Management Consu;tants Traffic Management Magazme Gateway Systems Corporation Council of Logistics Management Canadian Association of Physical Distribution Management sponsored by: Digital Equipment Corporation 181 MICHIGAN STATE UNIVERSITY LOGISTICS ORGANIZATION AND STRATEGY RESEARCH PROJECT This questionnaire is the third in a continuing effort to understand how logistics (also called physical distribution or materials management) activities are organized. Your responses will help develop a better understanding of the rapidly changing logistics organization. DIRECTIONS 1. The overall questionnaire contains 25 questions. Pro-testing indicates it can be completed in approximately 90 minutes. 2. Please answer only for your division or business unit. A business unit is typically a division or sub- sidiary of a larger corporation. Copies of this questionnaire may be provided to other business units in your corporation. If you are at corporate headquarters. please answer the questions from a cor- porate perspective. ' 3 If a particular question does not apply, skip it and go on. Please return the questionnaire even if you cannot complete it. 4. If you wish to expand on a question. use either blank space on the questionnaire or attach comments on a separate sheet of paper. 5. Throughout this questionnaire the terms logistics. physical distribution and materials management are used interchangeably. The Council of Logistics Management has defined logistics as a term describing the integration of two or more activities for the purpose of planning. implementing and controlling the efficient flow of raw materials, in-process inventory and finished goods from point of origin to point of consumption. 6. Please return questionnaire as soon as possible to: Dr. Donald J. Bowersox Professor of Marketing and Logistics 309 Eppley Center Michigan State University East Lansing. MI 48824 (517) 353-6381 182 1. What were the annual dollar sales of your business unit (division or subsidiary) and the total corpora- tion (if different) during the most recent fiscal year? (A) Business Unit 5 (B) Total Corporation 3 2. What are the primary products manufactured by your business unit? a In finished product logistics, do you use: is. No (A) Dealers (8) Distributors 4. What percentage of your manufacturing is: (A) To Customer Order _% (8) Sold from Inventory _______.°/o 5. (A) What is the title of your senior logistics executive? (B) How many years has this executive been in this position? (C) What was the senior logistics executive's previous assignment? 6. (A) What is the title of the person that senior logistics executive reports to? (8) What was this executive's previous assignment? 7. Do you have a formal logistics mission statement? Yes _ No If yes. please provide below or attach a separate sheet. 183 8. Do you have a formal logistics strategic plan? (A) Yes __ No (8) If yes. what is the time horizon ofthe plan? (C) If yes. how often is your plan reviewed or updated? 9. Do logistics executives formally participate in overall strategic planning for your business unit? Yes__ No.— 10. (A) Within the last five years. how many times have all or parts of logistics been reorganized? (B) What parts of logistics have been reorganized? 11. How many years has logistics been a formal organization? 12. In some companies the senior logistics executive manages activities that are not typically part of a logistics organization. For example. some logistic organizations have responsibility for data pro- cessing, real estate. dealer services. and/or facilities. (A) Does your logistical organization have responsibility for any such non-typical activities?“ Yes __ No (8) If yes. please list the responsibilities. 184 13. Please indicate which activities have been. are currently, or are expected to be part of the formal responsibility of logistics. In addition. identify whether the logistics organization has line responsibility or functions in an advisory role. Space is available to include additional activities not listed. How Long Part of Logistics Activity (vent!) Sales Forecasting Production Planning Sourcing/Purchasing lnbound Transportation Raw MaterialsIWork in Process Inventory Management Finished Goods Inventory Management lntra-Company Transportation Finished Goods Field Warehousing Order Processing Customer Service Outbound Transportation Logistics Systems Planning Logistics Engineering Logistics Administration lnternational Logistics Likely to be Added in Future Yes No Welfare of Hespenslblllty Line Advisory 185 14. Five types of organizations are illustrated below. These organizations vary in the degree to which logistics activities are dispersed or consolidated. Consider which chart is most similar to your organiza- tion and respond to the question at the end of the charts. Type A - Functional Organization: ' Dispersed Responsibilities for Logistics Activities CORPORATE MANAGEMENT margin? Accouunusi MANUFACTURING sues SYSTEMS FINANCE mm MARKETING ran-ud ............... ‘. ................ b --------------- h ........ g l - SM - - PM - Sales Form I 1 PM Fleeting - Cum Serves : I - Lew-ea - Em - Fete W ' ' Camel - Seine-tot - W . : I “am "mm ' . — I'M - m Gee. I l W W l l — Flam Wave W : ' M ' : — W . , W t ' — Rs- MI I ' W m ' 1 Mile! Loo-nee = i m U ————— — _ ------------- .1 Type B - Functional Organization: Consolidated Logistics Responsibilities CORPORATE MANAGEMENT P ------------ q k l t I i t i t : : MANAGEMENT . i I “OUNTINGI MANUFICTURINGI SALES] “232:3?" names openness i LOG‘ST'CS i MARKETING i I l I I I I I i I i i ' I . — 1 (Meter Logistic. l : Activities) : L ............ J Type C - Divisional Organization: 186 Logistics Functions Consolidated within Business Units Type D - Divisionali r-------- CORPORATE MANAGEMENT UNITA WT. W7C ' I I i L i I: i L I :W: Mal-mo museum: Loeisncs mm W : m : :Ww I I Wm. zed Organization: Centrally Consolidated Logistics Responsibilities CORPORATE MANAGEMENT hi3? u... . ”3%.“? Looisncs mum sun W sues W see- I MAI-0m Type E - Divisionalized Organization: Corporate Staff Logistic in the Business Units (essentially a c W mum I s Function with Line Logistics Functions ombination of Type C and D) ‘I r -h------ W38 UNITA UMTI UMTC I l inc-on? [ .---.-1 I7 I I ' V l ‘ I V I ' I : Ire-Ive was a mus—s m n Mes-Ia m m t .1: .2: r... i " U. “' we 3 — ‘ - w I | w : I L-1.-J' . ' 'L-TCDJ : - 1 _ 1 ___' 187 Althoughyoursituationmaynotexactlyfitoneoftheflvemodeis.indicaewhichmostcloseiyresembles your organization. ModelA__ Model B__ ModelC ModelD____ ModelE__ Other if "other" please explain or attach a separate organization chart. 15. Which of the following statements provides the most accurate description of the primary strategy of your logistics operation? Please check most applicable. __ Type A - Process A processbased strategy is concerned with managing a broad group of logistics activities as a value added chain. Emphasis is on achieving efficiency from managing purchasing. manufacturing. scheduling. and physical distribution as an integrated system. __ Type 8 - Market A marketobased strategy is concerned with managing a limited group of logistics activities for a multidivision single business unit or across multiple business units. The logistics organization seeks to make joint product shipments to common customers for different product groups and seeks to facilitate sales and logistical coordination by a single order-invoice. Often the senior sales and logistics executives report to the same manager. __ Type C — Channel . A channel-based strategy is concerned with managing logistics activities performed jointly with dealers and distributors. The strategic orientation places a great deal of attention on external control. Significant amounts of finished inventories are typically maintained forward or downstream in the distribution channel. __ Type D - Other if your strategy does not fit into one of the above. please describe it below. 