Authors: Tutor: Examiner: Subject: Level and semester423138/FULLTEXT01.pdf · 2011-06-14 · customer value is created through customer accommodation, value co-creation and customer

Authors: Tutor: Examiner:

Subject: Level and semester:

Abstract The purpose of this thesis is to explain the linkage between logistics and customer value. The focus is on how customer value can be created through logistics services. The thesis also explains how value is created in the internal logistics context.

Today, logistics plays an important role in an organization which indirectly contributes to growth and profitability. Logistics service providers are striving to provide outstanding logistics services to their customers. This thesis seeks to identify the elements of logistics services and attempts to analyze and evaluate whether these services can create value to internal customers. The research project is conducted as a single-case study with Electrolux Laundry System (ELS). This study aims at explaining the linkage between the Logistics Centre in Ljungby (LCL), the logistics service provider of the company and the value LCL can create for their customers (internal), the Sales Companies. Finding the gap between the perceptions and expectations of the customers is also another objective of this study. Based on the theoretical framework developed for the purpose of explaining the above linkage, a survey with questionnaires was designed to collect empirical data for analysis. 23 respondents from LCL and 4 Sales Companies were interviewed. The key conclusion of this study is that logistics plays a strategic role in an organization when customer value is created through customer accommodation, value co-creation and customer integration. Superior logistics services generate customer value through achieving efficiency, effectiveness and differentiation/relevancy which can lead to competitive advantage for the organization. As a result of the case study, a proposition is made: “If customer value is to be achieved, then customer success has to be attained.” Keywords: logistics, logistics services, logistics capabilities, customer value, service quality, customer accommodation, customer service, customer satisfaction, customer success, value co-creation, customer integration.

Kong, Berky and Choe, Mae Fong Page 2

Acknowledgements We would like to express our sincere gratitude and appreciation to those who have helped and contributed to the process of completing this master thesis. Foremost, we are grateful to Electrolux Professional Laundry Systems for the opportunity to engage in this research for the company. We would like to thank the interviewees from Electrolux Professional Laundry System, in particular the Logistics Centre in Ljungby (LCL), Sweden and the 4 Sales Companies in the UK, France, Germany and Norway for their interest, time and willingness to participate in the questionnaires. We would especially like to thank Janne Ljungman and Peter Nilsson from LCL, the key informants for our case study whose contributions were most informative and valuable to the design of the questionnaire as well as the findings for our thesis. We cherish the hospitality shown to us during our company visit to Ljungby. We have been honored and motivated to develop an insightful research. We are most grateful to our supervisor, Dr. Joachim Timlon, for providing valuable guidance throughout the process. The debates had and the consensus reached contributed heavily to our development and thought styles to complete the thesis at the master’s level. As a veteran consultant, his analytical and structural capabilities benefited us in terms of formulating the framework and structure of the thesis. Also, his excellent relationship with our case company’s senior executives facilitated the questionnaire design and data collection process. We would also like to express our gratitude to Professor Hans Jansson whose seasoned experience and devotion to academic researches contributed to our learning and discussions in the methodology seminars and throughout the program. We are thankful to Dr. Jansson for the prompt and precise advice on the research. We would also like to thank PhD students Mikael Hilmersson, for providing advice and discussion on quantitative analysis and Niklas Åkerman, whose digital tape recorder had been indispensible to us throughout the whole data collection process. Last but not least, special mention has to be made to our friends and classmates whose active debate, discussions and encouragement have assisted with the progress and completion of our thesis. It has been a wonderful and pleasant journey. Kalmar, Sweden, 24 May 2011 Berky Kong and Mae Fong Choe


List of abbreviations

ELS Electrolux Laundry Systems

LCL Logistics Centre Ljungby, Sweden

G-D Goods-dominant

S-D Service-dominant

UK United Kingdom


Contents 1.0 INTRODUCTION .................................................................................................................................. 11

1.1 Research Background ...................................................................................................................... 11

1.2 Research Questions......................................................................................................................... 14

1.3 Purpose ........................................................................................................................................... 15

1.4 Delimitations ................................................................................................................................... 16

2.0 METHODOLOGY .................................................................................................................................. 17

2.1 Scientific Approach ......................................................................................................................... 17

2.2 Research Type ................................................................................................................................. 17

2.3 Research Method ............................................................................................................................ 18

2.4 Research Approach ......................................................................................................................... 19

2.5 Case Study Design ........................................................................................................................... 20

2.6 Data Collection ................................................................................................................................ 21

2.6.1 Three principles of data collection ........................................................................................... 22

2.6.2 Data Sampling .......................................................................................................................... 27

2.6.3 Empirical Data Structure .......................................................................................................... 27

2.6.4 Sections of Empirical Data ....................................................................................................... 27

2.6.5 Respondent Profile .................................................................................................................. 28

2.6.6 Data Analysis ............................................................................................................................ 31

2.7 Quality of Research ......................................................................................................................... 31

2.7.1 Internal validity ........................................................................................................................ 31

2.7.1.1 Construct validity .................................................................................................................. 32

2.7.2 External validity ........................................................................................................................ 33

2.7.2.1 Construct validity .................................................................................................................. 34

2.7.3 Reliability .................................................................................................................................. 34

2.8 Ethics ............................................................................................................................................... 35

2.9 Research Model .............................................................................................................................. 36

3.0 THEORETICAL FRAMEWORK .............................................................................................................. 38

3.1 Logistics Services ............................................................................................................................. 38

3.1.1 Logistics services categories .................................................................................................... 38

3.1.2 Correlation between “supply chain” and “logistics” ............................................................... 39

3.1.3 The importance of logistics management in an integrated supply chain ................................ 39

3.1.4 Logistics service as a source of competitive advantage .......................................................... 41

3.1.5 Internal Logistics Structure ...................................................................................................... 42

3.2 Customer Accommodation ............................................................................................................. 42

3.2.1 Customer Service (Customer Accommodation Level One) ...................................................... 43

3.2.2 Customer Satisfaction (Customer Accommodation Level Two) .............................................. 44

3.2.2.1 SERVQUAL scale and Gap Model .......................................................................................... 46


3.2.3 Customer Success (Customer Accommodation Level Three) .................................................. 48

3.2.4 Internal Customer Service ........................................................................................................ 49

3.3 Value creation ................................................................................................................................. 50

3.3.1 Definition of Customer Value .................................................................................................. 50

3.3.2 Creation of customer value through logistics .......................................................................... 51

3.3.3 Co-creating value from a Service-Dominant Perspective ........................................................ 52

3.3.3.1 Logistics Service Value Co-creation Process ......................................................................... 53

3.3.4 Customer integration ............................................................................................................... 57

3.4 Synthesis ......................................................................................................................................... 59

4.0 EMPIRICAL FINDINGS ......................................................................................................................... 64

4.1 The Case Company .......................................................................................................................... 64

4.2 Logistics Centre Ljungby (LCL) ......................................................................................................... 65

4.2.1 The Strategic Role of Logistics ................................................................................................. 65

4.2.2 Customer Accommodation ...................................................................................................... 66

4.2.3 Value Creation .......................................................................................................................... 68

4.3 The Sales Companies ....................................................................................................................... 69



4.3.3 Value Creation .......................................................................................................................... 74

4.4 The Sales Company in the United Kingdom .................................................................................... 74

4.4.1The Strategic Role of Logistics .................................................................................................. 75


4.4.3 Value Creation .......................................................................................................................... 78

4.5 The Sales Company in France ......................................................................................................... 78



4.5.3 Value Creation .......................................................................................................................... 82

4.6 The Sales Company in Germany ..................................................................................................... 82



4.6.3 Value Creation .......................................................................................................................... 86

4.7 The Sales Company in Norway ........................................................................................................ 86



4.7.3 Value Creation .......................................................................................................................... 90

5.0 ANALYSIS ............................................................................................................................................ 91

5.1 The Strategic Role of Logistics......................................................................................................... 91

5.1.1 Value-adding process to link supply chain units ...................................................................... 94


5.1.2 Efficiency, effectiveness and relevancy/differentiation .......................................................... 95

5.1.3 Competitive advantages .......................................................................................................... 95

5.2 Customer Accommodation ............................................................................................................. 96

5.2.1 Customer Service ..................................................................................................................... 96

5.2.2 Customer Satisfaction .............................................................................................................. 97

5.2.2.1 Gap Analysis - Summary ........................................................................................................ 97

5.2.3 Customer Success .................................................................................................................... 98

5.2.4 Summary on Customer Accommodation ............................................................................... 100

5.3 Value Creation ............................................................................................................................... 100

5.3.1 Co-creation of Value .............................................................................................................. 103

5.3.2 Customer integration and logistics capabilities ..................................................................... 106

5.3.2 Summary on Value Creation .................................................................................................. 107

6.0 CONCLUSIONS .................................................................................................................................. 110

6.1 The Strategic role of logistics ........................................................................................................ 110

6.2 Customer Accommodation ........................................................................................................... 110

6.3 Value Creation ............................................................................................................................... 111

6.4 Summary ....................................................................................................................................... 113

7.0 MANAGERIAL RECOMMENDATIONS ............................................................................................... 114

7.1 Relationship Marketing campaigns ............................................................................................... 114

7.2 Co-create value through pro-active understanding of the customers and the markets .............. 115

7.3 Customer Segmentation ............................................................................................................... 115

7.4 Develop Logistics Capabilities ....................................................................................................... 116

7.5 Performance Management ........................................................................................................... 116

7.6 Performance Measurement .......................................................................................................... 116

7.7 Integrative Management .............................................................................................................. 117

7.8 Training & workshops ................................................................................................................... 117

8.0 FURTHER RESEARCH ......................................................................................................................... 118

8.1 Correlation between customer value and organic growth ........................................................... 118

8.2 Cross cultural influence on perceived customer satisfaction ....................................................... 118

8.3 The relationship design for internal logistics ................................................................................ 118

8.4 The impact of stock outs ............................................................................................................... 118

9.0 BIBLIOGRAPHY .................................................................................................................................. 119

10.0 APPENDICES .................................................................................................................................... 125

Appendix A : Questionnaire for Logistics Center Ljungby (LCL) .......................................................... 125

Appendix B : Questionnaire for the Sales Companies ........................................................................ 129

Appendix C : Empirical Data for Logistics Centre Ljungby (LCL) .......................................................... 134

Appendix C1 : The Strategic Role of Logistics Services ................................................................... 134

Appendix C2 : Overall logistics deliveries (percentage ratings) ...................................................... 135


Appendix C3 : Overall logistics deliveries (ranking of importance) ................................................ 135

Appendix C4 : Basic elements of customer service – Finished Products ........................................ 136

Appendix C5 : Basic elements of customer service - Spare Parts ................................................... 136

Appendix C6 : Basic elements of customer service (ranking of importance) ................................. 137

Appendix C7 : Expectations and Perceptions – Finished Products ................................................. 137

Appendix C8 : Expectations and Perceptions – Spare Parts ........................................................... 138

Appendix C9 : Dimensions of service quality .................................................................................. 138

Appendix C10 : General questions on Customer Accommodation ................................................ 138

Appendix C11 : Co-creation of Value .............................................................................................. 139

Appendix C12 : Open-ended Questions for Management ............................................................. 139

Appendix D : Empirical Data for the Sales Companies ........................................................................ 141

Appendix D1 : The Strategic Role of Logistics Services ................................................................... 141

Appendix D2 : Overall logistics deliveries (percentage ratings)...................................................... 141

Appendix D3 : Overall logistics deliveries (ranking of importance) ................................................ 141

Appendix D4 : Basic elements of customer service - Finished Products ........................................ 142

Appendix D5 : Basic elements of customer service - Spare Parts ................................................... 142

Appendix D6 : Basic elements of customer service (ranking of importance) ................................. 142

Appendix D7 : Expectations and Perceptions - Finished Products ................................................. 143

Appendix D8 : Expectations and Perceptions - Spare Parts ............................................................ 144

Appendix D9 : Expectation Gap (LCL and the Sales Companies) Finished Products ....................... 144

Appendix D10 : Perception Gap (LCL and the Sales Companies) Finished Products ...................... 145

Appendix D11 : Expectation Gap (LCL and the Sales Companies) Spare Parts ............................... 145

Appendix D12 : Perception Gap (LCL and the Sales Companies) Spare Parts................................. 145

Appendix D13 : Dimensions of service quality ................................................................................ 146

Appendix D14 : General questions on Customer Accommodation ................................................ 146

Appendix D15 : Co-creation of value .............................................................................................. 146

Appendix D16 : Open-ended Questions for Management ............................................................. 146

Appendix D17 : Open-ended questions for all respondents ........................................................... 149

Appendix E : Empirical Data for the Sales Companies in the UK ........................................................ 152

Appendix E1 : Expectations and Perceptions - Finished Products .................................................. 152

Appendix E2 : Expectations and Perceptions - Spare Parts ............................................................ 152

Appendix E3 : Expectation Gap - LCL and Sales Company (UK) - Finished Products ...................... 153

Appendix E4 : Perception Gap - LCL and Sales Company (UK) – Finished Products ....................... 153

Appendix E5 : Expectation Gap - LCL and Sales Company (UK) - Spare Parts ................................. 154

Appendix E6 : Perception Gap - LCL and Sales Company (UK) – Spare Parts ................................. 154

Appendix F : Empirical Data for the Sales Companies in France ........................................................ 155

Appendix F1 : Expectations and Perceptions - Finished Products .................................................. 155

Appendix F2 : Expectations and Perceptions - Spare Parts ............................................................ 155


Appendix F3 : Expectation Gap - LCL and Sales Company (France) - Finished Products ................ 156

Appendix F4 : Perception Gap - LCL and Sales Company (France) - Finished Products .................. 156

Appendix G : Empirical Data for the Sales Companies in Germany .................................................... 158

Appendix G1 : Expectations and Perceptions - Finished Products ................................................. 158

Appendix G2 : Expectations and Perceptions - Spare Parts ............................................................ 159

Appendix G3 : Expectation Gap - LCL and Sales Company (Germany) - Finished Products ............ 159

Appendix G4 : Perception Gap - LCL and Sales Company (Germany) - Finished Products ............. 160

Appendix G5 : Expectation Gap - LCL and Sales Company (Germany) - Spare Parts ...................... 160

Appendix G6 : Perception Gap - LCL and Sales Company (Germany) – Spare Parts ....................... 160

Appendix H : Empirical Data for the Sales Companies in Norway ...................................................... 161

Appendix H1 : Expectations and Perceptions - Finished Products ................................................. 161

Appendix H2 : Expectations and Perceptions – Spare Parts ........................................................... 162

Appendix H3 : Expectation Gap - LCL and Sales Company (Norway) – Finished Products ............. 162

Appendix H4 : Perception Gap - LCL and Sales Company (Norway) – Finished Goods................... 162

Appendix H5 : Expectation Gap - LCL and Sales Company (Norway) – Spare Parts ....................... 163

Appendix H6 : Perception Gap - LCL and Sales Company (Norway) – Spare Parts ......................... 163

Appendix I : Warehouse visit in Ljungby, Sweden (8 April 2011) ....................................................... 164

Appendix J : Power Point presentations provided by LCL (March 2011) ............................................ 164

Appendix K : Interviews (face-to-face) at LCL (8 & 9 April 2011) ........................................................ 164

Appendix L : Interviews (telephone) (from 21 April – 13 May 2011) ................................................. 164

List of Figures

Figure 1 Research Overview ........................................................................................................... 15 Figure 2 Thesis Outline .................................................................................................................... 16 Figure 3 Systematic combining (Dubois and Gadde, 2002) ............................................................ 20 Figure 4 Convergence of evidence of current case study ............................................................... 23 Figure 5 Chain of evidence for the case study ................................................................................ 26 Figure 6 Empirical findings and analysis structure .......................................................................... 28 Figure 7 Research Model (Kong and Choe, 2011) ........................................................................... 36 Figure 8 Logistics system and examples of relevant activities........................................................ 38 Figure 9 Logistics as a key function in an integrated supply chain (Bowersox, Closs and Cooper, 2010) 40 Figure 10 Internal perspective of the logistics system. The own organization is the starting point (Jonsson 2008) ...................................................................................................................................... 42 Figure 11 Continuum of the different levels of customer-driven service (Ellinger et al, 1997) ....... 43 Figure 12 The service quality model (Parasuraman, et al, 1985) ..................................................... 47 Figure 13 Logistics value co-creation process in three phases (Yazdanparast, Manuj and Swartz, 2010) 53


Figure 14 Logistics service value co-creation process with 3 phases and 12 propositions (Yazdanparast, Manuj and Swartz, 2010) ............................................................................................. 54 Figure 15 Influencers of Relationship Design in the Learning phase (Yazdanparast, Manuj and Swartz, 2010) ........................................................................................................................................ 55 Figure 16 Design and implementation of value creating solution in the Innovation and execution phase (Yazdanparast, Manuj and Swartz, 2010) ................................................................................... 56 Figure 17 Characteristics of service provided and Customer/Provider benefits in the Outcome phase (Yazdanparast, Manuj and Swartz, 2010) ................................................................................... 57 Figure 18 Logistics capabilities within the concept of Customer Integration (Bowersox, Closs, and Stank (1999) .......................................................................................................................................... 58 Figure 19 The internal logistics service gap model (Kong and Choe, 2011) ..................................... 60 Figure 20 Theoretical Framework Model (Kong and Choe, 2011) .................................................... 62 Figure 21 Overview of theory chapter .............................................................................................. 63 Figure 22 Electrolux Laundry Systems Manufacturing Plants ........................................................... 64 Figure 23 Scope of empirical study for Electrolux Professional Laundry Systems ........................... 65 Figure 24 Electrolux Laundry Systems Focused Customer Segments ............................................... 69 Figure 25 Comparison of empirical findings on LCL's strategic role between LCL and the Sales Companies 70 Figure 26 Service Levels .................................................................................................................... 71 Figure 27 Comparison of Empirical findings on value creation between LCL and the Sales Companies 74 Figure 28 LCL’s strategic role in the logistics system with a focus on “order to delivery” and “distribution” ........................................................................................................................................ 91 Figure 29 The Strategic Role of Logistics in an Organization ............................................................ 96 Figure 30 The internal logistics service gap model for LCL and the Sales Companies (Kong and Choe, 2011) 97 Figure 31 LCL’s level of Customer Accommodation (modified from Ellinger et al, 1997) (Kong & Choe, 2011) 100 Figure 32 The Value Creation Model (Kong and Choe, 2011) ......................................................... 101 Figure 33 Value Proposition (Bowersox, Closs and Cooper, 2010) ................................................. 101 Figure 34 Logistics service value co-creation process with 3 phases and 12 propositions (Vargo and Lusch, 2008) ........................................................................................................................................ 104 Figure 35 Logistics capabilities within the concept of Customer Integration (Bowersox, Closs, and Stank (1999) ........................................................................................................................................ 106 Figure 36 The internal logistics service gap model (Kong and Choe, 2011) ................................... 111

List of Tables Table 1 Six sources of Evidence with Strengths and Weaknesses Comparison (modified from Yin, 2009) 21 Table 2 Types of Database ................................................................................................................. 25 Table 3 Sampling Ratio by Market ..................................................................................................... 29 Table 4 List of Respondents for the Survey ....................................................................................... 30 Table 5 Basic low-end and high-end logistics services examples ...................................................... 39 Table 6 Description of Gaps in Service Quality Model (Parasuraman, et al, 1985) ........................... 47


Table 7 Evolution of management thought (Bowersox, Closs and Cooper, 2010) ............................ 48 Table 8 Integrative management value proposition (Bowersox, Closs and Cooper, 2010) ............... 51 Table 9 Comparing the differences between the G-D logic and the S-D logic perspectives (Vargo and Lusch, 2008) .......................................................................................................................................... 52 Table 10 Summary of opinions on the strategic role of LCL ............................................................ 93 Table 11 Perceived value created by LCL and LCL’s capabilities ..................................................... 94 Table 12 Summary of opinions on Value Creation by LCL ............................................................. 103 Table 13 List of capabilities and practices that may enable internal logistics service providers to create customer value for internal customers: .................................................................................. 108


1.0 INTRODUCTION In this chapter, the research background with our motives of this thesis will be described. The research questions will then be introduced. The purpose and the delimitations of the research will also be examined. Finally, the outline of the thesis will be summarized at the end of this chapter.

