The Effects of Logistics Capabilities on Firm Performance: Customer‐focused Versus Information‐focused Capabilities

Abstract

Competitive advantage may be gained from two main sources: assets and the capabilities that enable assets to be deployed advantageously (Dierickx and Cool 1989). Day (1994, p.38) defined capabilities as "complex bundles of skills and accumulated knowledge, exercised through organizational processes, which enable firms to coordinate activities and make use of their assets." Management's task is to exploit and leverage firm specific assets and capabilities (Mahoney and Pandian 1992).This research focuses on the relationships to performance of two types of capabilities: customerfocused capabilities and information-focused capabilities. The connection between customerfocused capabilities and firm performance has long been recognized in marketing literature (e.g., Day 1994). In the logistics field, increased attention has been given to the relationships among customer-focused logistics capabilities and firm performance (Innis and La Londe 1994;Novack, Langley, and Rinehart 1995;Stank and Lackey 1997). In particular, Bowersox, Closs, and Stank (1999) incorporated key customer-focused capabilities into a "customer integration" construct that formed one core competence of firms achieving high levels of supply chain logistical integration.Information technology and information-focused capabilities have increasingly been viewed as key predictors of firm performance. For example, EDI (electronic data interchange), e-commerce, e-logistics, ERP (enterprise resource planning), data warehousing, and data mining are current buzzwords in the business community. In logistics, the importance of information technology has long been recognized (e.g., Fawcett, Calantone, and Smith 1996;Williams et al. 1997). Bowersox, Closs, and Stank positioned information-focused capabilities as important enablers of improved firm performance in best practice firms.The first goal of this research is to propose and test a model of the relationships among customerfocused capabilities, information-focused capabilities, and firm performance. We begin by grounding each independent construct in prior research in marketing, IT, and logistics, and then develop hypotheses from this review. A methodology for testing the hypothesized model is described and followed by a discussion of results. BACKGROUND Customer-Focused CapabilitiesVarious research streams in marketing and logistics support the notion that firms have to develop customer-focused capabilities in order to achieve superior performance. The concept of "market orientation" represents superior skills in understanding and satisfying customers. Empirical evidence supports the proposition that market orientation is positively associated with superior performance (Deshpandé, Farley, and Webster 1993;Hunt and Morgan 1995;Jaworski and Kohli 1993;Narver and Slater 1990). Day argued that organizations could become more market oriented by identifying and building the special internal and external capabilities that set marketdriven organizations apart. In particular, market-driven organizations have superior c...

A survey based analysis of IT adoption and 3PLs' performance

“…Our definition of logistics capabilities tries to shed new light on the use of this variable, which has been defined in disparate ways in the extant literature. In fact, previous studies define logistics capabilities in terms of operational performance (Morash et al, 1996;Fawcett et al, 1997;Cho et al, 2008), information capabilities (Shang and Marlow, 2005), or a mix of both these factors (Zhao et al, 2001;Lu and Yang, 2006). These definitions cannot all be used in this work since they overlap with either the IT adoption variable or the firm performance variable.…”

An Integrated-Empirical Logistics Perspective on Supply Chain Innovation and Firm Performance

“…Morash et al (1996) defined logistics capabilities as "those attributes, abilities, organizational processes, knowledge and skills that allow a firm to achieve superior performance and sustained competitive advantage over competitors". Logistic capabilities determine the extent to which a firm can manage its operations efficiently and effectively (Gligor, Holcomb 2012) and are a potential sour ce of competitive advantage for a firm (Bowersox et al 1999;Zhao et al 2001).…”

“…While the former value discipline, labeled "demand oriented" emphasizes interactions and interfaces with customer, fulfillment of allied goals and objectives, timeliness and being responsive to market needs; the latter, known as "supply oriented" stresses more on operational capabilities aimed at ensuring product availability, incre asing convenience and minimizing total distribution cost. In contrast, Mentzer et al (2004) classified logistics capa bilities into: demand management interface capability (to manage and fulfill customer requirements; Zhao et al 2001;Lynch et al 2000;Bowersox et al 1999), supply management interface capability (to efficiently manage inflow of raw materials; Morash et al 1996;Lowson 2003), information management capability (to effectively manage information flow both in and out of an organization; Zhao et al 2001;Closs et al 1997) and coordination capability (to align the interests of the participating members; Mentzer et al 2004;Gligor, Holcomb 2012). Esper et al (2007) categorized logistics capabilities into five broad labels: (a) customer focus capability(also known as demand management interface capability and aims for providing differentiated products and services to customers in a way exceeding their expectations), (b) supply manage ment capability (aimed at reducing the cost of total manu facturing or service generating system, optimal utilization of resources and minimizing total distribution cost), (c) Integration capability (aims to achieve unification of effort among different activities both inside and outside the focal firm), (d) measurement capability (degree to which a firm monitors internal and external operations), and (e) infor mation exchange capabilities (indicates the effectiveness with which a firm collects, stores and distributes tactical and strategic information both internally and externally).…”

“…Information management capability were measured with four items that enquired respondents if their firm can effectively share operational information among its va rious departments; maintains an integrated data base for information sharing; possess adequate systems and technology for detecting, capturing and maintaining ti mely data. The items for measuring information mana gement capability were suitably adapted from Zhao et al (2001) and Mentzer et al (2004). Supply management capability was measured with four items that enquired the respondents if their firm has its logistics operations synchronized with that of its suppliers; if the firm pursues programs for developing its suppliers and if it has enhan ced flexibility through collaboration with its suppliers.…”

“…Supply management capability was measured with four items that enquired the respondents if their firm has its logistics operations synchronized with that of its suppliers; if the firm pursues programs for developing its suppliers and if it has enhan ced flexibility through collaboration with its suppliers. The items for measuring supply management interface capability were suitably adapted from Zhao et al (2001) and Mentzer et al (2004). Logistics integration was me asured with four items that enquired respondents if their firm's internal logistics activities are closely coordinated; their logistics integration is efficiently supported with excellent distribution, transportation and warehousing facilities; if the inbound and outbound distribution of goods is well integrated.…”