188 16. Rank the following events in terms of your ability to accommodate. Use a five point scale where: - not applicable current logistics system cannot handle current logistics system has difficulty handling current logistics system handles with few problems current logistics system handles easily. ‘I 2 3 4 5 Special customer service 1 2 3 4 5 requests Sales and Marketing 1 2 3 4 5 incentive programs Product introduction 1 2 3 4 5 Product Phase Out 1 2 3 4 5 Disruption in supply 1 2 3 4 5 Computer breakdown l 2 3 4 5 Unexpected production 1 2 3 4 5 schedule changes Product recall 1 2 3 4 5 Customization of service 1 2 3 4 5 levels to specific markets or customers Product modification or 1 2 3 4 5 customization while in the logistics system 189 17. Please rate each of the following in terms of their impact on your logistical operations. Use a five point scale where: 1 - not applicable 2 . no impact 3 - slight impact 4 - high impact 5 . very high impact Forecast accuracy 1 2 3 4 5 Computer support 1 2 3 4 5 Excessive end-of-month or 1 2 3 4 5 end-of-quarter surges Communications with customers 1 2 3 4 5 Production planning and scheduling 1 2 3 4 5 Interface with manufacturing 1 2 3 4 5 Availability of trained logistics personnel 1 2 3 4 5 Vehicle routing and scheduling 1 2 3 4 5 Computer applications backlog 1 2 3 4 5 Transportation cost 1 2 3 4 5 Communication with material vendors 1 2 3 4 5 Communication with dealers. distributors. 1 2 3 4 5 or brokers ' Warehouse productivity 1 2 3 4 5 Measurement tools and methods - 1 2 3 4 5 Communication with internal non-logistics 1 2 3 4 5 organizational units Timely information 1 2 3 4 5 Supplier performance 1 2 3 4 5 Communications with external logistical 1 2 3 4 5 service suppliers incompatibility of computer equipment 1 2 3 4 5 and/or software 190 18. Please list primary performance measurements that the senior logistics management uses to monitor and identify problems. A)Cost 8) Customer Service C) Productivity D) Quality 10 191 19. Below is a list of logistic computer applications. Please check the appropriate box for each application. Will be Will be revised installed Currently in next in next M $5.12. Air. Freight Audit and Payment Purchasing Sales Forecasting MRP DRP Raw Material inventory Control Finished Goods inventory Control Warehousing Order Processing Order Entry Vehicle Routing and Scheduling lnbound Freight Consolidation Outbound Freight Consolidation Supporting l-‘rnancials Performance Measurements Distribution Modeling 20. Are you currently using. or planning in the next three to five years to use EDI (Electronic Data Interchange) in the following applications? Application Current Planned Raw Materials Vendors _ _ __ Copackerleontractors __ __ Public Warehouses Carriers _ ____ Customers/Brokers __ __ Other (please specify) 11 192 21. Are you currently using knowledge-based expert systems (Artificial Intelligence) in logistics operations? (A) Yes __ No (B) If yes. please elaborate how you are using such systems? (C) if no. do you have specific plans to install such a system within the next three years? Yes __ No___ 22. Do you have the following information available. either from your own computer system or from car- riers or other logistical service providers? e No Freight tracking Real-time freight rating systems Accurate freight delivery time 23. Please indicate the characteristics of information used to manage logistics. Use a five point scale where: 1 - Never 2 :- Not usually 3 - Sometimes 4 . in most instances 5 - Always Timely 1 2 3 4 S Accurate 1 2 3 4 S Readily Available 1 2 3 4 5 Formatted on an Exception Basis 1 2 3 4 5 Appmpriately Formatted to Facilitate Use 1 2 3 4 5 12 193 24. What do you anticipate will happen in regard to your company's usage of outside service vendors in the next three to five years? Rank the following on a scale of 1 to 5. where: 1 - Will not use outside logistical services 2 . Will use less than current levels 3 a Usage will remain constant 4 - Will use more outside logistical services 5 - \Mll use many more outside logistical services Transportation 1 2 3 4 5 Warehousing 1 2 3 4 5 Order Entry and Processing 1 2 3 4 5 inventory Management 1 2 3 4 5 Freight Audit and Payment 1 2 3 4 5 25. in addition to cost. which of the following factors influence the decision to use outside service vendors? Please rank them on a scale of 1 to 5. where: 1 . not applicable 2 u not important 3 . neutral 4 a somewhat important 5 . very important Deregulation 1 2 3 4 5 Services available 1 2 3 4 .5 Quality of services 1 2 3 4 5 Data processing/Communications services 1 2 3 4 5 Management quality 1 2 3 4 5 Customer attitudes 1 2 3 4 5 Other (please specify) 13 194 Please indicate below: This information will be handled in a confidential manner. Name: Title: Parent Company: Division or Business Unit: Street Address: City: StateIProvince: __ Zip/Postal Code: Telephone: ( ) Are you a member at the Council of Logistics Management? Ci Yes D No Are you a member of the Canadian Assooation of Physical Distribution Management? 0 Yes D No Would you be willing to partiCipate in a short telephone follow-up mtervuew to this questionnaire? DYes DNo Thank You APPENDIX B COMMON ATTRIBUTES INDEX COMPONENTS APPENDIX B COMMON ATTRIBUTES INDEX COMPONENTS Title of senior logistics executive Title of person to whom senior logistics executive re- ports Mission statement - if one exists and nature of its content Formal logistics strategic plan -.if one exists; its time horizon; frequency of review Degree of logistics executive’s participation in developing the corporate strategic plan Number of times the logistics entity was reorganized in the last five years Number of years logistics has been formally organized as a department under whatever descriptive title Number and nature of traditional functions Number and nature of beyond functions Handling of special customer requests, product phase- outs, etc. Use of formal performance measurements Number of installed computer applications and their nature Uses of Electronic Data Interchange (EDI), if any Uses of Artificial Intelligence (AI), if any Characteristics of information that logistics manage- ment employs; timeliness, ready availability, etc. 195 APPENDIX C MICHIGAN STATE UNIVERSITY LOGISTICS RESEARCH ADVISORY BOARD APPENDIX C MICHIGAN STATE UNIVERSITY LOGISTICS RESEARCH ADVISORY BOARD William J. Best Vice President A.T. Kearney Management Consultants Donald J. Bowersox Professor of Marketing and Logistics Michigan State University Jack W. Farrell Special Projects Editor Melanoma; Magazine John E. Griggs, Ph.D. President Gateway Systems Corporation Charles P. Johansen Marketing Manager - Distribution Systems Digital Equipment Corporation Ronald E. Seger Vice President A.T. Kearney Management Consultants James R. Stock Professor of Marketing and Logistics Michigan State University 196 APPENDIX D STATISTICAL HYPOTHESES APPENDIX D STATISTICAL HYPOTHESES - D g! e. -e :.e:. e O : e‘ as : . e H0:1-a.1 There will be no difference in levels of anticipated usage of outside transportation services among manufacturing firms when clas- sified by their degree of centralization. HO:1-a.2 There will be no difference in levels of anticipated usage of outside warehousing ser- vices among manufacturing firms when classi- fied by their degree of centralization. H0:1-a.3 There will be no difference in levels of an- ticipated usage of outside order entry and processing services among manufacturing firms when classified by their degree of centralization. H0:l-a.4 There will be no difference in levels of anticipatedt usage of outside inventory management services among manufacturing firms when classified by their degree of cen- tralization. HO:1-a.5 There will be no difference in levels of anticipated usage of outside freight audit and payment services among manufacturing firms when classified by their degree of cen- tralization. 