1.1 Research Background This is a thesis on logistics and customer value with an attempt to look into both elements from an internal logistics perspective. During the last decades, the role of logistics in organizations has been changed. Prahalad and Hamel (1990) and Stalk et al. (1992) realize that there has been an increasing attention directed towards logistics as a competitive weapon. Despite over two decades of recognition of logistics as a source of competitive differentiation, there has been little effort put into building a theory of the role of logistics in the organization (Mentzer et al., 2004).

The growing importance of logistics for globalization Logistics is an organizational planning framework for material management, information, service and capital flows. Logistics in the context of the prevalent dynamic business environment also involves complex information that is essential for organizations to function efficiently. Logistics has been gaining a growing significance in supply chain management because of the ever increasing complexities of modern day business. It can be translated as a competitive strategy adapted by an organization to meet and exceed the expectations of its existing and prospective customers (Beckett, 2005). Well-performed logistics management creates competitiveness and superior performance by improving efficiency and effectiveness to positively affect profits. The influence of logistics on profitability takes place by creating customer value through superior logistics services (Bobbitt, 2004). Christopher (2005) argues that effective logistics can become a major source of competitive advantage in the sense that a position of enduring superiority over competitors in terms of customer preference may be achieved through better logistics management. In the present business world, logistics plays an important role for an organization focusing on growth and profitability. It also plays on a global stage which is crucial for the phenomenon of globalization. Globalization of businesses and liberalization of trade has increased the importance of the logistics function in the past few decades. As businesses source raw materials and components globally, and sell their products in global markets, logistics management has been expanding beyond international boundaries. This has increased its complexity which requires strategic ways to manage logistics activities. The global logistics market generated total revenues of $3,566 billion in 2008, representing a compound annual growth rate (CAGR) of 6% for the period spanning 2004-08. The industry is forecast to grow at a CAGR of 2% for the five-year period 2008-13, to reach $3,895.5 billion by the end of 2013. (Bharat Book, 2010). The forecast growth indicates that businesses are increasingly relying on logistics as a result of globalization which also means that superior logistics may be a key success factor for international businesses to compete against competitors.

Explore gaps in expectations and perceptions of customers and service providers Understanding and achieving service quality has become a priority in industry and academics.


“A firm can provide logistics service equal to or even better than a competitor’s but still have dissatisfied customers. This may arise from the lack of knowledge of customer expectations, improper standards of performance, performance failure, poor communication or incorrect customer or firm perception of performance.” (Bowersox, Closs and Cooper, 2010).

Traditionally, logistics managers have attempted to assess their performance through an “operational focus” by relying on internally generated measures and using the measurement of quality to infer customers’ opinions of the provided service (Davis and Mentzer, 2006). In pursuing operational excellence, logistics managers have often overlooked an outward orientation toward customers that calls for competing on superior customer value delivery (Woodruff, 1997). By analyzing the perceptions and expectations, organizations can add to the traditionally measured set of operational service attributes and build upon their understanding of customer needs and requirements to improve service quality. (Mentzer, Flint and Kent, 1999) It is essential for organizations to have measurement tools for gauging its service performance. Performance measurement is critical to the success of almost any organization because it creates understanding, moulds behaviour and leads to competitive results. World-class performance requires superior process measurement both within the firm and across organizational boundaries (Fawcett and Cooper, 1998). It is particularly important for internal logistics service units because the non-competitive nature of the relationship between internal parties may hinder their motivation in providing above average services to counterparts in the organization. To develop a competency scale for the internal logistics service unit, an effective service quality benchmarking model is particularly useful. Additionally, assessing customers’ perceptions and expectations is also motivated by the objective of reducing environmental uncertainty. Environmental uncertainty affects business strategies and tactics, thus affecting logistics, management and marketing strategies. This uncertainty is related to the dynamic nature of customer desires. Service providers who uncover the unique ways in which their customers view their world and the specific change forces on which they are focusing on are more likely to be able to design customized logistics solutions that best meet the customer's changing desires than those who provide standardized logistics solutions. Focusing on customers’ changing desires rather than competitors’ offerings would more likely lead to the development of effective logistics solutions to meet the specific customers’ changes. (Flint and Mentzer, 2000) Change is inevitable and may involve logistics. Customers change what they value from suppliers making it crucial for suppliers in competitively dynamic industries to find ways to retain strategically important business customers. Customer value strategies require a deep understanding of how and why changes occur and involves anticipating and responding to changes in customers' desired value as well as changes in desired consequences. (Flint and Mentzer, 2000) There are several benchmarking tools suggested by previous researches to measure customer service quality such as Parasuraman’s SERVQUAL (1991) which is used to gauge the service quality for external customers. Additionally, there are logistics capabilities models such as the Grey assessment model. However, there are few tools available for analyzing the internal customer


satisfaction for logistics services within an organization. Thus, one of the motives for this research is to develop a modified benchmarking model which is particularly adapted to the logistics context as well as to measure internal customer satisfaction. Explain linkage between customer value and logistics from a contemporary perspective As a consequence of increasing globalization, the competition among organizations is growing and therefore new ways of winning growth and profitability have to be adopted in the new business climate. As mentioned above, logistics has a growing significance in influencing the performance of organizations and therefore traditional logistics service offerings are inadequate to compete in the marketplace. Traditional logistics services tend to be passive, routine, and standardized which may sometimes mean “one size fits all”. Logistics in the old days only focused on operational excellence which suggested that providers offer logistics services and the customers buy them (Vargo and Lusch, 2008). Contemporary logistics services are more proactive, interactive, and particularly, customer-oriented. Service providers nowadays are developing services that customers want and their key objective is value-adding and continuing the positive relationship with the customers (Vargo and Lusch, 2008). Rewarding mutual win-win benefits are generated through the tight relationship between providers and customers which may eventually create value for both parties. Based on the perspective of Service-Dominant logic, value is defined and co-created by customers rather than being embedded in the output (Vargo and Lusch, 2008). So such perspective suggests that “customers and providers co-create value”. One of the motives of this thesis is to explain the linkage between logistics and customer value. Gap in literature for internal logistics An extensive investigation on literature in relation to the thesis topic shows that there is limited previous literature or studies conducted to cover internal logistics services for internal customers, who are the employees along the supply chain within the same organization. Most of the available research results are based on external logistics service providers with external customers or end-customers. There exists a significant gap in theories on logistics services and customer value in the internal logistics. Thus, we are also interested in finding out whether the existing theories for external logistics can be applied to the internal logistics setting. In conclusion, there is room for exploration of the ways to achieve customer value through the creation of logistics value especially in the internal logistics setting. Understanding customer needs and requirements is a basis for developing value. To achieve this, an exploration of customer expectations and perceptions is necessary. Through the comparison of case study empirical findings and the selected theories, it will be meaningful to contribute some generalized recommendations that logistics managers can adopt with the aim of creating customer value through logistics.


Research sub-question 1What is the strategic role of logistics in an organization?

Research sub-question 2How are customers accommodated through logistics services?

Main Research QuestionHow can an organization strategically use logistics to create

customer value?

Research sub-question 3How is value created?

1.2 Research Questions Based on the research background mentioned above, logistics plays an indispensible role in an organization, indirectly contributing to growth and profitability. Logistics service providers are actively seeking ways to capture the opportunities of the growing logistics demand due to globalization of businesses. In order to understand the perceived service quality by the customers, logistics service providers attempt to assess the customers’ perception and expectation in order to identify the improvements that can be made to serve customers better. In addition, contemporary logistics management is getting more customer-focused in order to create higher value for both customers and providers. In light of the above rationale, we have developed the following research questions that both we and the logistics service providers are interested in.

The main research question leads to the following three sub-questions:

This research sub-question 1 will explain the importance of logistics for an organization in the dynamic business environment. We would also like to justify the selection of this topic as the research focus.

This research sub-question 2 looks into the ways that logistics service providers can become more customer focused. This question will be addressed by established theories and gauging tools that will help service providers to ascertain their service quality level from the perspective of the customers. Answering this question will be beneficial for providers to better understand the customers and identify areas for improvement.

The purpose of the third sub-question is to identify ways to add value or create value for both product/service providers and customers. Answering this question can inspire logistics service


Logistics as a strategic role for the creation of customer value

How can an organization strategically use logistics to create customer value?

What is the strategic role of logistics in an organization?

How are customers accommodated through

logistics services?

How is value created?

The growing importance of logistics for globalization

Explore gaps in expectations and perceptions of customers and

service providers

Explain linkage between logistics and customer value from a contemporary perspective

Gap in literature for internal logistics

providers to adopt some useful tactics that can create customer value and serve the customers better. Figure 1 Research Overview

1.3 Purpose The overall purpose of this thesis is to explain the linkage between logistics and customer value. The following steps will be adopted in the thesis to fulfill the aforesaid purpose: • To identify the elements of internal logistics services and to analyze and evaluate if these

services can strategically be used to create value • To develop a framework for how internal logistics services can create value for internal

customers • To propose managerial recommendations for logistics service providers to create customer value

Research Topic

Research Main Question

Research Sub-Questions Motivations


1.4 Delimitations

Nature of Customer Some of the theories chosen were based on research findings relevant to “external customers” meaning that service providers and customers are from different organizations. However, our case company has a setup where they only serve “internal customers”, i.e. the Sales Companies. So our empirical findings and analysis will be based on a service provider serving internal customers of the same organization. Customers of the internal customer will mean “end-customers” in this thesis.

Restricted to manufacturing industry Although the theoretical framework of this thesis was developed based on generic industries, the empirical findings, analysis and strategic recommendations were oriented towards the case company which is in the manufacturing industry. The research results may therefore not necessary be applicable in other non-manufacturing industries.

Logistics services vary among companies The composition of logistics services tend to be varied from organization to organization. Therefore the research results in logistics context may not be valid for some companies with different logistics setup. Figure 2 Thesis Outline

• IntroductionChapter 1•MethodologyChapter 2•Theoretical FrameworkChapter 3•Empirical FindingsChpater 4•AnalysisChapter 5•ConclusionsChapter 6•Managerial RecommendationsChapter 7

•Future ResearchChapter 8


2.0 METHODOLOGY This chapter aims to describe our research methods through a discussion of alternative methodology and the motivations for our choices. Reliability and validity are incorporated in this chapter to provide an evaluation of the trustworthiness of our research. Finally, we illustrate the conduct of our research in a research model.

2.1 Scientific Approach According to Yin (2003), there are three prime approaches for conducting research: exploratory, descriptive and explanatory. The explanatory approach is used to explain the linkage between the interacting factors and the analysis of the results of these factors. This is an explanatory case study seeking to explain the linkage between logistics and customer value from a contemporary perspective. The research process began with the exploratory approach to initially identify and define the research problems. We have applied this approach by studying theoretical literature that explained the relevant research problems to have a better understanding of the assigned thesis project. Validating of theory predictions and principles was done to build and elaborate those theories and then enrich the theories’ predictions and principle. While the exploratory approach seeks to gain a deeper understanding, the explanatory approach is used to clarify complex subjects, explain the cause and effect when it answers questions and correlations. As it explains how things occur, the explanatory case study can be appropriate when the research area and the amount of knowledge have become comprehensive. This type of research demands that there is adequate knowledge within the research area in order to derive theoretical assumptions into practice.

2.2 Research Type There are two main research types: quantitative and qualitative. Creswell (2003) claims that the quantitative research is an approach in which the investigator primarily uses positivist claims for developing knowledge and employs inquiry strategies such as experiments and surveys, and collects data on predetermined instruments that yield statistical data. The researcher is required to use closed-ended questioning and focuses on numeric data. The qualitative research is primarily based on the investigator’s participatory perspective. It uses strategies of inquiry such as narratives, phenomenology, ground theory studies or case studies. The researcher collects open-ended, emerging data with the primary intent of developing themes from the data. Norman (2005) defines qualitative research as a situated activity that locates the observer in the world, meaning that the researcher is able to generate both subjective and objective information from the research area. It involves the studied use and collection of a variety of empirical materials from case studies and interviews that describe the routine and problematic moments and meanings in individuals' perceptions. Moreover, Merriam (1998) also claims qualitative research is an approach that focuses on the process and phenomenon as a whole and the meaning interpreted by the researcher's perception. Our research was based on a combination of qualitative and quantitative methods. We sought to quantify the data we collected from the research study to measure and confirm the gaps in the


perceptions and expectations of the service providers and customers. For our quantitative method, we have employed simple calculations of averages and did not involve the usage of statistical tools or programs. At the same time, using a qualitative research allowed us to obtain more in-depth insights from individual evaluations of the current situation through the interviews in ELS. This is so that we would be able to create a deep understanding of a specific case and the linkage between various factors such as relationship characteristics and flows of information.

2.3 Research Method According to Yin (2009), there are five types of research methods being Experiments, Surveys, Archival analysis, History and Case study. When choosing a research method, Yin (2009) states that the decision should be based on three conditions: types of research questions, extent of control over actual behavioral events and the degree of focus on contemporary events as opposed to historical events. Each type of research method has its own characteristics, advantages and drawbacks. The role of case study has been defined by Yin (2009) as:

• To explain the presumed causal relations in real-life involvements which are too complicated for the survey or experimental strategies.

• To describe an involvement and the real-life context in which it took place. • To illustrate particular topics within an evaluation in a descriptive way. • To enlighten particular circumstances in which the involvement being evaluated has vague

and multiple set of outcomes. In our research study, we sought to investigate and explain a contemporary set of events, i.e. Logistics Service as a strategic driver of customer value, over which we, as investigators, have no control. The case study is an empirical inquiry which is real and specific. It is also an “explanatory case study” as we were motivated to explain the theories within a real-life context. The case study method is important for us to gain a holistic view of how actors such as the logistics service provider and its customers (particularly internal customers from the same organization as the service providers) interact to create value in the case company. In addition, our research questions largely focus on 'how' questions within the main research question: ‘How can an organization strategically use logistics to create customer value’. This is one of the main conditions for choosing the case study method (Yin, 2009).

“The objective of employing a case study is to expand and generalize theories – analytic generalization” (Yin, 2009)

Dubois and Gadde (2002) argue that case studies provide unique means of developing theory by utilizing in-depth insights of empirical phenomena and their contexts. Case studies involve the detailed examination of the phenomenon within its real-life context. The aim is to provide depth of analysis, which includes not only the phenomenon itself but also the context in which it is located. According to Yin (2009) the case study methods give attention to the intertwining of phenomenon and context, however he does stress that such detailed examination can be applied only within the specified boundaries of the case. Merriam (1998) also argues that case study is designed to gain in-depth understanding and can accommodate a variety of disciplinary perspectives. Furthermore, Yin


(2009) claims that the unique strength of case studies is the possibility of handling many varieties of evidence such as documents and interviews.

“Case study research method is to understand a real-life phenomenon in depth which encompassed important contextual conditions because they were highly pertinent to the phenomenon of the study.” (Yin and Davis, 2007)

Naturally, there are downsides in the case study design. Gummesson (2002) criticises case studies as lacking statistical reliability and validity and only able to be used to generate hypotheses but not test them. Additionally, generalizations cannot be made from case studies. However, Fisher (2004) argues that case studies lose representativeness but not necessarily generalizability, while Yin (2009) states that case studies can be used to generalize about theoretical propositions but not to generalize about populations or universes. We consider the case study as an adequate approach for our research strategy. Using this research method is suitable for increasing the understanding of the internal customer satisfaction levels, customers’ expectations and perceptions so that management strategies may be developed to create customer value. Results obtained from this research may also be applied to other manufacturing firms in the logistics context.

2.4 Research Approach A research approach is defined as the path of conscious scientific reasoning (Peirce, 1931). In order to construct our research process framework, we have applied the abductive approach which is a combination of the inductive and deductive approaches which together form the basis for discovering hypothetical patterns during the research process. The inductive approach is a theory development process guided by the real-life observations of the research phenomenon. This approach was applied during the analysis of our findings. The deductive approach started from the established theory and generalization and was used when explaining a specific case or event based on the theory (Dubois and Gadde, 2002). The approach was applied in the formation of the theoretical framework and in drawing conclusions and recommendations. Dubois and Gadde (2002) state that the abductive approach allows researchers to move between empirical data and theoretical models. At the start of the research project, we carried out a panoptic and extensive search covering articles, journals and books to shortlist suitable theoretical concepts related to Logistics Service, (Internal) Customer Orientation, Value Creation and Strategy. We have subsequently combined the theories to develop our research model to solve the problems derived from the investigation of our case company. During the research process, we had continually acquired new knowledge by going back and forth between the empirical data and the theoretical models. Thus, the abductive approach enabled us to continually reinterpret empirical data and the theoretical framework to discover new approaches to thoroughly investigate the current situation of our case company. Dubois and Gadde (2002) explain “Systematic combining” as a process where theoretical framework, empirical fieldwork and case analysis evolve simultaneously and it is particularly useful for further


developing existing theories. They further elaborate systematic combining as a process where new empirical findings lead to the addition of new theory to the research at the same time as new theoretical findings influence the direction of the research. The framework would be changed as the analysis and interpretation continues and this would then influence issues that can be further covered in the research. This idea is based on a standpoint that to be able to understand theory it is necessary to compare it with reality and vice versa. This process as a whole means that the theoretical framework can be expanded or changed as the work goes on. Dubois and Gadde (2002) propose a model describing the basic components in systematic combining. Figure 3 Systematic combining (Dubois and Gadde, 2002)

This methodology includes two processes: “Matching” and “Direction and Redirection”. Matching is the process of going back and forth between the framework, data sources and analyses. This implies that the researchers go from one type of research activity to another and between empirical observations and theory, enabling the expansion of the understanding of both theory and empirical phenomena (Dubois and Gadde, 2002). Matching results in the development of the theoretical framework in parallel with collecting information from the real world and is an approach based on abductive rationales. On the other hand, direction and redirection is a critical process which enables researchers to discover new spectra and ideas concerning the research problem which helps them to verify and adjust their focus. This is an important step to achieve matching (Dubois and Gadde, 2002). In systematic combining the main approach is not to identify all theory beforehand but instead to develop the theoretical concept in parallel with the collection of empirical data (Dubois and Gadde, 2002). The advantage of applying systematic combining is that it is a flexible methodology to identify unanticipated issues that may be further discovered during the research process, allowing researchers the flexibility to add new models or concepts when needed. Throughout the work with research and collection of data as well as when conceptualizing the problem, we have employed systematic combining to go back and forth between theory and empirical findings to adjust the theoretical framework. We have been able to find interesting features of Customer Service and Customer Value by using previous theoretical findings as a basis. 2.5 Case Study Design Yin (2009) claims there are four types of case study design as below:-

Matching Direction & Redirection

The empirical world

Framework

The case

Theory


• Single case with holistic nature • Single case with embedded nature • Multiple cases with holistic nature • Multiple cases with embedded nature

According to Yin’s (2009) definition, our case study is a single case design as we studied one specific company, namely Electrolux Laundry Systems. A case study can be furthermore divided into embedded and holistic. In an embedded case study, the analysis is concerned with more than one unit. Our single case is embedded, since we have been studying different units within the company. Sample units in our single case comprise the logistics centre in Ljungby (Sweden) and the four local sales companies in the United Kingdom, Germany, France and Norway. These multiple sample units are primary data sources that are capable of giving answers to the research questions. Therefore, this study has been identified as a single case embedded design. According to Lipset, Trow, and Coleman (1956), single case study aims at “generalization” and not “particularization” analysis. That also coincides with the aim of our research.

2.6 Data Collection Data collection includes primary and secondary data or a combination of both. In our research we have collected the combination of primary and secondary data to complement and validate each other. Merriam (1998) states there are three techniques of collecting data in qualitative research: interviewing, observation and document analysis. Yin (2009) further expands those data collection techniques by suggesting that there are six commonly used sources of evidence in case study researches which are compared in terms of their strengths and weaknesses as shown in Table 1 below. Table 1 Six sources of Evidence with Strengths and Weaknesses Comparison (modified from Yin, 2009)

Source of evidence Strengths Weaknesses Documentation Stable – can be reviewed

repeatedly Unobtrusive – not generated for the purpose of case study Exact – contains exact names, references, and details of an event Broad coverage – long span of time, many events, and many settings

Retrievability – can be low; biased selectivity if collection is incomplete Reporting bias – reflects (unknown) bias of author Access – may be deliberately blocked

Direct Observation

Reality – covers events in real time Contextual – covers context of event

Time consuming Selectivity – unless broad coverage Reflexivity – event may proceed differently because it is being observed Cost – involves costly manpower for long working hours


Interviews

Targeted – focus directly on case study topic Insightful – provide perceived causal inferences

Construct bias - due to poorly designed questions Response bias - Inaccuracies due to poor recall Reflexivity - interviewee gives what interviewer wants to hear

Archival Records

Same as above for documentation Precise and quantitative

Same as above for documentation Accessibility due to privacy reasons

Participant-Observation

Same as above for direct observations Insightful - into interpersonal behavior and motives

Same as above for direct observations Bias - due to investigator' s manipulation of events

Physical Artifacts

Insightful into cultural features Insightful into technical operations

Selectivity Availability

2.6.1 Three principles of data collection Yin (2009) advocates that a good case study should follow the three principles of data collection:

• Using multiple sources of evidence • Creating a case study database • Maintaining a chain of evidence

2.6.1.1 Multiple sources of evidence Our research adopted three out of the six different sources of evidence classified by Yin (2009) as depicted in Table 1 above. The major advantage of using multiple sources of evidence in our case study is to develop converging lines of inquiry which is a process of triangulation and corroboration. Therefore our case study findings or conclusion is likely to be more convincing and accurate if it is based on several different sources of information, following a corroboratory approach. See Figure 4 below for the Convergence of Evidence of our Case Study.


Fact

Documentation

DirectObservation

Interviews-focused-structured-semi-structured

Figure 4 Convergence of evidence of current case study

Documentation Yin (2009) argues that documents play an explicit role in any data collection in doing case studies. We have used documentation sources such as relevant internal presentations and reports of the case company which contained useful company-specific information such as sales turnover and headcounts for the past 5 years. These were helpful for further analysis. We also gained updated information about the case company from these documents, such as the organizational structure, business nature and functional roles and responsibilities.

Direct Observation Casual primary data collection was conducted through direct observation at the warehouse and the backoffice aimed at understanding the operational flow, work environment, technology adopted and corporate culture. Photographs were taken at the warehouse as records. These were very good background information for the benefit of designing a more context-specific survey for primary data collection which can increase the construct and internal validity of the case study.

Interviews The core of primary data was collected through qualitative interviews to investigate the environments, perceptions and expectations of the internal service providers and internal customers. These were semi-structured as we were prepared for input from respondents giving further information and new ideas beyond the interview pre-set questions.

Interviews (Face-to-face) For our research, primary data was mainly collected through qualitative interviews conducted with the logistics management and backoffice staff from Electrolux Professional Laundry Systems’ Logistics Centre in Ljungby (LCL) and the sales companies in the UK, Norway, Germany and France. Merriam (1998) states that this method allows researchers to respond to the situation at hand and to be aware of new ideas on the topic. Interviews were conducted by phone and face-to-face


meetings in conjunction with follow-up communication by emails. These semi-structured interviews allowed us to obtain more in-depth insights from the respondents. Primary data was also collected through a survey with questionnaires which comprised structured statements to which the respondents were required to rate the extent of their agreement. We have used a Likert scale of 1 to 7, with an additional scale of “0” representing “I do not know”. In some of the questions, respondents were requested to rate the level of agreement in percentage scales or rate the relative importance of several items. Although we were pursuing a consistent line of inquiry through structured statements, our actual stream of questions in the interview was likely to be fluid rather than rigid (H. J. Rubin & Rubin, 1995). Relevant but unstructured questions were asked during the structured interviews to explore the respondents’ personal experience and opinions, particularly on contextual examples. The questionnaires also included sections which were open-ended and subjective. It is important for a researcher to manage the flow of the interview (Fisher, 2004) and probing is a crucial technique. We used the probing technique during the interviews to ask for more details and clarifications continuously (Merriam, 1998). Fisher (2004) also claims the researcher can control an interview through probing an idea expressed earlier in the interview and also before the last utterance. We also used the probing technique to obtain more concrete examples following a prior question. This allowed for more information to be collected by going deeper into the question. For example, the question “What is the strategic role of LCL within the supply chain of Electrolux Laundry Systems?” was followed with the following questions:-

“To what extent has LCL fulfilled this strategic role?”

“Please give examples of what LCL has done well in the past 2 years.”

“What do you think LCL should have done differently in the past 2 years?”

This allowed the respondent to elaborate on the topic of the strategic role of LCL in a subjective manner while still being guided by the parameters of the questions asked. The first preliminary interview with our case company was conducted in early April 2011 at the logistics centre in Ljungby. A focused interview was conducted with the senior executives of LCL to obtain information on the corporate history, organizational structure and the roles and functions within LCL in the form of open-ended questions and unstructured interview. The relationship between LCL and the sales companies and dealers worldwide was also explained. The recent functional changes within LCL were also explored whereby the order handling team is now sharing a common email address for all incoming emails from customers. The procedure of communicating with customers by the order processing staff had been restructured and the order processing team physically demonstrated the processing of emailed orders or inquiries. All the interview conversations were recorded digitally with the permission of the interviewees. Notes were also taken down during the interviews. During the focused interview, we projected a blank canvas about the topic to allow the interviewee the opportunity to provide a fresh commentary about it, even though we had already accumulated a certain level of knowledge on the topic. No leading questions were asked in order to serve the corroboratory purpose. A questionnaire covering our research area had been prepared beforehand and this was also discussed during the preliminary interview. We received answers to a number of questions with


regards to the current logistic strategy and its current targets. However, we received feedback that the questionnaire was too lengthy, not context-specific, and might be too complicated for some of the respondents. As a result, we decided to redesign the questionnaire to be more context-specific by separating the questions for the service perceptions and expectations into sections for Finished Products and Spare Parts respectively and rephrasing some questions to more aptly describe context-specific activities in LCL and ELS to increase the applicability and relevance of the questionnaire. It was also decided that the focus would be within the boundaries of the order handling, stock keeping and distribution processes. We also discussed the potential list of participants for our survey. To obtain the most suitable knowledge about the research subject, the respondents have been suggested to be country sales managers, administration and back office employees who are receiving services or interact with LCL on a regular basis. Due to time and budget restraints, end customers were not included in the questionnaire and the sentiments of the sales companies were taken to be generally representative of the end customers’. Some of the knowledgeable interviewees became our key informants and provided us with insights into the research subject and also initiated access to corroboratory sources of evidence. We referred to these key informants on several occasions subsequently, to obtain further information and contacts.

Interviews (by telephone) After the preliminary meeting, we adjusted the questionnaire to be more context-specific. We subsequently contacted the named respondents in each of the sales companies to organize the individual telephone interviews. These interviews were conducted with the purpose of understanding the local countries’ perceptions and expectations as the customer and recipient of the services provided by LCL and to gain an understanding of their views on the strategic role of logistics and how it creates value. We asked the questions in an unbiased and objective manner so as not to create defensiveness on the part of the respondents. One of the drawbacks of using phone interviews was that interviewees may be pressed for time and hence may rush through to complete the questionnaire. However, we felt that the respondents were attentive throughout the whole interview and they placed an importance on it due to its relevance to the improvement process of the services by LCL.

2.6.1.2 Creating a Case Study Database Table 2 below shows the empirical database of our case study which has been divided into 4 types: Table 2 Types of Database

Database type Description

Case study notes

Hand-written or transcribed notes taken during interviews and direct observations.

Relevant responses were transcribed into Microsoft WORD and EXEL file formats.

Audio recordings of the interviews captured by a digital voice recorder were used as a supplementary backup for hand-written


notes jotted down on the spot. Retrieval of recording only when hand-written information was incomplete or unclear.

Case study documents Powerpoint presentations and reports from the case company in electronic format.

Tabular materials Survey and other quantitative data collected from the structured interviews.

Input into Microsoft EXEL file format.

Narratives Compiled open-ended answers to the questions in the case study protocol which served as the basis for the case report and analysis. Source of evidence was cited (i.e. from which interviewee or documentation)

Transcribed responses from the respondents were sent to the corresponding individual respondents by email for further comments and confirmation. Digitized files of the above database have been stored in separate folders of the computer so that data can be retrieved and shared among investigators efficiently for analysis.

2.6.1.3 Maintaining a chain of evidence To increase the reliability of the information in our case study, we have maintained a chain of evidence. Yin (2009) suggests that the chain of evidence creates a clear cross-referencing to methodological procedures and to the resulting evidence. It also enhances the construct validity and increases the overall quality of our case study. Through the chain of evidence for our case study as shown in Figure 5 below, readers are able to trace the steps from the initial research questions to the research conclusion.

Figure 5 Chain of evidence for the case study

Case Study Questions

Case Study Protocol (Linking Questions to Theory)

Citations to Specific Evidentiary Sources in the Case Study Database

Case Study Database

Case Study Report


2.6.2 Data Sampling An important aspect when collecting data for the empirical study is where and when the survey should be done, what to survey and whom to survey. In our research, we dealt with sampling. In particular, it was based on non-probability rather than probability sampling. Our non-probability sampling was purposeful which means it was based on the assumption that we wanted to discover, understand and gain insight and therefore must select a sample from which the most can be learnt. In our research, we were largely dependent on convenience sampling as the interviewees were contacts provided by the main contact person at our case company. We are also restricted to the study of one case company as we were bounded by time and budget constraints. Although it would appear that we ran the risk of information poverty, the employee(s) and/or management representatives selected as the interviewees were expected to be highly representative of the sales companies in the countries observed and were therefore considered to be a typical sample, representing the average person, situation or phenomenon of interest. We interviewed many respondents from the small teams of Sales Companies which represents a high percentage of the population. In some countries, the three or four individuals interviewed made up a large part of the total number of employees at the Sales Companies, which means that we captured the sentiments of a high percentage of the population.

2.6.3 Empirical Data Structure The case study survey was conducted through structured and semi-structured questionnaires. Structured questionnaires are in the form of rating the agreement level to standard statements either by using the Likert scale (from 0-7) or percentage scales (from 0-100%) or ranking the importance of listed items. Semi-structured questionnaires are in the form of open-ended questions which is a set of additional questions on top of the structured questionnaires particularly for the respondents at management levels of each market. (Appendices A and B)

Certain respondents could only provide insights on Finished Products or Spares, depending on their areas of responsibility. The response ‘0 = I do not know’ is reflected where the respondent does not handle Spare Parts or Finished Products. This response is also used where the respondent genuinely has no idea.

2.6.4 Sections of Empirical Data The questionnaires were designed based on the three building blocks of the theoretical framework with the aim of seeking answers to the research questions in a systematic and logical manner. Therefore the presentation of the empirical data and the corresponding analysis will follow the structure described in Figure 6.


Figure 6 Empirical findings and analysis structure

The theoretical building blocks consist of the Strategic Role of Logistics Services, Customer Accommodation and Value Creation. Empirical findings will be presented according to the different building blocks. As the logistics service provider, the respondents from LCL were mostly able to provide their opinions on both finished products and spare parts. Meanwhile, some of the respondents from the sales companies or LCL’s customers (internal) only handle either Finished Products or Spare Parts and therefore their responses would only reflect their area of responsibilities in their respective markets. “0” would be shown in the empirical data for statements irrelevant to the respondents.

2.6.5 Respondent Profile The defined population in this study was from the single case company, Electrolux Laundry Systems (ELS). Respondents of the case study survey were sampled from the service provider – the Logistics Center Ljungby (LCL) in Sweden and the customers (internal) - four other pre-determined markets or Sales Companies by LCL which are in the UK, France, Germany and Norway.

Out of all the 19 Sales Company’s which LCL offers logistics services to, these 4 sample Sales Companies are of different sizes and sales turnovers. They are treated as LCL’s internal customers and in both empirical findings and data analysis chapters we have generalized the Sales Companies as “Customers” of LCL.

In each Sales Company, at least one of the respondents was from a management position and the rest of the respondents of the same market were backoffice employees with at least one person

LCL

UK

Finished Products

Spare Parts

France

Finished Products

Spare Parts

Germany

Finished Products

Spare Parts

Norway

Finished Products

Spare Parts

Theoretical Building Blocks

Strategic Role of Logistics Services

EfficiencyEffectiveness

Differentiation / Relevancy

Customer Accommodation

(Gap Model)Expectations vs

PerceptionsFinished Spare Products Parts

Value CreationCo-creation of value

Customer integrationLogistics Capabilities


each responsible for “Finished Products” and “Spare Parts”. This sampling by position and area of responsibility enables the samples to be more representing of the context of the business and therefore brings a more holistic and context-specific survey results.

In Table 3 below, the sampling ratio in percentage by market or country of the Sales Company is presented. LCL has the highest sampling ratio which represents ¼ of the employees in that particular office as respondents to our questionnaire.

Table 3 Sampling Ratio by Market

Sweden (LCL) UK France Germany Norway

Total employees 28 48 32 25 15

Sampled Respondents 7 5 4 4 3

Sampling Ratio 25% 10.4% 12.5% 16% 20%

Table 4 below shows the list of respondents of the case study survey and some of their background characteristics. A total of 23 respondents were sampled from both the logistics service provider and customers. These respondents have been serving their corresponding company ranging from 3 months to 37 years. However, some respondents preferred to combine their responses in a single questionnaire as they represent the same role in the company. For example, two Order Administrators of LCL combined their responses and so we have treated them as one respondent (Respondent E). In Germany, two Order Takers and Logistics Support staff (Respondent B) jointly answered a questionnaire representing the response from Finished Products. Therefore, a total of 21 sets of questionnaire were completed in our empirical data.