197 200 HO:1-d.1 There will be no difference in levels of anticipated usage of outside transportation services among manufacturing firms when clas- sified based upon their size. HO:1-d.2 There will be no difference in levels of anticipated usage of outside warehousing ser- vices among manufacturing firms when classi- fied based upon their size. HO:1-d.3 There will be no difference in levels of an- ticipated usage of outside order entry and processing services among manufacturing firms when classified based upon their size. MO:l-d.4 There will be no difference in levels of anticipated 'usage of’ outside inventory management services among manufacturing firms when classified based upon their size. HOl-d.5 There will be no difference in levels of anticipated usage of outside freight audit and payment service among manufacturing firms when classified based upon their size. 201 There will be no difference in levels of anticipated usage of outside transportation services among manufacturing firms when clas- sified based upon industry type. HO:1-e.2 There will be no difference in levels of anticipated usage of outside warehousing ser- vices among manufacturing firms when classi- fied based upon industry type. HO:1-e.3 There will be no difference in levels of anticipated usage of outside order entry and processing services among manufacturing firms when classified based upon industry type. HO:1-e.4 There will be no difference in levels of anticipated ‘usage of’ outside inventory management services among manufacturing firms when classified based upon industry type. HO:1-e.5 There will be no difference in levels of anticipated usage of outside freight audit and payment services among manufacturing firms ‘when classified. based upon industry type. 202 HO:1-f.1 There will be no difference in levels of anticipated usage of outside transportation services among manufacturing firms when clas- sified based upon Common Attributes Index grouping. HO:1-f.2 There will be no difference in levels of anticipated usage of outside warehousing ser- vices among manufacturing firms when classified based upon Common Attributes Index grouping. HO:1-f.3 There will be no difference in levels of anticipated usage of outside order entry and processing services among manufacturing firms when classified based upon Common Attributes Index grouping. HO:1-f.4 There will be no difference in levels of anticipated usage of outside inventory management services among manufacturing firms when classified based upon Common Attributes Index grouping. HO:1-f.5 There will be no difference in levels of anticipated usage of outside freight audit and payment services among manufacturing firms when classified based upon Common At- tributes Index grouping. Se 203 HO:2-a.1 There will be no difference in the influence of deregulation upon the decision to use out- side logistical service vendors among manu- facturing firms when classified based upon their degree of centralization. HO:2-a.2 There will be no difference in the influence of services available upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their degree of centralization. HO:2-a.3 There will be no difference in the influence of the quality of services upon the decision to 'use outside logistical service ‘vendors among manufacturing firms when classified based upon their degree of centralization. HO:2-a.4 There will be no difference in the influence of ‘the data. processing/communications ser- vices upon the decision to use outside logis- tical service vendors among manufacturing firms when classified based upon their degree of centralization. HO:2-a.5 There will be no difference in the influence of management quality upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their degree of centralization. HO:2-a.6 There will be no difference in the influence of customer attitudes/orientation upon the decision to use outside logistical service vendors among manufacturing firms when clas- sified based upon their degree of centraliza- t on. 204 There will be no difference in the influence of deregulation upon the decision to use out- side logistical service vendors among manu- facturing firms when classified based upon their strategic orientation. HO:2-b.2 There will be no difference in the influence of services available upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their strategic orientation. HO:2-b.3 There will be no difference in the influence of the quality of services upon the decision to ‘use outside logistical service vendors among manufacturing firms when classified based upon their strategic orientation. HO:2-b.4 There will be no difference in the influence of the data processing/communications ser- vices upon the decision to use outside logis- tical service vendors among manufacturing firms when classified based upon their strategic orientation. HO:2-b.5 There will be no difference in the influence of management quality upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their strategic orientation. HO:2-b.6 There will be no difference in the influence of customer attitudes/orientation upon the decision to use outside logistical service vendors among manufacturing firms when clas- sified based upon their strategic orienta- t on. 205 HO:2-c.1 There will be no difference in the influence of deregulation upon the decision to use out- side logistical service vendors among manu- facturing firms when classified based upon their degree of formalization. HO:2-C.2 There will be no difference in the influence of services available upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their degree of formalization. There will be no difference in the influence of the quality of services upon the decision to» use outside logistical service ‘vendors among manufacturing firms when classified based upon their degree of formalization. HO:2-c.4 There will be no difference in the influence of ‘the data. processing/communications ser- vices upon the decision to use outside logis- tical service vendors among manufacturing firms when classified based upon their degree of formalization. - HO:2-c.5 There will be no difference in the influence of management quality upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their degree of formalization. HO:2-c.6 There will be no difference in the influence of’ customer attitudes/orientation. upon the decision to use outside logistical service vendors among manufacturing firms when clas- sified based upon their degree of formaliza- t on. 206 HO:2-d.1 There will be no difference in the influence of deregulation upon the decision to use out- side logistical service vendors