Table 4 List of Respondents for the Survey

Due to the fact that some respondents might have no knowledge or are not responsible for the areas covered in some statements, they responded with the answer “I do not know” which was represented by “0” in the raw data. This response was also used when the respondent genuinely has no idea about the matter in the statement. For example, the response “0” was reflected when a respondent whose role covers only spare parts was being asked for an opinion on a statement in

No. Market Respondent Name of Respondent Job title of Respondent Responsibility

Sweden (LCL)1 Respondent A Sven Kallin SVP, Logistics & IT * Both

2 Respondent B Janne Ljungman Logistics Manager * Both

3 Respondent C Stefan Nilsson Transport Manager * Both

4 Respondent D Fredrik Tideman Order Manager * Both

5 Lisbeth Gustavsson Order Administrator * Both

6 Jonas Karlsson Order Administrator * Both

7 Respondent F Peter Nilsson * Both

UK8 Respondent A Doug Walker Country Manager * Both

9 Respondent B Darren Lockley National Sales Manager Finished Products

10 Respondent C Suzanne Fox Sales Support Manager Finished Products

11 Respondent D Richard Carter After Sales Manager Spare Parts

12 Respondent E Lorraine Pazik Customer Care Office Manager Spare Parts

France13 Respondent A Gregory Levacher Country Manager * Both

14 Respondent B Pascale Kerneis Sales Administration Manager Finished Products

15 Respondent C Joêl Piffre Service manager (After Sales Service) Spare Parts

16 Respondent D Delphine Galland Logistic spare parts manager Spare Parts

Germany17 Respondent A Markus Wagner Backoffice Manager Finished Products

18 Eveline Morlock Order taker & log support Finished Products

19 Lisa Sullivan Order taker & log support Finished Products

20 Respondent C Gottfried Ensbacher Spare parts Manager Spares Parts

Norway21 Respondent A Oddvin Linkvist Country Manager Finished Products

22 Respondent B Heidi Hammer Logistics coordinator (F.P.) Finished Products

23 Respondent C Arne Fjeldhammer Logistics coordinator (Spares) Spares Parts

* Both = Finished Products and Spare Parts

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Pro

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-- S

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Com

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Respondent E

Respondent B


relation to finished products. The mean of that particular statement then would not cover that “0” response.

2.6.6 Data Analysis Regarding data analysis, there are two approaches according to Merriam (1998) and Yin (2009). Merriam (1998) argues that a researcher needs to classify the collected data into different categories in order to develop models and theories while Yin (2009) states that the researcher 'plays with the data' until meaning occurs. According to Merriam (1998) data analysis is considered a complex process of consolidating, reducing and interpreting the gathered information through constantly going back and forth between concrete bits of data and abstract concepts, inductive and deductive reasoning, between description and interpretation. For a case study research Merriam suggests three basic levels for conducting the analysis. The first level includes the topical sorting, organizing and presenting the data in a descriptive manner. In the next level the analysis moves from the description to the more abstract category construction which is the classification of data into groupings - themes. Finally the third level involves making inferences and generating theory. Yin ascribes to “playing with the data” until meaning occurs. Our approach was to use the theoretical framework and the empirical data to analyze the meaningful information that was collected. The ability to ‘play with the data’ between both sections allowed us to formulate adequate meaning when performing our data analysis. It also encouraged us to utilize the methods to compare and contrast when drawing out conclusions. Data analysis involves the examining, categorizing, tabulating, transforming, testing, modeling or recombining evidence, with the goal of highlighting useful information, drawing empirically based conclusions and supporting decision making (Yin, 2009). The strategy for our case study analysis was mainly based on the theoretical orientation and proposition that we had determined in our theoretical framework. This strategy is particularly useful to address our “how” research sub-questions.

As the empirical data we have collected contains both quantitative and qualitative nature, logic models and pattern matching techniques were adopted.

This is an exploratory case study seeking to investigate and explore the causal linkage on “how” customer value can be created through logistics services. Testing of theories’ predictions and principles was done which facilitated to build and elaborate those theories and then enrich the theories’ predictions and principle. For instance, the Gap Model developed by Parasuraman et al, (1985) was employed for analyzing our empirical data and subsequently modified.

2.7 Quality of Research The quality of the research is a critical issue in terms of validity and reliability as it affects the trustworthiness and creditability of the research. Validity shows if the developed framework represents reality and how data and theory are connected. Yin (2009) states there are four aspects that contribute to the quality of the research: construct validity, internal validity, external validity, and reliability. Different tactics are used in each aspect in order to enhance the quality. 2.7.1 Internal validity Merriam (1998) describes internal validity as dealing with the issues of how research findings match reality meaning congruence of findings in relation to reality ie. if the findings actually capture reality.

http://en.wikipedia.org/wiki/Information


The higher the internal validity, the more strategically important the conclusions and recommendations of the study would be for the case company. In qualitative research, it is important that the researcher uses the following six strategies to enhance the internal validity (Merriam, 1998):-

• Triangulation • Checking interpretation • Long-term observation/repeated observations • Peer examination • Involving participants in all phases of the research • Clarifying researchers' biases and assumptions

It is important that the researcher establishes internal validity when providing recommendations to the case company. To enhance the internal validity of our research and to maintain a chain of evidence, we deployed the triangulation method by using multiple sources of data (primary and secondary) internally and externally. Triangulation refers to the usage of multiple investigators, sources or methods to confirm the findings and to validate the case study materials. We used triangulation after conducting the interviews and interpreting the results in consultation with our supervisor to obtain an external opinion of the interpretation in order to increase the validity. We also checked the interpretation of data by sending the interview respondents a copy of our transcribed interview responses for confirmation and through follow-up communication with the interviewees. High internal validity determines logical consistency of the theoretical constructs and the empirical and analytical findings on which they are based. We argue our internal validity to be good as the empirical findings reflect the customer sentiments at the participating Sales Companies. However, end customers were not included in the case study and their sentiments were seen to be channeled through the Sales Companies, making our perception and conclusion of the situation single-sided. The validity could also be higher if we could have included interviews with the end customers to confirm that their needs, perceptions and expectations are in line with what was reflected by the Sales Companies. Additionally, we could have also collected more information from more of the nineteen sales companies to gather a more representative finding of overall customer satisfaction levels and sentiments of the services of the case company. We can, however, confirm the generalizability of the responses for the four participating countries to be truly representative of the particular countries as we involved a high percentage of employees. 2.7.1.1 Construct validity Construct validity means to establish correct measures for the concepts being studied. It is important to see if the concepts match each other (Yin, 2003). Yin (2009) introduces this type of validity during the data collection and composition process. It refers to the selection and composition of correct theoretical constructs investigated in the study. In order to enhance construct validity during the research, Yin (2009) suggests the following three tactics:

• Use multiple sources of evidence • Establish chain of evidence • Use key informants to review draft case study reports


In our research, we have selected three theoretical constructs which are the building blocks of our theoretical framework in our thesis: the strategic role of logistics services, customer accommodation and value creation. We account for these constructs as they consequently led us to address our sub questions which are the foundation to the main research question related to value creation through the leverage of Logistics Service. In our case, the strategic role of logistics services in the supply chain of an organization was first established as a building block. The value-adding process of logistics to generate operating efficiency (Bowersox, Closs and Cooper 2010) and logistics capabilities that are modified to be a source of competitive advantage (Morash et al., 1996; Lynch et al., 2000) are further explored. The existing and approved theoretical concepts and models of service quality (Parasuraman et al 1985) was used as a framework upon which data was matched and collected to ascertain the service quality and the present level of customer accommodation. The logistics based expectations and elements across 5 dimensions of service quality (Parasuraman et al, 1988) guided the formulation of the questions relating to customer accommodation (Bowersox, Closs and Cooper 2010). The questionnaire formulated to collect data was sent to our key informants in the case company for confirmation and verification of the correct measures used. These were reviewed against the setting of our theoretical framework which was explained to the informants and both were confirmed to be in alignment and to be highly applicable to the case company. Using the bridging platform that logistics services is part of the value of the product (Mentzer et al., 1997), the concept of value creation and co-creation of these values (Yazdanparast, Manuj and Swartz, 2010) with customers is analyzed according to the Service-Dominant (S-D) logic (Vargo and Lusch, 2008). Some of the theories chosen were based on research findings relevant to “external customers” meaning that service providers and customers are from different organizations. However, our case company has a setup where they only serve “internal customers”, i.e. the Sales Companies. So our empirical findings and analysis will be based on a service provider serving internal customers of the same organization. Customers of the internal customer will mean “end-customers” in this thesis. As we have chosen to apply theories that were originally formulated for the external logistics services and external customer setting, some of the theories chosen may not be fully valid in the context of internal logistics and internal customers. 2.7.2 External validity External validity concerns the extent to which the empirical findings in one study can be general enough and applied to other situations or case studies. The extent to which the research study is generalizable is a critical issue related to external validity. The higher the external validity, the higher the generalizability. Merriam suggests relevant strategies for enhancing the possibility of generalization of a single case study:-

• rich descriptions which requires enough description provided by the researchers • typicality or modal category which describes how typical the phenomenon studied is • multisite designs

The above mentioned strategies allow the readers to make comparisons related to their own situations. We have attempted to provide a rich description of the analyzed issues such as local


customer situation, relationships, perceptions and expectations. Readers would be able to compare their circumstances with our research and draw parallels from the case company to their respective companies. Through investigating the typicality readers make comparisons of their specific problems to research problems. The research findings in this report may be applicable to a broad spectrum of companies as the issues are generalizable to all companies providing logistics services to customers. These may be manufacturing or trading companies that arrange logistics services to customers or to their own units at other locations. To a certain extent, the findings in the research may be applicable to logistics service providers such as logistics operators, freight forwarders and warehouse operators managing inventory as a third or fourth party service provider of a manufacturer. As we have provided a rich description of the case company and the circumstances of the study, readers may consider the typicality of the situation to their own and apply the findings accordingly. Consequently, the level of external validity is considered to be rather high. 2.7.2.1 Construct validity The three theoretical constructs, the strategic role of logistics services, customer accommodation and value creation are highly generalizable to companies with involvement in logistics. To a similar extent the theories related to customer accommodation and value creation are relevant and applicable to a service provider-customer relationship, not limited to logistics related businesses or business with logistics interests. The theories formulated, together with the questionnaire devised was sent to the key informants at the case company for verification and they confirmed these to be in line with the case company setting and also the study. The theoretical framework was also discussed with our supervisor for confirmation of the same. While our research has a bias of a single-case company study and would certainly benefit from multiple sources of evidence, the limitation is countered by rich descriptions. For example, the in-depth and detailed theories and accompanying questionnaires presented to analyze the gaps in customers’ and service providers’ expectation and perceptions to indicate satisfaction levels may well provide the reader on the applicability to external cases. 2.7.3 Reliability Reliability refers to the extent to which the research findings can be replicated and also concerns the consistency of the findings (Merriam, 1998). Yin (2009) also argues the objective of reliability is to reduce errors and biases in the research study. Human behavior is natural and non-static and thus might change over time, possibly affecting the consistency of research findings. To enhance reliability, we have used audit trials which require the researchers to explain in detail how data was collected, categories derived and how decisions were made throughout the inquiries (Merriam, 1998). We have maintained a high transparency and transcribed verbal data into written manuscripts in order to reduce errors. Audio recordings were listened to several times over to confirm details and understanding. Factors that could affect the reliability of the research study include language where the message of the communication may be lost in translation if a translator is used. Some of the respondents did not speak English very well and thus, could have misunderstood some questions as our questionnaires


were in English. We overcame this problem by explaining the questions clearly during the interviews and reformulating the questions where necessary. One of the respondents in Norway could not speak English at all so he filled in the questionnaire while his colleague translated the questions from English to Norwegian. We spoke to the translator to confirm that she understood all the questions to confirm that she would be translating the right message. Due to the diversity in culture, educational background, language and experience of respondents, some of the terminologies used in the questionnaires might be interpreted differently by the respondents coming from different countries and job responsibilities. Where we felt this was the case, we took the time to explain and discuss the interpretation to align the understanding between the respondents and ourselves. Where doubts surfaced on the whole, follow up contact with the respondents were established for clarification. We kept our research in high transparency and transcribed the data into written manuscripts in order to reduce errors. Transcriptions were done immediately after the interviews to ensure all details were freshly captured on our notes, in memory and these were checked against the recordings before the final transcript was sent to the respondents for confirmation.

2.8 Ethics Ethics is an aspect that is of utmost importance in the research study and therefore we have sought to provide accurate information throughout our study. Any pre-existent bias was removed so that the study was performed in an objective manner in order to paint a true picture for the readers. Privacy and confidentiality issues were taken into consideration and sensitive data will not be used outside the study. Prior permission was obtained from all respondents before the recording device was used for the interviews.


2.9 Research Model

Figure 7 Research Model (Kong and Choe, 2011)

Identify Initial Research Problem

Literature Overview + Problem Conceptualization

Determine Main Research Questions and Sub-Questions

Research Development Process

Theoretical Framework

Case Study (Single Case Embedded)

Empirical Findings (Interviews, Documentation, Direct

Observations)

Analysis (Logic Models + Pattern Matching)

Conclusions

Managerial Recommendations

Research ModelE x p l a

n a t o r y A p pr o a c h

Phase 1

Phase 2

Phase 3

Phase 4


In our research model, we have categorized the elements into four phases:

In phase 1, the initial research problem was identified and relevant literature from books and articles were selected to conceptualize the problem. Literature summaries were developed in this phase for future development of our theoretical framework. We then aggregated enough basic information to determine the motives of our thesis and also the main research question and its related sub-questions.

In phase 2, the research development process started with the determination of the theoretical framework within which we selected the most suitable theories as the basis of designing our single case embedded case study. The Survey was adopted as the research technique which involved the design of structured and semi-structured questionnaires.

In phase 3, empirical data was collected through various sources of evidence including face-to-face and telephone interviews with respondents from LCL and the Sales Companies, documentation of the case company and direct observations. The empirical findings were then analysed in comparison with the concepts in the theoretical framework to understand the strategic role of logistics in the case company, and the extent of customer accommodation and value creation being practiced in the case company. This enabled us to seek answers to our research questions in a corroboratory approach.

The information gathered is presented in the empirical findings section. Analyses of the findings against the relevant theories are conducted and presented according to our theoretical model in the subsequent chapter.

In phase 4, the conclusions and strategic recommendations based on the empirical findings and analysis, are provided to the case company on the attainment of customer success and the creation of customer value. The developed research process model outlines our research process of the thesis. The main research topic springs from three main research questions related to the strategic role of logistics, customer accommodation and value creation.

Phase 1• Research Questions and Theory Development Process

Phase 2• Research Development Process

Phase 3• Empirical Findings and Analysis in comparison with Theoretical

Framework

Phase 4• Conclusions and Strategic Recommendations


3.0 THEORETICAL FRAMEWORK In this section, we will consolidate key literature in relation to our research topic which addresses the research questions on the foundation of three building blocks which are the Strategic role of Logistics Services, Customer Accommodation and Value Creation. As a conclusion, a theoretical model recapitulates the research questions in combination with relevant theories to depict our research approach.

In today's highly competitive global marketplace, organizations are striving hard to explore new ways to create and deliver superior value to customers. There is a growing trend for organizations to recognize that logistics efficiency and effective supply chain management are key drivers for both cost reduction and service enhancement which will ultimately create customer value.

3.1 Logistics Services From a supply chain perspective, logistics refers to the responsibility to design and administer systems to control movement and the geographical positioning of raw materials, work-in-process, and finished inventories at the lowest total cost. Logistical processes flow materials into the manufacturing capacity and finished products are distributed to consumers. (Bowersox, Closs and Cooper 2010). Jonsson (2008) describes logistics as a 6-process system which is detailed in Figure 8 below. Figure 8 Logistics system and examples of relevant activities

3.1.1 Logistics services categories According to Zhao and Wang (2010), logistics services can be categorized into 2 categories:

• Basic low-end services in logistics value chain, such as transportation, warehousing and handling which are mostly isolated functions.

• High-end services in logistics value chain have high-level functions like payment gathering, demand forecast, logistics system consultation and design, education and training, information processing and also have characteristics like logistics integration. Those products deliver higher value to the customers through value-added services.

The following Table 5 lists some examples of basic low-end and high-end logistics services.

Supply

•Supplier selection•Issue purchase

order•Release purchase

order•Goods tracking•Material handling•Invoice control

Manufacturing

•Capacity planning•Materials

planning•Materials

handling•Production•Stock keeping

Order to delivery

•Customer order reception

•Order management

•Order acceptance•Materials

handling•Packing and

loading•Transport•Invoicing

Distribution

•Transport planning

•Transport•Loading and off-

loading•Stock keeping•Product

configuring and installation

After sales

•Order management


•Loading and off-loading

•Goods reception•Materials

handling•Transport

Returns

•Identify product condition

•Disposition product



•Transport•Goods reception•Invoice crediting


Table 5 Basic low-end and high-end logistics services examples

In order to comprehend the thesis topic and its related problems, it is necessary to begin with an understanding of the big picture. We have summarized some common definitions of logistics, its relationship with other functions within the organization and its significance to the operations of the organization. 3.1.2 Correlation between “supply chain” and “logistics” Logistics and supply chain are not one and the same concepts.

“Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-efficient fulfillment of orders” (Christopher, 2005)

while supply chain being a wider concept than logistics, is

“a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users.” (J. Aitken, 1998)

Supply chain management consists of functions collaborating to leverage strategic positioning and to improve operating efficiency. Within an organization’s supply chain management, logistics is the work required to move and geographically position inventory. Supply chain strategy establishes the operating framework within which logistics is performed. In a nutshell,

“Supply chain is a strategy that integrates all aspects of satisfying customer requirements. Logistics is the process of positioning and managing inventory throughout the supply chain.” (Bowersox, Closs, and Cooper, 2010).

3.1.3 The importance of logistics management in an integrated supply chain According to Bowersox, Closs, and Cooper (2010), logistics is the process that links supply chain units into integrated operations. Logistics plays a key role in an integrated supply chain framework which links up units like procurement, manufacturing, sales and distribution and is the major hub within a supply chain. Thus, logistics is also viewed as a value-adding supply chain process. Units in the supply chain can either be within the same organization or outsourced third parties.