among manu- facturing firms when classified based upon their size. HO:2-d.2 There will be no difference in the influence of services available upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their size. HO:2-d.3 There will be no difference in the influence of the quality of services upon the decision to 'use outside logistical service vendors among manufacturing firms when classified based upon their size. HO:2-d.4 There will be no difference in the influence of the data processing/communications ser- vices upon the decision to use outside logis- tical service vendors among manufacturing firms when classified based upon their size. HO:2-d.5 There will be no difference in the influence of management quality upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon their size. HO:2-d.6 There will be no difference in the influence of customer attitudes/orientation upon the decision to use outside logistical service vendors among manufacturing firms when clas- sified based upon their size. 207 HO:2-e.1 There will be no difference in the influence of deregulation upon the decision to use out- side logistical service vendors among manu- facturing firms when classified based upon industry type. HO:2-e.2 There will be no difference in the influence of services available upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon industry type. There will be no difference in the influence of the quality of services upon the decision to ‘use outside logistical service vendors among manufacturing firms when classified based upon industry type. HO:2-e.4 There will be no difference in the influence of the data processing/communications ser- vices upon the decision to use outside logis- tical service vendors among manufacturing firms ‘when classified. based upon industry type. There will be no difference in the influence of management quality upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon industry type. There will be no difference in the influence of customer attitudes/orientation upon the decision to use outside logistical service vendors among manufacturing firms when clas- sified based upon industry type. 208 HO:2-f.1 There will be no difference in the influence of deregulation upon the decision to use out- side logistical service vendors among manu- facturing firms when classified based upon Common Attributes Index grouping. HO:2-f.2 There will be no difference in the influence of services available upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon Common Attributes Index grouping. HO:2-f.3 There will be no difference in the influence of the quality of services upon the decision to ‘use outside logistical service vendors among manufacturing firms when classified based upon Common Attributes Index grouping. HO:2-f.4 There will be no difference in the influence of the data processing/communications ser- vices upon the decision to use outside logis- tical service vendors among manufacturing firms when classified based upon Common At- tributes Index grouping. HO:2-f.5 There will be no difference in the influence of management quality upon the decision to use outside logistical service vendors among manufacturing firms when classified based upon Common Attributes Index grouping. HO:2-f.6 There will be no difference in the influence of customer attitudes/orientation upon the decision to use outside logistical service vendors among manufacturing firms when clas- sified. based. upon Common. Attributes Index grouping. APPENDIX E STATISTICAL ANALYSES .APTTHUIEX E STATISTICAL ANALXSES F AND P-VALUES FROM THE ANOVA ANALYSES: THE SIGNIFICANCE OF SELECTED MAIN EFFECTS AND INTERACTIONS __1_Tab e: magnetism: Donations—Variables: E- l Centralization X Strategic Orientation Transportation E- 2 Centralization X Strategic Orientation Warehousing E- 3 Centralization X Strategic Orientation Inventory Management E- 4 Centralization X Strategic Orientation Freight Audit E- 5 Centralization X Executive Level Transportation E- 6 Centralization X Executive Level Order Entry E- 7 Centralization X Executive Level Inventory Management E- 8 Centralization X Executive Level Freight Audit E- 9 Centralization X Reorganizations Order Entry E-lO Centralization X Years Organized Inventory Management E-ll Centralization X Overall Planning Order Entry E-12 Centralization X CAI Group Warehousing E-13 Strategy X Executive Level Order Entry E-lh Strategy X Executive Level Inventory Management E-lS CAI Group X Strategy Warehousing E-16 Centralization X Strategy Services Available E-l7 Centralization X Strategy Service Quality E-l8 Centralization X Strategy Data Processing E-19 Centralization X Strategy Plan Data Processing E-20 Centralization X Strategic Plan Management Quality E-Zl Centralization X Mission Statement Deregulation E-22 Centralization X Mission Statement Service Quality E-23 Centralization X Mission Statement Management Quality E-24 Centralization X Industry Services Available E-25 Centralization X Industry Service Quality E-26 Centralization X Industry Management Quality E-27 Centralization X Industry Customer Attitudes E-28 Centralization X CAI Group Data Processing E-29 Strategy X Industry X Strategic Plan Management Quality E-30 Strategy X Industry X Mission Management Quality E-3l Strategy X Industry X CAI Group Management Quality E-32 Industry X Strategic P1an.X CAI Group Management Quality E-33 Industry X Strategic Plan X Overall Planning Management Quality E-34 Overall Planning X Mission X Strategy Management Quality 209 210 TABLE E-l ANTICIPATED USAGE OF OUTSIDE TRANSPORTATION SERVICES Source of Variation df F p Main Effects Centralization 1 0.01 .924 Strategic Orientation 2 0.01 .991 Interaction 2 1.14 .321 TABLE E-Z ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation df F p Main Effects Centralization 1 0.03 .854 Strategic Orientation 2 0.48 .622 Interaction 2 0.89 .413 TABLE E-3 ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT SERVICES Source of Variation df F p Main Effects Centralization 1 0.03 .862 Strategic Orientation 2 0.27 .761 Interaction 2 1.12 .327 211 TABLE E-4 ANTICIPATED USAGE OF OUTSIDE FREIGHT AUDIT SERVICES Source of variation df F p Main Effects Centralization 1 3.24 .073 Strategic Orientation 2 0.83 .437 Interaction 2 0.57 .568 TABLE E-5 ANTICIPATED USAGE OF OUTSIDE TRANSPORTATION SERVICES Source of Variation df F p Main Effects Centralization 1 0.03 .860 Level of Senior Logistics Executive 5 1.64 .151 Interaction 5 1.12 .348 TABLE E-6 ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df P p Main Effects Centralization 1 0.03 .870 Level of Senior Logistics Executive 5 1.58 .167 Interaction 5 0.33 .856 212 TABLE E-7 ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT SERVICES Source of Variation df F p Main Effects Centralization 1 0.01 .931 Level of Senior Logistics Executive 5 1.49 .194 Interaction 5 0.61 .657 TABLE E-8 ANTICIPATED USAGE OF OUTSIDE FREIGHT AUDIT SERVICES Source of Variation df F p Main Effects Centralization 1 2.73 .100 Level of Senior Logistics Executive 3 0.63 .594 Interaction 3 0.81 .488 TABLE E-9 ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Centralization 1 0.14 .705 Number of Logistical Reorganizations 3 2.57 .055 Interaction 3 0.72 .538 213 TABLE E-10 ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT SERVICES Source of variation df F p Main Effects Centralization 1 0.02 .889 Number of Year Logistics Organized 3 2.21 .088 Interaction ' 3 0.31 .820 TABLE E-ll ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df F