Basic low-end logistics services

•Transportation•Inventory•Handling•Packaging

High-end logistics services

•Circulation manufacturing•Demand forecast•Manufacturing service•Vendor management inventory (VMI) service•Purchase agent•Payment settlement


The Integrated Supply Chain Framework The integrated supply chain perspective shifts traditional channel arrangements from loosely linked groups of independent businesses that buy and sell inventory to each other toward a managerially coordinated initiative to increase market impact, overall efficiency, continuous improvement, and competitiveness.

“Logistics management is that part of the supply chain which plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” (Council of Supply Chain Management Professionals, 2010)

Nowadays, the cost of logistics activities is a major expenditure for most businesses and supply chain arrangements. Therefore, logistics management has a key influence on the cost structure and profitability of an organization.

Figure 9 Logistics as a key function in an integrated supply chain (Bowersox, Closs and Cooper, 2010)

Logistics is the primary conduit of product and service flow within a supply chain arrangement. As shown in Figure 9 above, the generalized supply chain arrangement logically and logistically links an organization and its distributive and supplier network to customers (Bowersox, Closs and Cooper 2010). Therefore, the integrated value-creation process must be aligned and managed from material procurement to end-customer product/service delivery i.e. throughout the supply chain. A thorough

Relationship management

Information, product, service, financial and knowledge flows

Logistics

Procurement

ConsumersM

ater

ials

Supply network

Integrated enterprise

Capacity, information, core competencies, capital, and human resource constraints

Market distribution

networkCustomer

accommodation

Manufacturing


theoretical review is included in this chapter on how integrated value creation processes can be realized through logistics services.

3.1.4 Logistics service as a source of competitive advantage Logistics service value focuses on the relationship of logistics service to customer service, capabilities and competitive advantage of an organization (Yazdanparast, Manuj and Swartz 2010). Logistics service is an important element of customer service and helps an organization maintain its current competitive position in the marketplace (Langley and Holcomb, 1992). Efficiency, Effectiveness and Relevancy/Differentiation generates competitive advantage Logistics customer value is created through efficiency, effectiveness, and differentiation (Mentzer and Konrad 1991; Langley and Holcomb 1992). For instance, value can be created through customer service elements such as product availability, timeliness and consistency of delivery and ease of placing orders. If logistics can create value through the inimitability of its logistics activities, an organization may be able to differentiate itself from its competitors (Grant 2010). The value customers receive from logistics activities also serves as an indicator of logistics performance. Excellence in logistics performance requires superiority when compared to competitors (i.e., differentiation) (Langley and Holcomb 1992). Beyond efficiency and effectiveness, logistics activities provide the best comparative net value to customers (Stahl and Bounds 1991) in order to compete in today's competitive marketplace. Due to the importance of logistics to customer value creation (Flint et al. 2005; Lambert, García-Dastugue, and Croxton 2005), the performance of logistics activities must be perceived as differentially superior to competitors in the same market segment(s) (Williamson, Spitzer, and Bloomberg 1990). In addition to the traditional logistics service that focuses on achieving internal operation standards that translate into efficiency and customer focus based upon meeting customer performance standards that translate into effectiveness, a truly relationship-driven logistics function that focuses on establishing customer success that translates into relevancy, is needed (Bowersox et al., 2000). An emphasis on having a specific understanding of the needs and requirements of the diverse and varied customers of the logistics function has the potential to turn standard basic services into value-added solutions. Evidence collectively reveals that the logistics function as a whole should strive to minimize the ratio of resources utilized against derived results (efficiency), accomplish pre-determined objectives (effectiveness) and gain superiority when compared to competitors (differentiation) (Bobbitt 2004). When traditional attributes of logistics service are modified to create value-added services or are configured in unique bundles, they take the shape of logistics capabilities that can be a source of competitive advantage (Morash et al., 1996; Lynch et al., 2000). Creating value-added solutions involves the willingness and capability of an organization to become an increasingly relevant provider to its customers. This is an ongoing process. Apart from achieving a one-time understanding of customer needs and requirements, mechanisms to regularly monitor and be aware of the changing priorities of the customer should be established (Langley and Holcomb,


O R G A N I Z A T I O N

1992). Constant alert on customers’ changing needs and continuously developing value-added solutions for them may lead to relevancy and differentiation. 3.1.5 Internal Logistics Structure Jonsson (2008) describes that in an internal perspective, the logistics system is limited to an internal supply chain consisting of materials supply, production and distribution, which are interconnected through internal customer-supplier relationships (see Figure 10 below). The flow of materials, information and payment through the company between the external customers and suppliers takes place using internal resources, based on internal conditions and internal goals. Thus the focus of the internal logistics system is on the co-ordination between materials supply, production and distribution with the aim of creating efficiency and minimizing sub-optimization within the company. Figure 10 Internal perspective of the logistics system. The own organization is the

starting point (Jonsson 2008)

As mentioned above, logistics is an essential element in the supply chain as well as the organization’s efficiency and ultimately, profitability. Thus, there is a growing trend for organizations to manage logistics strategically in order to win customers’ success through the co-creation of value between the organizational functions and the customers. The following captures the major literature in relation to customers and the creation of value through logistics services.

3.2 Customer Accommodation With the recognition that meeting customers’ needs is the core objective of a firm, many of today’s most progressive and successful firms emphasize logistics service as a competitive differentiator (Livingstone, 1992; Stern et al., 1993). Logistics contributes to an organization’s success by accommodating customers’ delivery and inventory availability expectations and requirements and the focus is on creating or adding value for the customer. The customer being served is the focal point and driving force in establishing logistical performance requirements. In customer accommodation, there are increasing levels of sophistication and commitment to customer-driven service. The varying levels can be arrayed along a continuum (see Figure 3.4 below). As firms become more sophisticated and more adept at leveraging logistical abilities, they move along the continuum from initial efforts targeted to basic customer service and on to re-focused effort toward achieving customer satisfaction and eventually, may shift to emphasizing customer success as the ultimate goal.

O R G A N I Z A T I O N

Supplier Customer Material Supply Production Distribution Supplier Customer

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Figure 11 Continuum of the different levels of customer-driven service (Ellinger et al, 1997)

Defining Customers In total supply chain, the ultimate customer is the end user of products or services. End users can be further broken down to two categories. Firstly, we have consumers who are individuals or households that purchase goods or services to satisfy personal needs. Secondly, organizational end users purchase to allow them to perform a job or task in the organization. The supply chain management perspective entails the accommodation of both the consumer as well as organizational end users. Additionally, the supply chain perspective recognizes specific firms between the firm and the end user, termed as ‘intermediate customers’ as they are purchasing for the purpose of reselling.

“From a logistics standpoint, however, a customer can be perceived as any delivery location. Destinations range from consumers’ homes to retail and wholesale businesses to the receiving docks of manufacturing plants and warehouses. In some cases, the customer is a different organization or individual or organization taking over ownership of the product or service being delivered. In many other firms the customer is a different facility of the same firm or a business partner at some other location in the supply chain.” (Bowersox, Closs and Cooper 2010).

3.2.1 Customer Service (Customer Accommodation Level One) Customer service is described by Jonsson (2008) as “a number of activities involving the purchaser, the vendor and third parties, which aim to add value to the product” and includes “the entire process of filling the customer’s order (either manual or electronic), managing the payment, picking and packing the goods, shipping the package, delivering the package, providing customer service for the end user and handling the possible return of goods” (Ballou, 2004). Outstanding customer service adds value throughout the supply chain. Customer service at the basic level balances availability, operational performance and reliability for all customers.


• Availability is the capacity to have the inventory as desired by the customer. Three main performance measures relating to availability are stock-out frequency, fill rate and orders shipped complete.

• Operational Performance deals with the time required to deliver a customer’s order and is specified in terms of speed, consistency, flexibility and malfunction recovery

• Service Reliability regards the combined attributes of logistics and relates to the firm’s ability to perform all order-related activities as well as provide critical information and status updates on logistics operations. (Bowersox, Closs and Cooper 2010).

The focus of the basic customer service level is typically on operational aspects of logistics where the organization strives to provide the seven rights to its customers. These are to provide:-

• the right amount of • the right product • at the right time • at the right place • in the right condition • at the right price • with the right information (Bowersox, Closs and Cooper 2010).

“The ultimate in logistics service is to do everything right and to do it right the first time”. The highest level of commitment is perfect order performance which requires zero defects logistics operations and is therefore generally reserved for key customers. (Bowersox, Closs and Cooper 2010). The perfect order is an order that is:-

• delivered complete • delivered on time • delivered at the right location • delivered in perfect condition • delivered with complete and accurate documentation

(Bowersox, Closs and Cooper 2010).

The level of commitment to each dimension of service requires careful consideration of competitive performance and cost/benefits analysis. “A firm can provide logistics service equal to or even better than a competitor’s but still have dissatisfied customers. This may arise from the lack of knowledge of customer expectations, improper standards of performance, performance failure, poor communication or incorrect customer or firm perception of performance.” (Bowersox, Closs and Cooper 2010).

3.2.2 Customer Satisfaction (Customer Accommodation Level Two) The next level of customer accommodation is the attainment of customer satisfaction, over and above the basic service. The basic service of focusing on internal operational performance is


improved to attain customer satisfaction, which recognizes that customers have service expectations that “..extend beyond typical logistical considerations and include factors related to communication, credibility, access, responsiveness and customer-specific knowledge as well as reliability and responsiveness of operations.” (Bowersox, Closs and Cooper 2010). Parasuraman, Zeithaml and Berry have identified 10 customer logistics-based expectations as follows:-

• Reliability • Responsiveness • Access • Communication • Credibility • Security • Courtesy • Competency • Tangibles • Knowing the Customer

Some of these elements may be more important than others and there may be factors other than those listed with significance to particular markets. It is essential to understand the differing requirements of different market segments as each market will attach different importance to different service elements. “It is because of the multivariate nature of customer service and because of the widely differing requirements of specific markets that it is essential for any business to have a clearly identified policy towards customer service” (Christopher, 2005) Furthermore, as customer satisfaction is built on the platform that customers have expectations about performance, it is then logical and necessary to assess their perceptions against those expectations to ascertain service quality levels. However, it is important to first distinguish satisfaction from quality. Service quality and customer satisfaction Bateson (1992) conceptualizes quality as an attitude, the customer’s comprehensive evaluation of a service offering, built up from a series of evaluated experiences and is hence less dynamic than satisfaction. Satisfaction, on the other hand, is the outcome of the evaluation a consumer makes of any specific transaction. By definition, service quality is:

“a measure of how well the service level delivered matches customer expectations. Delivering quality service means conforming to customers’ expectations on a consistent basis.” (Lewis and Booms, 1983).

Meanwhile customer satisfaction is defined as

“a function of the similarities between the consumer’s expectations and the perceived performance of the purchase.” (Oliver, 1981)


In empirical studies, quality and satisfaction are treated as synonymous in a service context (Zeithaml et al. 1993, Ruyter, et al, 1996). Organizations continually aim at achieving quality as it is seen as “the lifeblood that brings increased patronage, competitive advantage and long term profitability” (Clow and Vorhies, 1993). Service quality enhancements have been shown to consistently result in increased market share and revenue gains. (Ellinger et al, 1997). In order to take steps to manage and enhance the service quality, it is natural that an assessment of present service levels must be done. “If you can’t measure it, you can’t manage it” (Peter F. Drucker, 2005) Broad literature reveals some ways to measure internal service quality and customer satisfaction levels and these are discussed in the subsequent sections. 3.2.2.1 SERVQUAL scale and Gap Model Parasuraman et al. (1988) developed the SERVQUAL scale—a wide spread instrument to compare both the expectations and the service perceptions of customers on a twin scale of 22 items. Expectations and perceptions are measured across 5 dimensions of service quality, where the size of the gaps between customers’ service expectations and their perceptions indicate the level of dissatisfaction while the degree and direction of the gap between consumers’ perceptions and expectations indicate perceived service quality. (Parasuraman, Zeithaml and Berry, 1988).

• Tangibles: Physical facilities, equipment and appearance of personnel. • Reliability: Ability to perform the promised service dependably and accurately. • Responsiveness: Willingness to help customers and provide prompt service. • Assurance: Knowledge and courtesy of employees and their ability to inspire trust and

confidence. • Empathy: Caring, individualized attention the firm provides for its customers.


Figure 12 The service quality model (Parasuraman, et al, 1985)

The service quality model depicted above in Figure 12 represents the relationship between the perceived and expected service levels from the consumer and the perspectives of the service provider (marketer) and the customer (consumer), while the gaps are described in Table 6 below:

Table 6 Description of Gaps in Service Quality Model (Parasuraman, et al, 1985)

Gap 1 Knowledge Reflects management’s lack of knowledge or understanding of customers

Gap 2 Standards Exists when internal performance standards do not adequately reflect customer expectations

Gap 3 Performance The difference between standard and actual performance

Gap 4 Communications Over commitment or promising higher levels of performance than can actually be provided

Gap 5 Perception Customers sometimes perceive performance to be higher or lower than actually achieved

Gap 6 Satisfaction / Quality

When one or more gap exists customer perception is that performance does not meet expectations

What then is customer satisfaction? Expectancy disconfirmation states if a customer’s expectations of a supplier’s performance are met or exceeded, the customer will be satisfied. If Perceived Performance > = Expectations, then Satisfaction


If Perceived Performance < Expectations, then Dissatisfaction “Customers will be satisfied if a supplier meets or exceeds the customer’s expectations” (Parasuraman et al, 1988)

However, attaining customer satisfaction is not sufficient and satisfied customers are not necessarily loyal customers. Satisfied customers still defect. This has been supported by research showing that many customers who report being satisfied that their expectations have been met are likely to patronize and do business with competitors. (Bowersox, Closs and Cooper 2010). Another limitation of customer satisfaction is the realization that customers’ expectations may not be their real requirements. Additionally, satisfaction lies in the expectations and perceptions of individual customers and not all customers are equal. In other words, what satisfies one customer may not satisfy others and it is thus important to shift the focus from customers’ expectations to their real, individual requirements.

3.2.3 Customer Success (Customer Accommodation Level Three) The highest level of customer accommodation is known as customer success. Where basic customer service aims to meet internal standards and satisfaction programs seek to meet or exceed expectations, a success platform is built on customer needs and requirements, which are frequently different from customer expectations.

“Achieving customer success requires an intimate knowledge of customers’ needs and their operational requirements and a commitment by the service provider to enhance their customer’s ability to compete more successfully in the marketplace.” (Bowersox, Closs and Cooper 2010).

Table 7 Evolution of management thought (Bowersox, Closs and Cooper, 2010)

Philosophy Focus Customer service Meet internal standards Customer satisfaction Meet expectations Customer success Meet customer requirements

As mentioned earlier, customer expectations may not be their real requirements as these expectations are often downgraded to perceptions due to previous expectations, word of mouth or communication from the firm itself. This emphasizes why happy customers are not the result of merely meeting expectations. (Bowersox, Closs and Cooper 2010). Achieving customer success involves a thorough understanding of individual customers’ requirements, internal processes, competitive environment and whatever else necessary to succeed in its own competitive arena. The following provides a rationale for working to achieve customer success. “..even highly satisfied customers can go out of business, leaving a firm with a diminished customer base. In short, a satisfied customer is not always a successful customer, and successful customers are needed for sustained operations. The distinction between achieving satisfaction and success is knowledge of the entire supply chain. Whereas customer satisfaction requires information to bridge the gap between the firm and its customers, customer success requires that a firm


understands what its customers’ customers desire … This knowledge is used to provide a ‘better’ product/service mix . ..” (Fawcett and Fawcett, 1995) Value-added services represent a means to achieve customer success. The value added services or ancillary services are sometimes offered as an expected or optional supplement that adds perceived value to the primary service but may not be required as a necessary or usual part of the sale. Some examples related to logistics are customized packaging, shipment consolidation, expedited orders/documentation and may also involve high-end services like payment gathering, Purchase Order Management, demand forecasting, information processing and reporting, education and training and the like. These are the unique or specific activities that firms can jointly develop to enhance their efficiency, effectiveness and relevancy. As these tend to be customer specific, value-added services are not generalized. As such, organizations may need to select customers for which it should develop value-added services. (Bowersox, Cooper and Closs, 2010, Anderson and Vincze, 2000)

3.2.4 Internal Customer Service Internal customer service or internal exchange refers to methods used to satisfy needs within the organization. An important part of the internal exchange is the emphasis on providing a high level of service quality to internal customers for the same reasons they provide it to external customers – more effective performance, lower waste, and lower costs (Marshall, Baker and Finn, 1998; Hart, 1995; Heskett et al., 1994). Atkinson (1990) also suggests that “emphasis should be on the internal dynamics of the organization, recognizing that meeting the requirements of the internal customer is as important as meeting the needs of the external customers.” A parallel exists between Internal Customer Service and the idea of Internal Marketing, which can be seen as:

“viewing the employees as internal customers, viewing jobs as internal products and then endeavouring to offer internal products that satisfy the needs and wants of these internal customers while addressing the objectives of the organization” (Baron and Harris, 2003).

Internal marketing is based on a dual tenet that every employee in a service organization should recognize that they have their own customers to serve and that all employees should be convinced of the quality of service provided. This approach has been found to result in better communication, reduced internal conflict and a spirit of innovation (Baron and Harris, 2003). Internal customer service is different from internal marketing, in that the former focuses on how employees serve other employees, while the latter has a greater focus on how the company serves the employees (Berry 1981; George, 1990; Grönroos, 1996). However, both internal customer service and internal marketing has its focus on the internal customer, where the orientation is based on the identification of internal market having a “value exchange between different departments”. Providing superior internal inter-relational functions provides a base for effective performance, lower waste and costs and may also positively affect the external service quality. This is in line with Hart (1995) and Heskett et al. (1994), that


“according to the service-profit chain concept, improvements in internal service quality also should be expected to result in improved external service quality”.