p Main Effects Centralization 1 0.08 .780 Participation in Overall Strategic Planning 1 1.87 .173 Interaction 1 0.01 .943 TABLE E-12 ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation df F p Main Effects Centralization 1 0.12 .727 CIA Group 2 2.18 .115 Interaction 2 0.79 .455 214 TABLE E-13 ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY SERVICES Source of Variation df P p Main Effects Strategic Orientation 2 0.43 .650 Level of Senior Logistics Executive 5 1.87 .099 Interaction 10 0.99 .439 TABLE E-14 ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT SERVICES Source of Variation df F p Main Effects Strategic Orientation 2 0.61 .544 Level of Senior Logistics Executive 5 2.00 .078 Interaction 10 0.69 .682 TABLE E-15 ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation df F p Main Effects CAI Group 2 2.77 .064 Strategic Orientation 2 0.29 .748 Interaction 4 0.39 .819 INFLUENCE Source of Variation Main Effects Centralization Strategic Orientation Interaction 215 TABLE E-lG OF SERVICES AVAILABLE df F P 1 1.68 .200 2 1.04 .354 2 0.52 .592 TABLE E-17 INFLUENCE OF SERVICE QUALITY Source of Variation Main Effects Centralization Strategic Orientation Interaction df F p 1 0.83 .363 2 0.18 .833 2 1.50 .226 TABLE E-18 INFLUENCE OF DATA PROCESSING/COMMUNICATIONS Source of Variation Main Effects Centralization Strategic Orientation Interaction df F P 1 0.42 .520 2 0.59 .555 2 2.19 .115 216 TABLE E-19 INFLUENCE OF DATA PROCESSING/COMMUNICATIONS Source of Variation df P p Main Effects Centralization 1 0.59 .445 Logistics Strategic Plan 1 0.35 .557 Interaction 1 0.00 1.000 TABLE E-20 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Centralization 1 3.45 .0644 Logistics Strategic Plan 1 0.10 .7511 Interaction 1 0.58 .4460 TABLE E-21 INFLUENCE OF DEREGULATION Source of Variation df F p Main Effects Centralization 1 1.27 .261 Logistics Mission Statement 1 1.17 .281 Interaction 1 3.16 .077 217 TABLE E-22 INFLUENCE OF SERVICE QUALITY Source of Variation df P p Main Effects Centralization 1 0.13 .718 Logistics Mission Statement 1 2.70 .102 Interaction 1 0.04 .837 TABLE E-23 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Centralization 1 3.38 .067 Logistics Mission Statement 1 0.67 .414 Interaction 1 0.00 1.000 TABLE E-24 INFLUENCE OF SERVICES AVAILABLE Source of Variation df F p Main Effects Centralization 1 1.87 .172 Industry Group 6 2.12 .053 Interaction 6 0.81 .560 218 TABLE E-25 INFLUENCE OF SERVICES QUALITY Source of variation df F p Main Effects Centralization 1 1.31 .254 Industry Group 6 1.41 .211 Interaction 6 1.34 .239 TABLE E-26 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Centralization 1 3.70 .056 Industry Group 6 1.33 .248 Interaction 6 0.85 .536 TABLE E-27 INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F p Main Effects Centralization 1 3.03 .083 Industry Group 6 1.92 .079 Interaction 6 0.96 .451 219 TABLE E-ZB INFLUENCE OF DATA PROCESSING/COMMUNICATIONS Source of Variation df F p Main Effects Centralization 2 2.23 .110 CAI Group 1 0.58 .446 Interaction 2 0.86 .425 TABLE E-29 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 3.32 .038 Industry Group 6 2.99 .008 Logistics Strategic Plan 1 3.91 .050 Three-Way Interaction 12 0.69 .884 TABLE E-30 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 3.70 .026 Industry Group . 6 3.23 .005 Logistics Mission Statement 1 9.28 .003 Three-Way Interaction 12 0.74 .837 220 TABLE E-31 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Strategic Orientation 2 3.39 .035 Industry Group 6 3.23 .005 CAI Group 2 5.94 .003 Three-Way Interaction 24 1.01 .464 TABLE E-32 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Industry Group 6 3.40 .003 Logistics Strategic Plan 1 4.60 .003 CAI Group 2 6.57 .002 Three-way Interaction 12 0.35 .995 TABLE E-33 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F p Main Effects Industry Group 6 3.40 .003 Logistics Strategic Plan 1 5.06 .025 Participation in Overall Strategic Planning 1 7.89 .005 Three-Way Interaction 6 1.01 .452 221 TABLE E-34 INFLUENCE OF MANAGEMENT QUALITY Source of Variation df P p Main Effects Participation in Overall Strategic Planning 1 7.83 .006 Logistics Mission Statement 1 8.10 .005 Strategic Orientation 2 4.19 .016 Three-Way Interaction 2 0.79 .599 APPENDIX F ANCOVA RESULTS labile W: F- F- F- F- F- F- F- F- \DQNO‘U‘tFWNH F-lO F-ll F-12 F-l3 F-14 F-lS F-16 F-l7 F-18 F-l9 F-20 F-21 4APTTDUIEK F .ANCKNHA RIENIUTS F AND P-VALUES FROM THE ANCOVA ANALYSIS: THE SIGNIFICANCE OF SELECTED MAIN EFFECTS AND COVARIATES Executive Level/Sales Executive Level/Sales Executive Level/Sales Executive Level/Sales Executive Level/Sales Strategy/Years Organized Industry/Years Organized Industry/Years Organized CAI Group/Years Organized Strategy/Years Organized Industry/Years Organized CAI Group/Years Organized Industry/Years Organized Strategy/Functions Industry/Functions Industry/Functions CAI Group/Functions Strategy/Functions Industry/Functions CAI Group/Functions Industry/Functions 222 W: Transportation Warehousing Order Entry Inventory Management Freight Audit Deregulation Services Available Service Quality Data Processing Management Quality Management Quality Management Quality Customer Attitudes Deregulation Services Available Service Quality Data Processing Management Quality Management Quality Management Quality Customer Attitudes 223 TABLE F-l ANCOVA: ANTICIPATED USAGE OF OUTSIDE TRANSPORTATION Source of variation df F p Main Effect Level or Senior Logistics Executive 5 3.92 .002 Covariate Sales 1 0.97 .324 TABLE F-2 ANCOVA: ANTICIPATED USAGE OF OUTSIDE WAREHOUSING SERVICES Source of Variation df F p Main Effect Level or Senior Logistics Executive 5 4.23 .001 Covariate Sales 1 0.02 .894 TABLE F-3 ANCOVA: ANTICIPATED USAGE OF OUTSIDE ORDER ENTRY/PROCESSING Source of Variation df F p Main Effect Level or Senior Logistics Executive 5 2.24 >.050 Covariate Sales 1 1.71 .192 224 TABLE F-4 ANCOVA: ANTICIPATED USAGE OF OUTSIDE INVENTORY MANAGEMENT Source of Variation df F p Main Effect Level or Senior Logistics Executive 5 2.38 .039 Covariate Sales 1 0.35 .553 TABLE F-5 ANCOVA: ANTICIPATED USAGE OF OUTSIDE FREIGHT AUDIT SERVICES Source of Variation df F p Main Effect Level or Senior Logistics Executive 5 3.35 .006 Covariate Sales 1 1.32 .251 TABLE F-6 ANCOVA: INFLUENCE OF DEREGULATION Source of Variation df F p Main Effect Strategic Orientation 2 4.12 .017 Covariate Years Logistics Organized 1 0.84 .360 225 TABLE F-7 ANCOVA: INFLUENCE OF SERVICES AVAILABLE Source of Variation df E Main Effect Industry Group 6 3.07 Covariate Years Logistics Organized 1 0.35 TABLE F-8 ANCOVA: INFLUENCE OF SERVICE QUALITY Source of Variation df F Main Effect Industry Group 6 2.40 Covariate Years Logistics Organized 1 2.96 TABLE F-9 .006 .556 .028 .086 ANCOVA: INFLUENCE OF DATA PROCESSING/COMMUNICATIONS Source of Variation df F Main Effect CAI Group 2 5.03 Covariate Years Logistics Organized 1 0.47 .007 .495 226 TABLE F-10 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df E Main Effect Strategic Orientation 2 3.42 Covariate Years Logistics Organized 1 0.01 TABLE F-11 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F Main Effect Industry Group 6 3.50 Covariate Years Logistics Organized 1 0.24 TABLE F-12 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F Main Effect CAI Group 2 5.88 Covariate Years Logistics Organized 1 0.02 .034 .931 .002 .623 .003 .883 227 TABLE F-13 ANCOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F Main Effect Industry Group 6 2.88 Covariate Years