3.3 Value creation In a competitive environment, it is not enough for an organization to simply position a fixed set of activities along a value chain. Organizations constantly strive to provide “value – an intangible concept that is frequently defined in terms of exceptional customer service that accompanies exceptional product quality and value-based prices” (Anderson and Vincze, 2000). Increasingly, smart organizations do not just add value, they reinvent it. According to Normann and Ramirez (2000), focus should not just be on the company or the industry, but :

“the value-creating system within which different economic actors (e.g. suppliers, customers, employees, business partners, etc.) work together to co-create value”

The key strategic task lies in the reconfiguration of roles and relationships among this constellation of economic actors in order to mobilize the creation of value in new forms and by new players. Hence, the underlying strategic goal is :

“to create an ever-improving fit between organizational competencies and customers”

It is a systematic social innovation which involves continuous design and redesign of complex business systems.

3.3.1 Definition of Customer Value Bowersox, Closs and Cooper (2010) define that customers have at least three perspective of value:

The traditional perspective of value is economic value. Economic value builds on economy of scale in operations as the source of efficiency. The focus of economic value is efficiency of product/service creation. The customer’s take-away of economic value is high quality at a low price.

A second value perspective is market value. Market value is about presenting an attractive assortment of products at the right time and place to realize effectiveness. Market value focuses on achieving economy of scope in product/service presentation. The customer’s take-away of market value is convenient product/service assortment and choice.

The third value perspective is relevancy. Relevancy involves customization of value-adding services, over and above product and positioning, which make a significant difference to customers. Relevancy value means the right products and services, as reflected by market value, at the right place, as reflected by economic value, modified, sequenced, synchronized and otherwise positioned in a manner that creates valuable segmental diversity. In manufacturing and assembly, relevancy is achieved by integrating specific components into products to increase functionality desired by a specific customer. The customer’s take-away in terms of relevancy is a unique product/service bundle.


The simultaneous achievement of economic value, market value, and relevancy value requires total integration of the overall business process and is known as the integrative management value proposition which is illustrated in Table 8 below.

Table 8 Integrative management value proposition (Bowersox, Closs and Cooper, 2010)

Economic Value Market Value Relevancy Value

Lowest total cost Attractive assortment Customization

Economy-of-scale efficiency Economy-of-scope effectiveness Segmental diversity

Product/service creation Product/service presentation Product/service positioning

Procurement/Manufacturing Strategy Market/Distribution Strategy Supply Chain Strategy

3.3.2 Creation of customer value through logistics A school of thought links logistics function to customer value. Langley and Holcomb (1992) suggest that the objective of supply chain management should be the synchronization of all supply chain activities to create customer value. Thus, supply chain management philosophy suggests the boundaries of supply chain management include not only logistics but also all other functions within an organization and within a supply chain to create customer value and satisfaction. In this context, understanding customers' values and requirements is essential (Ellram and Cooper 1990; Tyndall et al. 1998). Thus, supply chain management philosophy drives supply chain units to have a customer orientation which provides the basis for internal logistics service with an internal customer focus. Stank, Keller, Daugherty (2001) suggest that a primary goal of supply chain management is to create or enhance value provided to the end-customer. Christopher (2005) also supports the customer orientation perspective by adding the cost element. He argues that the objective of supply chain management is to link the marketplace, distribution network, manufacturing processes and procurement activity in a way that customers can receive quality services at a lower total cost. Part of the value that a company creates for its customer is its ability to deliver the right product in the right amount at the right place at the right time for the right customer in the right condition at the right price (Shapiro and Heskett, 1985). This translates to the fact that logistics service is part of the value of the product (Mentzer et al., 1997). According to Langley and Holcomb (1992), logistics creates customer value through three generic ways: efficiency, effectiveness, and differentiation or relevancy. Moreover, when traditional attributes of logistics services are modified to create value-added services or are configured, they result in unique logistics capabilities that can be a source of competitive advantage (Morash et al., 1996; Lynch et al., 2000).


3.3.3 Co-creating value from a Service-Dominant Perspective Service-Dominant (S-D) logic was first developed by Vargo and Lusch (2004) and revised in 2008 (Vargo and Lusch, 2008). According to S-D logic, value is defined and co-created by customers rather than being embedded in the output. During the era when manufacturing was booming, organizations widely adopted the Goods-Dominant (G-D) logic perspective which advocates product/service providers produce products/services and customers buy them. S-D logic perspective suggests that :

“customers and providers co-create value” The salient differences between Goods-Dominant (G-D) logic and S-D logic perspectives can be summarized in their views in Table 9 about the meanings and implications of relationships. Table 9 Comparing the differences between the G-D logic and the S-D logic perspectives (Vargo and Lusch, 2008)

G-D logic S-D logic

Meanings of relationships

• Dyadic bonds represented by trust and commitment

• Long-term patronage-repetitive transactions

• Reciprocal, service-for-service nature of exchange • Co-creation of value • Complex, networked structure of the market • Temporal, emergent nature of value creation • Contextual nature of value determination

Normative implication

• Manage customers through communication and satisfaction, to maximize customer lifetime value

• Collaborative nature of value determination • Collaborate with customers to develop mutually

beneficial value propositions • Co-create value through service-for-service

exchange Source: Adapted from Vargo (2009) Vargo (2009) argues that G-D logic may be viewed as embedded in the context of the S-D logic, making S-D logic a broader view (Vargo, 2009) under which production and delivery of products and services may be understood. Based on S-D logic, it is suggested that value creation in the provision of logistics service is an interactive process, and the organization and its customers exist in a relational context (Vargo and Lusch, 2008). This implies that logistics service providers have to maintain tight relationships with customers to generate value. Overall, based on the above discussion, four key ways may be identified in which S-D logic provides a powerful framework for the process of logistics service provision and consequent logistics value creation (Yazdanparast, Manuj and Swartz 2010).

I. The concept of “service” makes it a suitable context for S-D logic to be an appropriate framework to analyze logistics being a service which is critical to aspects of business operations.


II. The quality of logistics service affects the value perceived by the customer not only of the service received but also of the product delivered through the logistics service. Therefore, the concept of goods deriving value through the service they provide becomes salient in a logistics context.

III. The powerful concept of “co-creation” of value becomes critical in a logistics context because of the dynamic and ever-changing environment in which logistics services are provided.

IV. As the world economy becomes more service-driven and more outsourcing takes place, logistics becomes a key service to provide and deliver value in a broader and global context.

Logistics, being a service characterized by frequently modified service offerings, provides a dynamic context which potentially stands to gain from the S-D logic perspective. In addition to being an appealing context in which to look at the process of value creation and service provision from an S-D logic perspective, logistics is also an essential context because logistics service has been viewed as a competitive tool (Stock and Lambert, 1992). To employ logistics as a competitive lever, it is important to examine the customer’s understanding of the phrase “service value” in order to deliver services that lead to value creation for the customers. Thus, close relationships with customers are necessary. 3.3.3.1 Logistics Service Value Co-creation Process The process of co-creation of value in a logistics context has three phases: learning, innovation and execution, and outcomes (Yazdanparast, Manuj and Swartz, 2010). See Figures 13 and 14 below for illustrations.

Figure 13 Logistics value co-creation process in three phases (Yazdanparast, Manuj and Swartz, 2010)

The three phases and their key elements are integrated into a comprehensive process of co-creation of logistics service value which encompasses 12 propositions (12 Ps).

Learning phase

Innovation &

Execution

Outcomes phase


Figure 14 Logistics service value co-creation process with 3 phases and 12 propositions (Yazdanparast, Manuj and Swartz, 2010)

Learning Phase During the learning phase, the logistics service provider focuses on understanding the customer (internal and external) and also the customer focuses on understanding the logistics service provider through the interactions and relationship experiences intended to encourage learning between the 2 key actors – the customer and the provider.

Learning is a capability that enables other logistics capabilities that are vital for the co-creation of logistic service value such as collaboration (Sinkovics and Roath, 2004), agility (Bowersox et al., 1995; Christopher, 2000), flexibility (Fawcett et al., 1996; Morash and Clinton, 1997) and innovation (Flint et al., 2008). According to Grant (2010), learning is the process of absorbing, involving and integrating external and internal knowledge resources.

“Value co-creation is a collaborative and interactive process” (Vargo, 2009)

To engage customers in co-creation, logistics managers must plan and implement relationship experiences for customers that encourage active engagement of customers in designing logistics services. The nature of relationships in the logistics context is either transactional or collaborative, which is a function of service offering composition, contract duration and the customer’s motivation for using the services offered by the service provider (Selviaridis and Spring, 2007). Of these, service offering composition and customers’ motivation can be directly influenced by the design of the relationship experience (Figure 15).

Learning phase

P1, P2, P3

Outcome phase

Factors affecting relationship

design

Relationship design

Customer / Provider benefits

Characteristics of service provided

P12

Innovation & execution phase

Design of value creating solution

Implementation of value creating

solution

P6, P7

P4, P5

P8, P9 P10, P11


Learning phase

P1, P2, P3 Factors affecting relationship design: • Direct costs • Opportunity costs • Value received / cost incurred (Motivation to create more opportunities for the co-creation of value)*

Relationship design:

• Level of resource commitment • Level of time commitment • Level of dialogue • Level of interaction

Figure 15 Influencers of Relationship Design in the Learning phase (Yazdanparast, Manuj and Swartz, 2010)

Note: *Consequence of the outcomes

P1. The design of a relationship experience, in terms of time and resource commitments, depends on direct costs and opportunity costs of a transaction as perceived by both the provider and the customer. P2. Relationship designs that enable a higher relative return in terms of value received and cost incurred will lead to higher levels of dialogue and interactions with customers. P3. The higher level of dialogue and interaction will lead to a higher level of joint learning focused on the co-creation of logistics value. Innovation and execution phase In this phase (Figure 16), the logistics service provider utilizes the knowledge acquired in the previous learning phase to design and implement customized and innovative solutions that lead to value-creating service offerings for the customer.

Dickson (1992) suggests that organizations that do the best are those that learn most swiftly in a dynamic and evolving competitive market. Thus, an increased investment in a relationship experience focused around learning leads to a service that closely matches the customer expectations because the service is “co-created” by the customer rather than just “offered” to the customer. That is, the service delivered involves innovation and is customized to the requirements rather than merely an item from a predetermined “service menu” of the provider.


Figure 16 Design and implementation of value creating solution in the Innovation and execution phase (Yazdanparast, Manuj and Swartz, 2010)

*Asset specificity in the inter-party relationship of a transaction represents the extent to which the investments made to support a particular transaction have a higher value to that transaction than they would have if they were redeployed for any other purpose (McGuinness 1994). **Operand and Operant Resources - Operant resources are those resources that act upon other resources to create benefit, such as an organization’s competences and capabilities. Operand resources are those resources which must be acted on to be beneficial, such as natural resources, goods, and other generally static matter (Constantin and Lusch 1995; Vargo and Lusch 2004a). P4. Learning phase will lead to innovation phase. P5. Higher levels of knowledge gained through joint learning and mutual expectation clarification will lead to higher levels of asset specificities of the value-creating activities. P6. The higher the level of asset specificities, the higher would be the quality of solution implementation or service delivered. P7. The higher the availability of relevant operational resources, the higher will be the implementation quality of value-creating activities in terms of how closely the delivered service matches customer requirements.

Outcomes phase The learning achieved and innovations developed through the aforesaid two phases influence the performance of the service provider and also impact the customer in terms of service quality, efficiency, effectiveness, and relevancy. In this outcomes phase (Figure 17), superior performance leads to competitive advantage and customer satisfaction which will motivate the service provider and customer to continue the relationship experience with the aim of achieving even more superior outcomes. It is not just the strategy but the execution of strategy and resulting innovation that leads to successful outcomes for an organization.

Innovation and execution phase

P6, P7

Design of value creating solution: • Asset specificity* • Operant (competences and

capabilities) and operand (goods, natural resources) resources**

Implementation of value creating solution:

• Quality of implementation P4, P5


Figure 17 Characteristics of service provided and Customer/Provider benefits in the Outcome phase (Yazdanparast, Manuj and Swartz, 2010)

P8. The innovation phase leads to the outcomes phase. P9. Service offerings based on co-creation of value will lead to efficiency and effectiveness for both actors and relevancy for the customer. P10. Higher relevancy will lead to a stronger competitive advantage for both actors and higher customer satisfaction. P11. Higher efficiency, effectiveness, and relevancy will lead to the pursuit of additional learning opportunities to maintain the value co-creation process. P12. Mutual benefits such as higher efficiency and effectiveness for both actors and relevancy for the customer will lead to a higher motivation for continuing relationships. An on-going value co-creation process As a result, the outcomes phase will lead back to the learning phase hence transforming the complete process of relationship-driven value co-creation from a linear process to a loop. Based on the concept of S-D logic, the outcomes should not be seen as one-off outputs with value, but rather resource inputs for an on-going value creation process (Lusch et al., 2008).

3.3.4 Customer integration Bowersox, Closs, and Stank (1999) provide a comprehensive conceptualization of customer-focused capabilities in the logistics context, which is "customer integration”. Customer integration or customer-focused capabilities enable organizations to build lasting distinctiveness and competitive advantage with customers of choice. This requires organizations to assess their own strengths and weaknesses in service capability relative to the needs and desires of top customers. Since few firms can fully satisfy every customer or market segment, leading organizations are increasingly using such assessments to select where and where not to compete. Top organizations recognize the differences in the needs and desires of major or key customers and design offerings according to those needs.

Outcome phase

P10, P11 P8, P9

Characteristics of service provided: • Superior performance

Customer / Provider benefits:

• Competitive advantage

• Customer Satisfaction

(Motivation to continue the relationship experience)

P12


Successful integration depends upon comprehensive knowledge of the organization and its supply chain partners' capabilities as well as customer requirements and expectations. This enables management to focus efforts primarily on customers for whom they can provide unique and profitable product/service offerings and flexibly deploy resources toward customer-valued activities that competitors cannot effectively match. Customer integration involves "identifying the long-term requirements, expectations, and preferences of current and/or potential customers and markets, and focusing on creating customer value". Four capabilities have been proposed within the customer integration concept: Figure 18 Logistics capabilities within the concept of Customer Integration (Bowersox,

Closs, and Stank (1999)

Customer segmental focus is the capability to tailor product/service offerings to the needs of each key customer by allocating relatively more departmental resources to those key customers than the rest of the customers. Sustainable competitive advantage can be generated through better efficiency, effectiveness and differentiation for the segment that contributes a relatively higher percentage of an organization’s profit. While sound operations are a prerequisite for customer integration, organizations go beyond the basics by developing a meaningful understanding of customers' needs supported by flexible processes that enable them to create customized solutions (relevancy). This type of approach can progress to an intimacy with customers’ operations (flexibility) and a proactive search for customer closeness. Organizations share information and use it to be more responsive to customers (responsiveness). Ultimately, this can lead to partnering and alliance formation to solidify the relationship and sustain differential advantage.

Customer-focused capabilities are significantly related to organizational performance. Consistent success depends on an organization’s ability to create value for end-customers. In order to achieve customer integration, however, it requires dramatically new ways of thinking and acting from the

Segmental FocusA capability to focus resources on meeting orexceeding expectations of core customers byoffering unique value-added servicescustomized for the customers

FlexibilityA capability to adapt to unexpected operationalcircumstances

ResponsivenessA capability to accommodate customers'unique and unplanned requirements

RelevancyA capability to not only satisfy customers’existing needs, but to also be prepared tosatisfy customers’ emerging needs

Logistics Capabilities


management and the employees of an organization. Standardized and routine operations have to be reformed to enable customer integration to succeed.

3.4 Synthesis

Sub-question 1 : What is the strategic role of logistics in an organization? Logistics is the primary conduit of product and service flow within a supply chain arrangement and is viewed as a value-adding process that links supply chain units into integrated operations which may generate operating efficiency (Bowersox, Closs and Cooper 2010).

In the past two decades, many of the researchers argued that logistics service creates customer value by enhancing the logistics capabilities through efficiency, effectiveness and differentiation to gain inimitable competitive advantages against the competitors. (Yazdanparast, Manuj and Swartz 2010; Bowersox et al., 2010; Christopher, 2005; Langley and Holcomb, 1992; Morash et al., 1996; Lynch et al., 2000; Mentzer and Konrad,1991). Jonsson (2008) describes that in an internal perspective, the logistics system is limited to an internal supply chain consisting of materials supply, production and distribution, which are interconnected through internal customer-supplier relationships. The focus of the internal logistics system is on the co-ordination between materials supply, production and distribution with the aim of creating efficiency and minimizing sub-optimization within the company.

Sub-question 2 : How are customers accommodated through logistics services? Bowersox, Closs and Cooper (2010) advocate that organizations build their platform of customer accommodation on three levels of increasing commitment. The first is the basic level of customer service which balances availability, operational performance and reliability for all customers. The second level, customer satisfaction, is focused on customers, their expectations and their perceptions of the performance of the service provider. In the second level of customer accommodation, the focus shifts from measures of internal operational performance to external measures. A gap analysis is used to capture and analyze the perceptions and expectations of the customers to ascertain their satisfaction levels.

We have introduced a model to explore the gaps in expectation and perception of internal logistics services based on the original gap model which will be reworded to apply to the internal logistics setting. Many researchers have shown that mere adaptations to the wordings of the 22 item scale are necessary to render the model applicable to the internal service setting. (Young and Varble, 1997; Frost and Kumar, 2000; Kang et al., 2002, Large and Konig, 2009)

Internal Logistics Service Gap Model (Kong & Choe, 2011) In order to compare and contrast the satisfaction levels of the internal customers, a model has been developed to quantify the expectations and perceptions of the logistics service levels from the perspectives of the service provider and the internal customers. The original gap model will be


reworded to apply to logistics services in order to explore the expectations and perceptions of the logistics service providers and their customers to attain the four corresponding gaps:-

• Internal customers’ expectations of service quality • Internal customers’ perceptions of service quality • service provider’s expectations of service quality • service provider’s perceptions of service quality

Figure 19 The internal logistics service gap model (Kong and Choe, 2011)

The expectations and perceptions of both the service provider and the internal customers are measured across 4 dimensions of service quality:-

• Reliability: Ability to perform the promised service dependably and accurately. • Responsiveness: Willingness to help customers and provide prompt service. • Assurance: Knowledge and courtesy of employees and their ability to inspire trust and

confidence. • Empathy: Caring, individualized attention the firm provides for its customers.

The fifth dimension of Tangibles is omitted from the analysis as the service provider’s physical facilities, equipment and appearance of personnel is seen to be irrelevant to internal customers. (Large and Konig, 2009) The gap between the perceptions of both service provider and the internal customer on the performance of the logistics department shows the perception gap while the gap between the expectations and perceptions shows the performance gap.

Internal Customers’ Perspective

performance gap from

the internal customers’ perspective =(2)-(1)

expectation gap Internal Logistics Performance perception gap

=(4)-(1) =(2)-(3) performance gap from

the service provider’s perspective =(3)-(4)

Service Provider’s Perspective

(1) Internal Customers’ expectations of service quality

(2) Internal Customers’ perceptions of service quality

(3) Service providers’ perceptions of service quality

(4) Service providers’ expectations of service quality


The size of the gap between internal customers’ service expectations and their perceptions indicates their level of satisfaction. The smaller this gap, the more satisfied the internal customers are and conversely, the larger the gap, the more dissatisfied they are. The highest level of customer accommodation, which is the customer success platform, is built on customer needs and requirements, which are frequently different from customer expectations, and this requires an intimate knowledge of customers’ needs and their operational requirements and a commitment by the service provider to enhance their customer’s ability to compete more successfully in the marketplace. (Bowersox, Closs and Cooper 2010). Value added services, the unique or specific activities that service providers develop to enhance their efficiency, effectiveness and relevancy, represent a means to achieve customer success. Sub-question 3 : How is value created? According to Normann and Ramirez (2000), organizations should focus on the value-creating system within which different economic actors (e.g. suppliers, customers, employees, business partners, etc.) work together to co-create value. The underlying strategic goal is to create an ever-improving fit between competencies and customers.

Logistics service value focuses on the relationship of logistics service to customer service, capabilities and competitive advantage of an organization (Yazdanparast, Manuj and Swartz 2010). Logistics service is an important element of customer service and helps an organization maintain its current competitive position in the marketplace (Langley and Holcomb, 1992). According to the Service-Dominant (S-D) logic (Vargo and Lusch, 2008), value is defined and co-created with customers and value creation through logistics service is an interactive process in which organization and its customers exist in a relational context. The powerful concept of “co-creation” of value becomes critical in a logistics context because of the dynamic and ever-changing environment in which logistics services are provided. The process of co-creation of value has three phases: learning, innovation and execution, and outcomes (Yazdanparast, Manuj and Swartz, 2010). Bowersox, Closs, and Stank (1999) suggest a way to enhance customer-focused capabilities in the logistics context through customer integration which is "the competency of building lasting distinctiveness with customers of choice" and involves "identifying the long-term requirements, expectations, and preferences of current and/or potential customers and markets, and focusing on creating customer value". Logistics capabilities within the concept of customer integration are customer segmental focus, flexibility, responsiveness, and relevancy which can bring efficiency, effectiveness and differentiation/relevancy to the customers and therefore competitive advantages can be generated for the customers.

Main Question : How can an organization strategically use logistics to create customer value? The strategic management of logistics as a value-adding process in the supply chain creates customer value through the modification of logistics capabilities that can be a source of competitive advantage in a dynamic environment.


To modify and enhance these logistics capabilities, customer accommodation strategy posits on the level customer success that an intimate knowledge of customers’ needs and their operational requirements and a commitment by the service provider to enhance their customer’s ability to compete more successfully in the marketplace is needed.

If Customer value is to be created from logistics services, then a three pronged-approach must be taken which is the co-creation of value in the relational context between the organization and its customers, customer accommodation strategies must be adopted and finally customer integration is required, to build lasting distinctiveness with customers of choice through the identification of customers’ long term and ongoing requirements and expectations. Figure 20 below shows a holistic perspective of the theoretical framework developed to show the link between the theoretical building blocks. Figure 20 Theoretical Framework Model (Kong and Choe, 2011)


Figure 21 Overview of theory chapter

How can an organization strategically use logistics to create customer value?

Customer Value

Strategic role of Logistics Services

Value-adding process to link supply chain

units

Efficiency, Effectiveness,

Relevancy (Differentiation)

Competitive advantages

Customer Accommodation

Customer service

Customer satisfaction

Customer success

Value Creation

Co-creation of value

Customer integration

Logistics capabilities

Main Question

What is the strategic role of logistics in an

organization?

How are customers accommodated through logistics

services?

How is value created?Sub-

Question


4.0 EMPIRICAL FINDINGS This chapter presents and describes the findings from the case study survey. The chapter begins with some general information about the case company and follows with a showcase of the empirical data from the questionnaires of the survey. The findings are categorized into sections according to characteristics such as country, responsibilities and/or product split (Finished Products and Spare Parts) where relevant. Relevant tables are positioned alongside for easy comparison. This chapter aims to provide an overview of the organized empirical data which facilitates data analysis in the following chapter.

4.1 The Case Company The Electrolux Group is the world’s largest producer of powered appliances for kitchen, cleaning and outdoor use. Electrolux is a global leader in household appliances and appliances for professional use, employing over 50,000 globally. Electrolux Laundry Systems (ELS), part of the Electrolux Group, is a leading supplier of professional laundry solutions worldwide. Its comprehensive range of equipment includes washer extractors, dryers and finishing equipment. ELS customizes solutions for individual businesses, from the laundries of apartment houses, hotels and health care institutions to commercial laundry operations and coin-operated launderettes. In 2002, ELS celebrated its 100th anniversary and it today has 1108 employees at its three manufacturing facilities in France, Sweden and Thailand. Figure 22 Electrolux Laundry Systems Manufacturing Plants

(source : Electrolux Laundry Systems Sweden AB, Company Presentation 2009)

ELS has a logistics centre in Ljungby, Sweden offering products and logistics services to a global customer base through its 19 sales companies and a network of 120 worldwide importers. The Electrolux Logistics Centre Ljungby (LCL) manages the logistics scope including information logistics,


Logistics Center Ljungby (LCL)

Sales Company

(UK)

Sales Company (France)

Sales Company

(Germany)

Sales Company (Norway)

order-delivery processing, provision of spare parts, distribution of finished goods from the production warehouse in Ljungby to the 19 sales companies and the worldwide importers. LCL engages with a contracted freight forwarder to handle the physical shipments and LCL is responsible for managing this third party relationship by agreement. As expressed by their tagline “Thinking of you’, Electrolux strives to maintain continuous focus on the consumers, whether it is a question of product development, design, production, marketing, logistics or services. In line with this, LCL is studying the potential of applying service principles and a customer orientation within its organizational structure and linkage between LCL and the group companies, moving the focus away from cost reduction and productivity, factors typically emphasized by traditionally producing firms. This thesis provides a strong basis of theoretical concepts that are applicable for LCL to take a closer look at the gap between the expectations and perceptions of the customers toward the logistics services offered by LCL, as well as to explore how they can create customer value. The scope of empirical study (Figure 23) for the case company includes the sales companies in the UK, France, Germany and Norway, in addition to the Logistics Centre Ljungby (LCL). Figure 23 Scope of empirical study for Electrolux Professional Laundry Systems

Empirical data in the appendices has been categorized by company or by market. Market mean or average of the scores from the same statement was calculated which reflected the general opinion of that particular country market’s or Sales Company’s samples. There are three key functions in the Logistics Centre in Ljungby included in this study and these are Stock-keeping / Inventory Management, Order Management and Distribution.

4.2 Logistics Centre Ljungby (LCL) Over the past five years, LCL experienced a slightly descending trend in annual sales turnover from almost SEK 1,000 million to SEK 823 million in the last financial year. Permanent headcount in LCL averaged 30 persons during the same period. (refer to Appendix C12)

4.2.1 The Strategic Role of Logistics In the opinion of the senior executives at LCL, their role within the supply chain of Electrolux Laundry Systems is to be the seller of equipment for laundry equipment and spare parts where they take on the responsibility from the factory as seller of Finished Products and to be the last part of the sourcing sector for Spare Parts. As a consequence of this overall role, LCL supplies to the customers

Logistics Service Provider

Internal Customers


with order tools and information and also maintains inventory & acts as a switchboard between Sales & Production. (refer to Appendix C12) LCL feels that they have fulfilled their roles defined above, to a certain level. LCL is a ‘square’ organization in the sense that they have fulfilled the major requirements of the sales companies. However, LCL does not have all the flexibility demanded by the market even though the overall performance has been good. LCL also fulfilled its strategic role through collecting information, training staff and execution of logistics support. However, in the opinion of the senior management in LCL, the strategies should have included more flexibility towards customers. (refer to Appendix C12)

Some of the things that LCL feels they have done well include:-

• Clarified the range of finished products and spare parts. • Reduced logistics costs by having one central warehouse for spare parts • Redesigned the transport services to became more efficient and resulted in cost savings • Higher service levels for spare parts, while service levels for finished products have been

more stable than before • Improved the purchase process for spare parts • Employed skilled people from different backgrounds • Increased availability of spare parts & finished products and decreased inventory

The latest departmental strategies are to increase communication with the former food service department in order to smoothen the integration process of the laundry and food services into “Electrolux Professional” with a single common setup. Additionally, their strategies include maintaining inventory and acting as a switchboard between Sales & Production. (refer to Appendix C12)

Collectively, the respondents from LCL generally agreed that LCL plays a strategic role for the sales companies and brings value & competitive advantage to the sales companies. They also agreed that LCL serves the customers efficiently, effectively, and contributed relevancy or differentiation to the Sales Companies. (refer to Appendix C17) In the eyes of LCL, they assist the Sales Companies to generate end customer value by providing transport and delivery solutions, reliability and instilling trust in them by performing services correctly according to the agreed service level. Another key end-customer value that LCL provides to the end customers through the Sales Companies is the provision of information. The customer focus provided to both the Sales Company and end customers adds the same value to the end customers as they do to the Sales Company. (refer to Appendix C17)

4.2.2 Customer Accommodation In terms of the overall logistics deliveries, LCL generally felt that the seven operational aspects of logistics were fulfilled to a high extent. With the exception ‘the right time’ and ‘the right information’ these operational aspects showed ratings of around 95% - 100%. (refer to Appendix C2) When asked about the relative importance ratings, LCL ranked the right product as having the highest priority, followed by right condition, then time. The right amount and place were subsequently ranked with equal importance. This is followed by the right information and finally, time. (refer to Appendix C3)


Basic elements of Customer Service In terms of the basic elements of customer service, the ratings of the level of agreement to the statements indicate concerns on the issues of the availability. There is a general sentiment that customers expect a better stock lead time. In terms of operational performance for Finished Products, areas that were rated overall lower are malfunction recovery and the provision of information with regards to delays. The ratings also reflect that when it comes to service reliability, customer response is an area that could be improved. (refer to Appendix C4) The ratings for Spare parts reflect common areas of concern as the ratings for Finished Goods, related to stock availability and lead time, malfunction recovery, information regarding delays and overall satisfaction with customer responses. (refer to Appendix C5) The respondents were asked to rate the basic elements of customer service and the results show that they collectively viewed availability as the most important element, followed by service reliability and then, operational performance. (refer to Appendix C6)

Expectations and Perceptions

Interviews with the employees at LCL reveal that they perceive the level of service that they have been providing for both Finished Goods and Spare Parts generally falls short of their own expectation of the level of service that they should be providing. This dissatisfaction is reflected in the Performance Gap from the service provider’s perspective. There is a realization and awareness that steps must be taken to improve their level of service. (refer to Appendix C7 & C8) Measures that they feel may improve the level of service include being more proactive rather than reactive when dealing with the provision of information, especially with regards to delays. Another suggestion by LCL on how they can be proactive is by anticipating changes in customer requirements by having a market analyst that constantly reviews and analyzes the market to determine what the

Performance Gap (LCL)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4

a) Reliability Fulfillment of promisesInterestCorrectnessPunctualityAccuracyb) ResponsivenessTime allotmentPromptnessWillingness to helpFreight forwarders' Willingness to helpResponsec) AssuranceConfidenceSecurityCourtesyKnowledged) Empathy AttentivenessOperating HoursPersonal AttentionInterests at heartNeedsAverage

Finished Goods Spare Parts


competition does and what customers need or want. This is seen as more proactive than waiting for customers to relay their demand to the Sales Companies and then, Sales Companies relaying the information to LCL. Of the four dimensions of service quality, LCL rated reliability as most important, followed by responsiveness, assurance and finally, empathy. (refer to Appendix C9) LCL is overall satisfied with their own services. On average, they were neutral when asked if the customer would choose another service provider if given a choice. There is an agreement that customers have increasing expectations but this is not being communicated frequently. However, LCL always assesses customer requirements so that they are aware of and satisfies country specific requirements. With the exception of one respondent, there is also a general consensus that they understand the end customers’ requirements and processes. (refer to Appendix C10) Most of the respondents in LCL also indicated that value-added services are provided and these are customized for select customers. The value-added services are believed to be relevant to the customer, provide a competitive advantage to them and are a means to enhance efficiency, effectiveness and relevancy. (refer to Appendix C10)

4.2.3 Value Creation The perceived value to the Sales Companies is that LCL provides the service of selling machines and support through delivery and order processing, availability, lead time, transport arrangements, information on production, delivery, price, claims and so forth. They also provide professional support and competence to the Sales Companies. (refer to Appendix D17) The Swedish employees in LCL were quite neutral about whether LCL co-creates value and integrate with customers and on the development of logistics capabilities. (refer to Appendix C11) In the opinion of LCL, they have the capability to proactively provide information regarding order, shipment and deliveries. They also have the capability to be a centre of knowledge, to develop solutions for the Sales Companies to be the number 1 choice in the market. LCL also has the capability to be a one stop solution for support to the Sales Companies, providing a common, centralized service of transport bookings, claims and checking of delivery times with the factory. Through LCL, the Sales Companies have a direct link to production units and can therefore obtain real delivery dates instead of going through a reseller. This central role also saves costs by reducing staff at each Sales Company. Additionally they have the capabilities to provide ‘availability’, ‘lead time’, ‘delivery performance’ and ‘flexibility’. LCL believes these capabilities offer competitiveness to the Sales Companies. (refer to Appendix D17)


4.3 The Sales Companies While LCL considers the Sales Companies as its customers (the internal customers), the customers of the Sales Companies (or end customers) include apartment house laundries, hotels and restaurants, healthcare institutions, coin-operated launderettes, dry cleaners, commercial laundry operators, dealers and the like. Figure 24 Electrolux Laundry Systems Focused Customer Segments


4.3.1 The Strategic Role of Logistics Scores from all respondents of the 4 markets were summarized. The mean of the aggregate sales companies’ opinions reveal that LCL plays a strategic role for the Sales Companies and also adds value to them. However, the respondents tended to stand neutral or slightly disagree to the statement that LCL contributes to efficiency, effectiveness and differentiation / relevance. (refer to Appendix D1)


Figure 25 Comparison of empirical findings on LCL's strategic role between LCL and the Sales Companies

4.3.2 Customer Accommodation On the whole, there is high satisfaction except for ‘the right time’, ‘right condition’ and ‘right price’, implying that there are delays, damages and high costs incurred in the deliveries. (refer to Appendix D2)

Basic elements of Customer Service There was an overall discontentment noted in the area of ‘availability’. Generally, it was felt that stocks of both Finished Goods and Spare Parts were not always available when needed. On the whole, there was a low knowledge recorded on the service levels and the service level (promised level of availability) is felt to be incorrect. The present service levels are illustrated below in Figure 26. The Sales Companies were also not happy with the stock lead time and expect this to be improved. (refer to Appendix D4 & D5)

Strategic Role of Logistics Services 1 2 3 4 5 6 7 Mean 1 2 3 4 5 6 7 Mean1 LCL plays a strategic role for the sales companies 6.17 6.132 LCL adds value to the sales companies 6.33 5.363 LCL enables the sales companies to be more competitive in the marketplace 5.50 4.534 LCL assists the sales companies to generate end-customer value 5.50 4.64

Efficiency 1 2 3 4 5 6 7 1 2 3 4 5 6 75 LCL offers low priced distribution to the end-customers 5.75 4.006 LCL offers adequate options of freight forwarder 5.75 4.007 LCL links production and sales functions efficiently 5.00 4.298 LCL handles orders efficiently 5.67 4.299 LCL provides spare parts efficiently 5.83 5.07

10 LCL provides finished products efficiently 5.67 4.31Effectiveness 1 2 3 4 5 6 7 1 2 3 4 5 6 7

11 LCL offers the most suitable transportation options for the sales companies 5.80 4.4012 LCL maintains an adequate stock level for finished products 5.50 3.8313 LCL maintains an adequate stock level for spare parts 5.00 4.5014 LCL enables the sales companies to sell more 5.50 4.33

Differentiation / Relevancy 1 2 3 4 5 6 7 1 2 3 4 5 6 715 LCL improves the order handling process to make it easier for the sales

companies and end-customers5.00 4.38

16 LCL actively reviews the stock level of spare parts to ensure the availability to end-customers

5.50 4.58

17 LCL actively reviews the stock level of finished products to ensure the availability to the sales companies

5.80 3.69

18 LCL actively improves the distribution solutions to the sales companies and end-customers

5.40 4.85

19 LCL adopts unique and distinctive ordering process 4.40 4.18ne

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Figure 26 Service Levels


In terms of ‘operational performance’, flexibility was rated low, along with malfunction recovery and prompt handling of returns or claims. Satisfaction with the transportation time was also rated at only 74.4% and 84.4% respectively for Finished Goods and Spare Parts and delays were only informed 81.1% and 72.8% of the time. For ‘service reliability’, elements of concern are ‘responses’ where the recorded satisfaction level was at only 68.4% for Finished Goods and 74.8% for Spare Parts. (refer to Appendix D4 & D5) Collectively, ‘availability’ was ranked as the most important element of customer service, followed by ‘operational performance’, then ‘service reliability’. (refer to Appendix D6)