Logistics Organized 1 2.66 TABLE F-14 ANCOVA: INFLUENCE OF DEREGULATION Source of Variation df F Main Effect Strategic Orientation 2 3.71 Covariate Functional Responsibilities 1 0.78 TABLE F-15 ANCOVA: INFLUENCE OF SERVICES AVAILABLE Source of Variation df F Main Effect Industry Group 6 2.97 Covariate Functional Responsibilities 1 0.06 .010 .104 .026 .378 .008 .801 228 TABLE F-16 ANCOVA: INFLUENCE OF SERVICE QUALITY Source of Variation df F Main Effect Industry Group 6 1.96 Covariate Functional Responsibilities 1 0.22 TABLE F-17 .071 .641 ANCOVA: INFLUENCE OF DATA PROCESSING/COMMUNICATIONS Source of Variation df F Main Effect CAI Group 2 3.58 Covariate Functional Responsibilities 1 0.01 TABLE F-18 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY Source of variation df F Main Effect Strategic Orientation 2 4.07 Covariate Functional Responsibilities 1 4.84 .029 .907 .018 .029 229 TABLE F-19 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F Main Effect Industry Group 6 3.14 Covariate Functional Responsibilities 1 2.17 TABLE F-20 ANCOVA: INFLUENCE OF MANAGEMENT QUALITY Source of Variation df F Main Effect CAI Group 2 3.75 Covariate Functional Responsibilities 1 0.00 TABLE F-21 ANCOVA: INFLUENCE OF CUSTOMER ATTITUDES Source of Variation df F Main Effect Industry Group 6 2.61 Covariate Functional Responsibilities 1 1.56 .005 .142 .024 .971 .018 .212 BIBLIOGRAPHY BIBLIOGRAPHY Achrol, Ravi Singh, Torger Reve, and Louis W. Stern (1983), ”The Environment of Marketing Channel Dyads: A Frame- work for Comparative Analysis, MW, 47, (Fall), pp. 55-67. Anderson, David L. (1988), ”Contract logistics," American Shipper. 30:2. (February). pp- 42-47- Anderson, David L. and Robert Calabro (1987), ”logistics Productivity Through Strategic Alliances," Proceedings of the Annual Conference of the Council of Logistics Management, Vol. I, pp. 61-74. Angelmar, Reinhard and Louis W. Stern (1978), ”Development of a Content Analytic System for Analysis of Bargaining’ Communication in. Marketing,” J99:na1__gf Marketing_3esearch. XV. (February). p- 93-102- Arndt, Johan (1983), "The Political Economy Paradigm: Foundation for Theory Building in Marketing," lggzngl mm: 47: (F311): PP. 44-54’ Arndt, Johan (1981), "The Political Economy of Marketing Systems: Reviving the Institutional Approach,” Jggrngl 9f_nagrgzmarke§ins. 1:2: (Fall). pp- 36-47- Arndt, Johan (1979), "Toward a Concept of Domesticated Mar- kets.” Journal_ef_uarkefing. 43. (Fall). pp- 69-75- Astley, W. Graham and Andrew M. Van de Ven (1983), "Central Perspectives and Debates in Organization Theory,” Adminiafratixe.§gienge_nuarterlx. 28:2. pp- 245-273- Babbie. Earl (19186). Tha__Era9ti22__9f__agsial__8eeearch. Fourth Edition . (Belmont, Calif . : Wadsworth Publishing Company). Bateson, John E. G. (1979), ”Why We Need Service Marketing," in o 8 Marketing, 0. C. Ferrell, S. W. Brown, and C. W. Lamb, Jr., eds., (Chicago: American Marketing Association), pp. 131-146. 230 231 Berg, Norman (1973), ”Corporate role in diversified companies.” in MW. 8. Taylor and K. Macmillan, eds., (New York: John Wiley and Sons), pp. 298-347. Berry, Leonard L. (1980), "Service Marketing is Different," Business. 30. (May-June). pp- 24-29- Berry, Leonard L., Valarie A. Zeithaml, and A. Parasuraman (1985), "Quality Counts in Services, Too," m Horizons. (Hay-June). pp- 44-52- Blalock, Hubert M. Jr. (1979), W, Revised Second Edition. (New York: McGraw-Hill Book Com- PanY) - Blau, Peter M. and Richard Schoenherr (1971) , W W. (New York: Basic Books). Bobbitt, Jr., H. Randolph and Jeffrey D. Ford (1980), "Decision-Maker Choice as a Determinant of Organiza- tional structure.” WW. 5:1. pp. 13-23. Bowersox, Donald J. (1988), "Logistical Partnerships,” in Joseph E. McKeon, ed. , (The logistics Resource Forum Series: Logistics Resource, Inc.). Bowersox, Donald J. (1986), "A Third Party Partner -- A Timely Concept." new. 1:11. (October). pp. 1-3. Bowersox, Donald J. and Patricia J. Daugherty (1987), ”Emerging Patterns of Logistics Organizations,” , 8:1, pp. 46-60. Bowersox, Donald J., Patricia J. Daugherty, Dale 8. Rogers, and Daniel L. Warlow (1987), ”Integrated Logistics: A Competitive Weapon/A Study of Organization and Stra- tegy Practices,“ Proceedings of the Annual Conference of the Council of Logistics Management, Vol. 1, pp. 1- 1‘. "Buyer-vendor partnerships: Are they working?" (1986) an: shew. 30:8. (August). 913- 70-86. Caddick, J. R. and B. G. Dale (1987), "The Determination of Purchasing Objectives and Strategies: Some Key In- fluences. " MW Went. 17:3. pp- 5-16- Callari, James J. (1987), ”Private warehouses go public," , (August), pp. 58-60. 232 Callari, James J. and Jack W. Farrell (1987), "Freight pay- ment: What's the best approach?“ W, (May), pp. 45-54. Carter, Nancy M. and John B. Cullen (1984), "A Comparison of Centralization/Decentralization of Decision Making Concepts and Heaeurea. " W. 10:2. pp. 259-268. Cavinato, Joseph (1988), ”How to Calculate the Cost of Out- 30“r01fl9.' Distributien. (January), PP- 72'75- Child, John (1972) , "Organizational structure, environment and performance: the role of strategic choice," mum. 6. pp- 2-22- Clopton, Stephen W. (1984), "Seller and Buying firm Factors Affecting Industrial Buyers' Negotiation Behavior and Outcomes. " WWW. 21. (February), pp. 39-53. Coase, R. M. (1937), “The Nature of the Firm," Economiga, 4, (November), pp. 386-405. Cooke, James Aaron (1988), "Outsourcing: Who'll do your job?” Wat. (Hay). pp- 38-43- Corey. E- Raymond (1977). W W- (Boston. Mass-z CBI Publishing Company, Inc.). Corey, E. Raymond (1978), ”Should companies centralize pro- cure-ment?" WW. 56. (November- December), pp. 102-110. Crosby, Philip B. (1979), Quali§g_1§_zzgg, (New York: McGraw-Hill). crazier. H- (1964). MW. (Cbicage: University of Chicago Press). Dalton, Dan R., William D. Todor, Michael J. Spendolini, Gordon J. Fielding, and Lyman W. Porter (1980), "Organization Structure and Performance: A Critical Review" W. 5:1. pp- 49-64- Davisson, John F. (1986), ”Third-Party Distribution -- The Growing Alternative. " W ment, (October), pp. 69-71. DeRose, Louis J. (1988), "What the buyer-seller partnership requires.“ W. 32:5. (Kay). pp. 74-75. DeRose, Louis J. (1987), "Buy results, not services,” Eng: shasins_flerld. 31:10. (October). 9- 49- 233 Dobler, Donald W., Lamar Lee Jr., and David N. Burt (1984), , 4th Ed. (New York: McGraw-Hill), pp. 95, 361-373. Drozdowski, Ted. E. (1982) “The 80's buyer must be more than a buyer,“ Rnrgnnging, 93, (December 16), p. 19. Drucker, Peter F. (1988), “The Coming of the New Organiza- tion." Wanna—mien. 88:1. (January- February), pp. 45-.53. Dwyer, F. Robert and Sejo Oh (1988) , "A Transaction Cost Perspective on vertical Contractual Structure and In- terchannel Competitive Strategies,” Jgnrnai___gr Marketing. 5232. (April), PP- 21'34- Dwyer, F. Robert and Sejo Oh (1986), "The Effects of Environmental Munificence on Channel Member Relations,” in AMA Educators' Proceedings, Terence A. Shimp, George John, John H. Lindgren, Jr., Meryl P. Gardner, Subhash Sharma, John A. Quelch, William Dillon, and Robert F. Dwyer, eds., (Chicago: American Marketing Association) pp. 195-200. Dwyer, F. Robert, Paul H. Schurr, and Sejo Oh (1987), ”Developing Buyer- Seller Relationshipsfl' wasting. 51. (April), pp. ll-27. Dwyer, F. Robert and M. Ann Welsh (1985), ”Environmental Relationships of the Internal Political Economy of Marketing Channels. " WWW. Vol. XXII, (November), pp. 397-414. England, Wibur B. and Michiel R. Leenders (1975), Enrgngging , 6th ed. (Homewood, 111.: Richard D. Irwin). Farmer, David H. (1978), "Developing Purchasing Strategies," WW. (Fall) pp. 6-11. "For buyers and sellers it’ s not 'business as usual, "' (1984). W. 28:6. (June). pp. 49-58- Ford, David and David Farmer (1986), "Make or Buy -- A Key strategic Issue. " Wing. 19: 3 . (October), pp. 54-62. Ford, D., H..Makansson, and J. Johanson (1986), ”How do com- panies interact? . " Industrial—War; MI 1: P0 1° 234 Ford, Jeffrey D. and W. Harvey Megarty (1984), "Decision Makers’ Beliefs About the Causes and Effects of Struc- ture: An Exploratory Study." MW lgnrnni, 27:2, pp. 271-291. Ford, Jeffrey D. and John W. Slocum, Jr. (1977), "Size, Technology, Environment and the Structure of Organiza- tiongé'l' WEE. 2. (October). ppe - e Frazier, Gary L. (1983), “Interorganizational Exchange Behavior: A Broadened Perspective,” Jgnrngi__gr Marketing. 47. (Pall). pp. 68-78- Frazier, Gary L. (1983), ”On the Measurement of Interfirm Power in Channels of Distribution,” Journal—gt Marketing—Research. XX. (Hay). pp- 158-166- Fredrickson, James W. (1986), ”The Strategic Decision Process and Organizational Structure, " AW Wigs. 11:2. pp- 280-297- Fredrickson, James W. (1986) , ”The Strategic Decision Pro- cess and Organizational Structure,” Agnggmy_gr_ngnggg; ment_8eyiew. 11:2. pp- 280-297- Galbraith, J. (1977), Qrggnirgrign_dg§ign. (Reading, Mass.: Addison-Wesley). Giunipero, Larry C. and Edward F. Keiser (1987), "JIT Pur- chasing in a Non-Manufacturing Environment: A Case Study.“ WWW ngnr. 23:4, (Winter), pp. 19-25. Goldman, Paul (1973), ”Size and Differentiation in Organiza- tion:§”10£goifiLfio£iolmisaLBexieL 16:1. (January). 910- - - Granzin, Kent L., George C. Jackson, and Clifford E. Young, ( 1986) "The Influence of Organizational and Personal Factors on the Transportation Purchasing Decision Pro- ceae." WW. 7:1. pp- 50-67- GronrooS. Christian (1983). WWW . (Cambridge, Mass.: Marketing Science Institute). Gummesson, Evert (1987-a), "The New Marketing -- Developing Long-term Interactive Relationships,” 'Lgng_3gngg_21§n_ nine. 20: 4, pp. 10-20. Gummesson. E- (1987-b). WW. (Ericsson, Stockholm). 235 Gustin, Craig M. (1984), 'A.Re-examination of the Integrated Distribution Concept.” WWW. 5:1, pp. 1-15. Hall, David J. and Maurice AA. Saias (1980), "Strategy Follows structure!" W. 1. Hall. RJi- (1977). W. (Englewood Cliffs, N.J.: Prentice-Hall). Hall, R.H., J.E. Haas, and N.J. Johnson (1967), "Organizational size, complexity, and fermalization," Wen. 32. pp- 903-922- Heinritz, Stuart and Paul V. Farrell (1981). W . (Englewood Cliffs, N.J.: Prentice-Hall, Inc.). Hennart, Jean-Francois (1986), ”What is Internalization?” 891W. 122. (Fall). pp- 790-803- Heskett, James L. (1973) , ”Sweeping changes in distribu- tion." W. (March-April). poo 123-132. Jackson, Barbara Bund (1985), "Build customer relationships that last." WW. 63:6. (November- December) pp. 120-128. Johnston, Wesley J. (1981), "Industrial Buying Behavior: A State of the Art Review,” in Beyign_gfi_flnrkgring 1981, Ben M. Enis and Kenneth J. Roering, eds., (Chicago: American Marketing Association), pp. 134-142. Judd, Robert C. (1964), "The Case for Redefining Services," Marketing. 28. (January). pp. 58-59- Kearney, A. T. (1981), ”Organizing Physical Distribution to Improve Bottom Line Results," Proceedings of the National Countil of Physical Distribution Management, ppe 1-1‘0 Kearney, A. T. (1985), " th§_1280;§, (Chicago, Ill.: Kearney Management Con- sultants). Kennedy, Anita M. (1983), ”The Adoption and Diffusion of New Industrial Products: A Literature Review, " European WW. 17:3. pp- 31-88- 236 Kimberly, John, R. (1976), “Organizational Size and the Structuralist Perspective: A Review, Critique, and Proposal. " WW. 21. (December) pp. 571-597. Kiser, G. E. (1986), “Elements of Purchasing Strategy,” I (Fall), pp. 3-70 Klein, B., R. B. Crawford, and. A. A. Alchian (1978), "Vertical Integration, Appropriate Rents, and the Com- petitive Contracting Process, " W51 Economics. 21. pp- 297-326- Knisely, Gary (1979), "Listening to Consumer is Key to Con- sumer or Service Marketing," W, 50, (February 19), pp. 54-60. Kotler. Philip (1984). We. (Englewood Cliffs, N.J.: Prentice-Hall, Inc.), p. 445. Kotabe, Masaaki (1987), "Global Sourcing Strategies by European and Japanese Multinational Firms: An Empiri- cal Study." Dissertation - Michigan State University. Kraljic, Peter (1983), "Purchasing must become supply management. " Wilma—321191.. 61:5. (September-October), pp. 109-117. Kutscher, Ronald E. and Jerome A. Mark (1983), "The service producing sector: some common perceptions reviewed," Lawrence. P. and Jo Lorscb (1967). Organizatimnmnmn: ngnr. (Boston, Mass.: Harvard University Press). Leenders, Michiel R., Harold E. Fearon, and. Wilbur B. England (1980) . W. 7th Ed. (Homewood, 111.: Richard D. Irwin), p. 395. Leenders, Michiel and Jean Nollet (1984), "The Gray Zone in Make or Buy.” WW amusement. (Fall). pp- 10-15- Leifer, Richard P. and. .Andre Delbecq (1978), "Organization/Environment Interchange: A Model of Boundary Spanning Activity. " 523W; Be: gigy, 3, (January), p. 40-50. Lenz, R. T. and Jack L. Engledow (1986), ”Environmental Analysis: The Applicability of Current Theory," W. 7. pp- 329-346- 237 Levitt, Theodore (1983) , ”Marketing intangible products and product intangibles.” W. 59:3. (May-June), pp. 94-102. Lewis, Howard T. (1943), W. (Chicago, 111.: Richard D. Irwin). Lewis, Robert C. and Bernard H. Booms, "The Marketing As- pects of Service Quality.“ in Emerging_£er§pectiye§ , L. Berry, G. Shostack, and G. Upah, eds. , (Chicago: American Marketing Associa- tion), pp. 99-107. Lounsbury, Charles B. (1987), ”Profit Through Transportaton Partnerships," Proceedings of the Annual Conference of the Council of Logistics Management, Vol. II, pp. 105- 116. Lovelock, Christopher H. (1981) , "Why Marketing Management Needs To Be Different for Services," in W m, J. H. Donnelly and W. R. George, eds., Chicago: American Marketing Association, pp. 5-9. Marcus, Alfred A. (1987), ”From Market Dominance to Credible Commitments: Shipper's Strategies in a Deregulated Trucking Environment," WW. 25:4. (Summer), pp. 4-15. McCarthy, E. Jerome and William D. Perreault, Jr. (1987), , 9th ed. (Homewood, 111.: Richard D. Irwin, Inc.). McKenna, Regis (1985), W. (Reading, Mass.: Addison-Wesley Publishing Company, Inc.). Meyer, M.W. (1972), ”Size and the Structure of Organiza- tions: A causal Analysis.” Anerisan_§osiologisal_ne: gigg, 37, pp. 434-440. Miles, R. and C. Snow (1978), Structurei_and_2rosess- (New York: HcGraw-Hill)- Mintzberg, Henry (1979), ”Organizational Power and Goals: A Skeletal Theory," in ° Wing. Dan E- Schendel and Charles W. Hofer, eds., (Boston: Little, Brown), pp. 64-80. Mintzberg, Henry (1978) , ”Patterns in Strategy Formation," Management_aciense. 24:9. (May). pp- 934-948- Mohr, L.B. “Organizational Technology and Organizational Structure." Adninistrafiye_Ssisnce_9narierly. 16. pp. 444-459. 238 Montanari, John R. (1978), "Managerial Discretion: An Ex- panded Model of Organization Choice,“ W W. 3. pp. 231-241- Morris, Michael H., Ramona Avila, and Alvin C. Burns (1988), ”The Nature of Industrial Source Loyalty: An Attitudinal Perspective. " in Worsening figiengg, Kenneth D. Bahn, ed., (Blacksburg, Va.: The Academy of Marketing Science), XI, pp. 333-337. Ouchi, W. (1980), ”Markets, Bureaucracies, and Clans," , 25, pp. 124-141. Parasuraman, A. and Valarie A. Zeithaml (1982), "Different Perceptions of Suppliers and Clients of In- dustrial Services.” in W W, L. Berry, G. Shostack, and G. Upah, eds., (Chicago: American Marketing Association), pp. 35-39. Parasuraman, A. , Valarie A. Zeithaml, and Leonard 1.. Berry (1988), ”SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality, " MW. 64:1. (Spring). pp- 12-40- Parasuraman, A., Valarie A. Zeithaml, and Leonard L. Berry (1985), "A Conceptual Model of Service Quality and Its Implications for Future Research," Jgnrngi___gr WI 49: (F811), pp‘ 41-500 Pfeffer, Jeffrey and Gerald R. Salancik (1978), The_Exrernal WW. (Boston: Pittman) - Pitts, R.A. (1977), "Strategies and structures for diversi- fication." W11. 20. pp- 197- 208. Porter, Michael E. (1985), ggmpgririyg_ngynnrggg, (New York: The Free Press). Porter, Michael E. (1980), anpgririyg_§rrgrggy, (New York: The Free Press). Porter, M. (1979), "How Competitive Forces Shape Strategy, WW. 57. (March-April). pp- 137- 145. Pride, William M. and O. C. Ferrell (1985), Mgrkgring_figsig Winona. 4th Ed. (Boston. Hosea Houghton Mifflin Company), p. 11. Pugh, D. S., D. J. Hickson, C. R. Hinings, and C. Turner, (1968) "Dimensions of Organization Structure," ' , 13:1, (June), pp. 65-105. 239 Quinn, James Brian and Christopher E. Gagnon (1986), "Will services follow manufacturing into decline?" narygrg MW. 64:6. (November-December). pp- 95- 103. Quinn J-B- (1980). Sirategies_fer_shangei__Logisal_increnen: . (Homewood, 111.: Irwin). Rathmell, John M. (1966), "What Is Meant by Services?" WI 30, (OCtODBr)I Pp° 32-360 Reed, Dale (1988), "Delivery as a quality issue," Pnrgnnsing Wgrig, 32:6, (June), p. 52. Regan, William J. (1963), "The Service Revolution,” ignrngi 9f_uarketing. (JUIY). PP- 57'52- Ruekert, Robert W., Orville C. Walker, Jr., and Kenneth J. Roering (1985), "The Organization of Marketing Activi- ties: A Contigency Theory of Structure and Perfor- mance." Journal_nf_uarkeiing. 49. (Winter). pp. 13-25- Rushing, William A. (1967), ”The effects of industry size and division of labor on administration," Adminisrgrn_ tiye_§siense_nnarterl¥.. 12. pp- 273-295- Salmond, Deborah and Robert Spekman (1986), "Collaboration as a Mode of Managing Long-Term Buyer-Seller Relation- ships," AMA Educators' Proceedings, Terence A. Shimp, George John, John H. Lindgren, Jr., Meryl P. Gardner, Subhash Sharma, John A. Quelch, William Dillon, Robert F. Dwyer, eds., (Chicago: American Marketing Associa- tion), pp. 162-166. Sasser, W. Earl, Jr., R. Paul Olsen, and D. Daryl Wyckoff (1980). W m, (Boston: Allyn 8 Bacon). Sasser, W. Earl (1976), "Match supply and demand in service industries.” naryard_nusine§s_8exiey. 54:6. (November- December), pp. 133-140. Schmidt, S. and L. Cummings (1976), "Organizational Environ- ment, Differentiation and Perceived Environmental Un- certanity." Desisi9n_ficienses. 7. (1976). pp. 447-467- Schneider, Lewis M. (1985), "New era in transportation strategy.” Haryard__aninees__Beyiex. 64:2. (March- April), pp. 118-126. Schonberger, Richard J. (1980) , "Purchasing Intangibles,” 240 Schurr, Paul H. and Julie L. Ozanne (1985), "Influences on Exchange Processes: Buyers’ Preconceptions of a Seller's Trustworthiness and Bargaining Toughness, " Ionrnal_ef__§9nsumer_8eaearsn. 11:4. (March). pp- 939- 953. Scribbins, Rod (1988) , ”The Distribution Contractor -- A Changing Role," - , 7:3, (April), pp. 5-11. Shostack, G. Lynn (1977), “Breaking Free from Product Marketing." Journal_nf_narketing. 41:2. (April). pp- 73-80e Shostack, G. 'Lynn (1987), “Service Positioning Through Structural Change." Journal_of_narketing. 51. January 1987, pp. 34-43. Skipper, James K. Jr., Anthony L. Buenther, and Gilbert Nass (1967), "The Sacredness of .05: A Note Concerning the Uses of Statistical Level of Significance in Social Science." Ine_Anerisan_§n§iologist. 2. pp- 16-18o Smith, Ruth A. and Michael J. Houston (1982), ”Script-Based Evaluations of Satisfaction with Services,” in Emerging_2ersnestiyes_on_aeryices_uarketing. L- Berry. G. Shostack, and G. Upah, eds. , (Chicago: American Marketing Associa-tion), pp. 59-62. Soukup, William R. (1987), "Supplier Selection Strategies," I9nrnal_ef_Pnrsnasing_and_naierial§_nanagsnent 23:2 (Summer), pp. 7-12. ' ' Spekman, Robert E. and Louis W. Stern (1979), ”Evironmental Uncertainty and Buying Group Structure: An Empirical Investigation.” W. 43. (Spring). pp. 54- 64. steinbruner. J-D- (1974). The_Cybernetis_Theory_of_Decisinn- (Princeton, N.J.: Princeton University Press). Stern, Louis W. and Adel I. El-Ansary (1982), Chgnneig, (Englewood. Cliffs, N.J.: Prentice-Hall, Inc.). Stigler, George J. (1951), “The Division of Labor is Limited by the Extent of the Market." W Economx. (June). pp- 185-193. 241 Taylor, Charles I., warren H. Cohen, Kenneth R. Ernst, and Larry M. Koester (1987) , ”Developing and Managing Distribution Partnerships," Proceedings of the Annual Conference of the Council of Logistics Management, Vol. II, pp. 93-104. Telem, Moshe (1985), ”The Process Organizational Structure," Wise. 22:1. pp- 313-52. Thomas, Dan R. E. (1978), ”Strategy is different in service businesses.” WW. 56:4. (July- August), pp. 158-165. Thompson. J- D. (1967). Won. (New York: McGraw-Hill). Ulrich, David and Jay 8. Barney (1984), "Perspectives in Organizations: Resource Dependence, Efficiency, and Population." W. 9:3. pp- 471-481. Van De Ven, Andrew H. (1976), ”On the Nature, Formation, and Maintenance of Relations Among Organizations," Agnggmy W. 1:4. (October). pp- 24-36- Voorhees, Roy Dale and John I. Coppett (1986), "Marketing - logistics Opportunities for the 1990s," W W. 7:2. (Fall). pp- 33-38- Wagner, William B. (1987), "The Role and Relevance of Im- proved Purchasing for Logistics,“ Jgnrnni_gr_flnsing§§ Insulation. 8:1. pp- 61-78. Walker, Orville C. Jr. and Robert W. Ruekert (1987), ”Marketing' s Role in the Implementation of Business Strategies: A Critical Review and Conceptual Frame- work.” wasting. 51. (July). pp- 15-33- Wasserman, Rodger D. (1987) , I'How to Build a Successful Shipper/ Service Provider Partnership,” Copyright American Delivery System, Inc., Keego Harbor, MI. White, S., J.E. Dittrich, and J.R. Lang (1980), ”The effects of group decision making process and problem situation complexity on implementation attempts,” agninifirrnriyg Wm. 25. pp- 248-440- Wildt, Albert R. and 011i T. Ahtola (1978), W Mariana - Quantitative Applications in the Social Sciences. (Beverly Hills, Calif: Sage Publications). Williamson. Oliver 3- (1985). W W I (New York: The Free Press). 242 Williamson, Oliver E. (1984), ”Credible commitments," Th3 Anii:trnst.8nlletin. 29:1. (Spring). pp- 33-76. Williamson, Oliver E. (1979) , "Transaction-Cost Economics: The Governance of Contractual Relations, " W W. 22. (October). pp- 233-261- Wilson, John W. and Judith H. Dobrzynski (1986), "And Now, The Post-Industrial Corporation," W. (March 3), pp. 64-71. Zeithaml, Carl F. and Valarie A. Zeithaml (1984), "Environmental Management: Revising the Marketing Perspective.” W. 48. (Spring). pp- 46-53. Zeithaml, Valarie A. (1981), ”How Consumer Evaluation Pro- cesses Differ Between Goods and Services," in W. James H- Donnelly and William R. George, eds. , (Chicago: American Marketing Association), pp. 186-190. Zeithaml, Valarie A., Leonard L. Berry, and A. Parasuraman (1988) , ”Communication and Control Processes in the Delivery of Service Quality.” W. 52:2, (April), pp. 35-48. Zeithaml, Valarie A., A. Parasuraman, and Leonard L. Berry, (1985)"Problems and Strategies in Services Marketing,” Waring. 49. (Summer). pp- 33-46-