The Performance Gap from the customers’ perspective shows that the Sales Companies on the whole felt that their perceptions of the services provided by LCL fall short of their expectations, for both Finished Goods and Spare Parts. ‘Courtesy’, an item in the dimension of ‘Assurance’, is the only area where their perceptions exceed their expectations and indicates satisfaction. For Finished Goods in particular, the area of main concern is ‘Responsiveness’ mainly for response (responding to requests without delay). (refer to Appendix D7 for details)

Performance Gap (Sales Companies)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4



Finished Products (Sales Companies)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4


Expectation Gap Perception Gap


The Expectation Gap shows the gap between the service provider’s and customers’ expectations. Blue indicate the areas that LCL has higher expectations than the Sales Companies and these are ‘punctuality’, ‘time allotment’ and ‘willingness to help’ where Finished Goods are concerned. For the dimension of ‘Reliability’ for Finished Goods, it appears that the expectations from both LCL and the Sales Companies match in general or are closely similar. Other items for Finished Goods where these match are ‘promptness’, ‘security’ and ‘courtesy’. For Spare Parts, the Sales Companies seem to have lower than or similar expectations with LCL for more items on the whole. (refer to D9 and D11 for details) The Perception Gap, on the other hand, shows the gap between the service provider’s and the customers’ perceptions of the service level provided. In this case, blue indicates that the Sales Companies have higher perceptions than LCL. Unfortunately this is only seen in the area of ‘time allotment’ for Spare Parts. On the whole, the Sales Companies have lower perceptions of the service provided, compared to LCL. (refer to D10 and D12 for details) It appears that the average rating for the freight forwarders’ willingness to help for Spare Parts is low, but this is due to the fact that the Germans do not expect the freight forwarders to help and thus their perceptions on this item is also low. (refer to Appendix D8 for details) The dimensions of quality were rated in order of importance starting from Reliability, followed by Responsiveness, Assurance and finally Empathy. (refer to Appendix D13) On the whole the Sales Companies agreed that they are satisfied with the services of LCL and with the exception of one respondent, collectively expressed that they would not choose another service provider if given the choice. They slightly agreed that expectations are increasing and on average are neutral when it comes to communicating these increasing expectations. Most express that their expectations are the same as their actual requirements. They were mostly neutral when asked if LCL assesses these requirements, if LCL knows about individual country requirements and if LCL is aware

Spare Parts (Sales Companies)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




about the end customers’ requirements. However, there is a high agreement when it comes to the commitment of LCL in the provision of logistics services. (refer to Appendix D14) There was a slight agreement that LCL provides value-added services and those that agreed, felt that the value-added services are relevant, provides competitive advantage and are a means to enhance effectiveness, efficiency and relevancy. (refer to Appendix D14)

4.3.3 Value Creation In general, the sales companies did not agree that LCL made efforts to co-create value and integrate with them. They also did not think that LCL has the logistics capabilities to customize the services to suit their needs. (refer to Appendix D15)

Figure 27 Comparison of Empirical findings on value creation between LCL and the Sales Companies

4.4 The Sales Company in the United Kingdom The market in the UK was traditionally a growth market but today the product replacement market is growing, leading to the current 50-50 ratio between the growth and replacement markets. There are currently around 100 customers for Finished Products, with 15 of them being key customers. The combined total of customers for both Finished Products and Spare Parts numbers 5000 in total, with 20 of them being their key customers. 70% of the GBP 11.5 million sales turnover last year was

Co-creation of value 1 2 3 4 5 6 7 1 2 3 4 5 6 71 LCL has on-going meetings with the sales companies to discuss on

distribution arrangement5.00 4.00

2 LCL has on-going meetings with the sales companies to fine tune the order handling process

4.50 3.85

3 LCL discusses with the sales companies on appropriate stock levels 3.50 3.134 LCL actively modifies transportation options offered to the sales companies 4.20 3.205 LCL actively enhances the order handling processes 4.17 3.536 LCL actively meets with sales companies to understand their needs and

requirements4.17 3.57

Customer integration 1 2 3 4 5 6 7 1 2 3 4 5 6 77 There is sharing of ideas, information and other resources between LCL and

the sales companies4.50 4.20

8 There is joint planning to anticipate and resolve operational problems between LCL and the sales companies

4.00 3.87

9 There is already established teamwork between LCL and the sales companies

4.33 4.33

Logistics capabilities 1 2 3 4 5 6 7 1 2 3 4 5 6 710 LCL develops customer-specific programs to cater to difference in customer

demands4.40 3.54

11 LCL maintains and modifies its operations based on the changing expectations of customers

4.67 3.57

12 LCL is good at handling unique or unplanned customer requirements 5.00 3.7313 LCL has the flexibility to adapt to unexpected operational circumstances 4.83 3.87

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generated from these key customers. Sales turnover figure for the last 5 years was mostly flat with a slight incline. There are 48 full time employees working at the Sales Company in the UK today. 65% of the customers in the UK are dealers/resellers of ELS products while 35% are direct end-customers. In terms of quality, the typical needs and requirements are to shorten the down time of the laundry equipment. In terms of cost, the customers demand value-for-money as cost is important but not a deciding factor for them. Finally, delivery time is the key differentiator in the market. (refer to Appendix D16)

4.4.1The Strategic Role of Logistics The senior executive in the UK opined that LCL’s strategic role in the supply chain is to link the manufacturing facility, sales companies and end customers. They felt that LCL has fulfilled the linkage between manufacturing and the Sales Companies but they have not fulfilled the understanding of end-customers’ needs and requirements. (refer to Appendix D16)

The senior executive felt that there has been a lot that has been done well by LCL, particularly the reduction of delivery time and costs, improvement on spare parts deliveries and openness to discuss and accept viewpoints from the sales company in the UK. However, he felt that LCL should communicate with end-customers to gain a better understanding of their needs and that they should have more focus on market requirements rather than on Electrolux’s requirements. (refer to Appendix D16) For the UK, good logistics is an entry requirement in their market. The value that LCL can add to the Sales Company is the availability of the machines, (particularly from the production plant in Thailand), on-time deliveries, problem solving, meetings and feedback on certain issues (spare parts). (refer to Appendix D17) The respondents in the UK feel that LCL enables them to be more competitive by having the right stock levels, product availability and on time deliveries. There should be direct deliveries to customers, 24hour parts deliveries and flexible delivery options. One respondent felt that the capabilities that they should have are the deliveries of Spare Parts and Finished Goods. However, they feel that the current performance lets the Sales Companies down. Others also disagree or were neutral to the statement that LCL enables them to be competitive. (refer to Appendix D17)

The end customer values that LCL provides to the Sales Company in the UK are flexible delivery options and standards of packaging and quick supply of spares (end customers usually require one Finished Product delivery but many deliveries of Spare Parts. (refer to Appendix D17) The latest strategies in the UK are to move more low value orders through indirect channels and focus on direct sales in major groups, contracts and high value projects. (refer to Appendix D17) Respondents from the UK strongly agreed that LCL plays a strategic role and adds value to their company but they had a neutral stance about LCL’s ability to create competitiveness and end-customer value for them. They felt that LCL does not offer adequate carrier options but they tended


to agree that LCL offers efficient order-handling and supply of both Spare Parts and Finished Products. They slightly disagreed that LCL is maintaining an adequate stock level, but they did agree that LCL offers suitable transportation options and enables them to sell more. They generally agreed that LCL can achieve differentiation and relevancy to customers. (refer to Appendix D1)

4.4.2 Customer Accommodation For the UK, there was a minimum of 85% satisfaction rating across the seven operational aspects of logistics with ‘place’ and ‘price’ having the highest ratings. (refer to Appendix D2) Basic elements of customer service For the UK, Stock availability is the main concern especially with Finished Products. On the whole, the UK generally had a higher rating across all categories except for ‘flexibility’ and ‘transportation time’ where they have expressed that LCL needs to focus on what the customers need and not what is easy or works for themselves. There is a need to get around the system or make exceptions where necessary to satisfy what customers demand. (refer to Appendix D4)


The Performance Gap shows that for Finished Goods on the whole, perceptions of the services provided by LCL fall short of the expectations implying a general dissatisfaction. This is especially so in the area of the freight forwarders’ willingness to help. This implies that the only items where they are satisfied are ‘courtesy’ where perceptions exceed their expectations. (refer to Appendix E1 for details) For Spare Parts, perceptions of the services provided by LCL also fall short of the expectations, implying a general dissatisfaction. For the dimension of ‘empathy’, satisfaction is within very close

Performance Gap (UK)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




reach, with the expectations already met for ‘interests at heart’. The perception on the item of ‘courtesy’ also exceeded their expectations. (refer to Appendix E2 for details)

The Expectation Gaps for both Finished Goods and Spare Parts indicate that the Sales Companies have higher expectations than LCL on the whole, but the gaps are small in general. For ‘responsiveness’ there is less expectations on the freight forwarders’ willingness to help with Spare Parts and therefore their expectations were also met. The Perception Gap shows that for Finished Products, the Sales Companies had lower perceptions for all the items in Finished Goods except for ‘courtesy’. The picture looks better for Spare Parts with more items where the perceptions of the Sales Companies are either higher or matches those of LCL.

Finished Products (UK)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4


Perception GapExpectation Gap

Spare Parts (UK)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




While there was a general satisfaction mainly in the dimension of ‘empathy’ mainly, it was ranked as the least important of the 4 dimensions after ‘reliability’, ‘responsiveness’ and ‘assurance’. (refer to Appendix D6) On the whole, it appears that the British respondents were generally satisfied with the services of LCL and would not choose another service provider if they were given a choice. (refer to Appendix D14) They expressed that they have increasing expectations which are the same as their actual requirements and this is communicated to LCL frequently. They agree that LCL assesses their requirements but are neutral about LCL being aware about country specific requirements as well as their end customers’ requirements and processes. (refer to Appendix D14) They agree that there is a commitment by LCL in providing logistics services and to a lesser extent agree that there are value-added services. They are neutral about whether these value-added services are customized and are provided for select customers. However, they agree that the value-added services are relevant, provide a competitive advantage and are a means to enhance efficiency, effectiveness and relevancy. (refer to Appendix D14)

4.4.3 Value Creation The British respondents slightly agreed that LCL co-creates value and integrate with them. However, they were neutral with regards to LCL having the logistics capabilities to suit their requirements. (refer to Appendix D15) The British respondents generally agreed that LCL co-created value with them by on-going meetings to discuss distribution and order handling matters. They also discussed appropriate stock levels, modified transportation options and order handling processes and actively met with them to understand their needs. They rated LCL with the highest relative attainment of co-creation of value than other markets. (refer to Appendix D15 & 17) As the UK Sales Company had more opportunities to meet or communicate with LCL, the respondents in UK reflected very positively about LCL’s customer integration ability where they shared information, ideas and resources, planned together and maintained established team work. They also rated LCL with the highest relative attainment of customer integration than other markets. (refer to Appendix D17) They also tended to be neutral or slightly agreed that LCL has the logistics capabilities on segmental focus, flexibility, responsiveness, and relevancy. (refer to Appendix D15)

4.5 The Sales Company in France The Sales Company in France comprises 32 full time employees and the sales turnover figure was on a steady decline over the past 5 years from EUR 31.8 million in 2006 to EUR 24 million in 2010. 85% of the total sales turnover in the last financial year was generated from Distributors or key customers. (refer to Appendix D16)


The customers in France consist of coin operators, care segments/OPL=On-premises laundry, facility management segment, sheltered workshop segment, elderly home segment. They demand the best quality at lowest cost with the shortest due time. Latest strategies in France include keeping project sales and to develop replacement sales which they are bad at. The sales strategy for the French market is to develop new channels such as new on-premise laundry segments for HORECA (Hotel/Restaurant/Catering) which requires better delivery lead time. (refer to Appendix D16)

4.5.1 The Strategic Role of Logistics In France, the senior management reflected LCL’s strategic role in the supply chain being to determine the level of stock. However, they feel that this was poorly fulfilled. An example given is that they are unable to fulfill even the “A” product delivery promise which is supposed to be delivered in 48 hours but this sometimes takes up to 8 days. (refer to Appendix D16) The senior executive felt that LCL has done well but could not recall any particular examples. He also did not have any comments on what should have been done differently. (refer to Appendix D16) The market in France is generally facing a decline. It is more of a replacement market generally but there are still new projects. The Sales Company in France has around 1000 total customers with 65 Distributors as their key customers. These Distributors are considered the key customers as the Sales Company in France only issues invoices to distributors. (refer to Appendix D16) The French respondents agreed that LCL plays a strategic role for their company. However, they had very diverse responses on LCL’s ability to provide value and competitiveness to them. Respondents tended to be neutral or slightly disagree to the statement that LCL provides efficiency, effectiveness and differentiation/relevance. (refer to Appendix D17) Some French respondents disagree or were neutral when asked about the value that LCL adds to them. The others mentioned that LCL provides support and solution when problems occur. A high level of service is needed to be a premium choice company, highlighting that Spares are needed in a short time. Also, respondents reflect that LCL enables the Sales Companies to be more competitive by achieving customer satisfaction. They commented that LCL adds end customer value by guaranteeing a high utility rate by ensuring that Spare Parts are shipped fast and machines (Finished Products) fixed fast. End customer value can also be added by bringing a high level of service to answer the need of availability and delivery time. However, they disagree that this is done. (refer to Appendix D17)

4.5.2 Customer Accommodation In France, there is an overall agreement that LCL satisfies the seven operational aspects of logistics services to a high level except for the ‘right time’ and ‘right price’ implying that overall deliveries are only 78.8% on time and 30% of the time the cost is high. (refer to Appendix D2)


While the ‘right price’ was rated low in comparison to the other six operational aspects, it is ranked the lowest in terms of importance. The right product was said to be the most important, followed by a tie for the ‘right amount’ and ‘right time’. Next was ‘right place’, then ‘right condition’ and ‘right information’. (refer to Appendix D3)

Basic elements of customer service Stock availability is the main concern especially with Finished Products. On the whole, France generally had a lower rating compared to the cumulative average of the Sales Companies across all categories related to ‘availability’ which indicate their higher level of dissatisfaction. ‘Flexibility’, ‘malfunction recovery’ and ‘transportation time’ are the areas where their ratings were also low. They also indicated a low satisfaction level with the responses, at only 40%. (refer to Appendix D4) The ‘service level’ and ‘stock lead time’ were the main concern when it came to the element of ‘availability’ for Spare Parts. On the whole, France generally had a lower rating compared to the cumulative average of the Sales Companies across all categories related to ‘operational performance’ which indicate their higher level of dissatisfaction compared to the other sales companies. ‘Flexibility’ was the most critical as the French felt that LCL was only flexible 41.7% of the time. As for ‘service reliability’, ‘satisfaction with responses’ was rated at only 60%. (refer to Appendix D5) Of the 4 dimensions of customer service, ‘Availability’ and ‘service reliability’ were ranked equally most important and ‘operational performance’ least important for the sales company in France. (refer to Appendix D6)


Performance Gap (France)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




The Performance Gap shows that for Finished Goods, the French were only satisfied in terms of ‘accuracy’, ‘freight forwarders’ willingness to help’, ‘security’ and ‘courtesy’. In all other areas, the perceptions of the services by LCL were below their expectations. (refer to Appendix F1 for details) For Spare Parts, the expectation for only ‘courtesy’ was met, indicating customer satisfaction. For all other items, the perceptions of the services provided fell short of the expectations of the French sales company. (refer to Appendix F2 for details)

Finished Products (France)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4



Spare Parts (France)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




The Expectation Gaps show that in France, the Sales Company has lower expectations than LCL for some of the items and higher for others. On balance, their average expectations are almost equal between LCL and the Sales Company in France. (refer to F3 and F5 for details) As for the Perception Gap, it appears that the French Sales Company has a generally lower perception than LCL on the services it provides. (refer to F4 and F6 for details) Of the 4 dimensions of service quality, ‘Reliability’ and ‘responsiveness’ were ranked equally most important, followed by ‘assurance’ and ‘empathy’. (refer to Appendix D13) On the whole, the French sales company recorded that they were slightly satisfied with the services of LCL and would not choose another service provider if given the choice. (refer to Appendix D14)

They were neutral with regards to their expectations increasing but agree that their expectations are the same as their requirements. They disagree that LCL always assesses their requirements and record that LCL is not aware about country specific requirements, despite the apparent commitment by LCL. The French were also neutral when it came to value-added services. (refer to Appendix D14)

4.5.3 Value Creation The French respondents had stronger disagreements on whether LCL co-creates value and integrates with them. They also disagreed that LCL has the logistics capabilities to cater to their needs and requirements. (refer to Appendix D15)

4.6 The Sales Company in Germany The market in Germany is mainly a replacement market with a total of 2000 customers for both Finished Goods and Spare Parts. Around 50 of these are their key customers. Today, these key customers contribute around 33% of the EUR 9-10 million sales turnover and this percentage continues to rise as the sales turnover figures remained flat for the past 5 years. The Sales Company in Germany comprises 25 full time employees. (refer to Appendix D16)

In Germany, customers of ELS are contract cleaners or nursing homes. These customers expect high quality for a reasonable price with the shortest delivery time. Focusing on core segments (contract cleaners, nursing homes & commercial laundries) is the latest strategy. (refer to Appendix D16)

4.6.1 The Strategic Role of Logistics In Germany, the senior management feels that LCL’s strategic role in the supply chain is to set standards to maintain a well-working supply chain. The Germans feel that LCL has made efforts to improve the distribution but the impact of the improvements have not been noticed yet. (refer to Appendix D16) When asked what LCL has done well in the past years LCL, the German senior executive responded that LCL has been trying to keep “A-B-C” products in stock (3 different service levels or promised


delivery time) but they are not doing too well in this area. They were unable to keep their promises on the availability of “A” products, whereas “A” products should be kept available at all times. (refer to Appendix D16) The German respondents generally agreed that LCL plays a strategic role and creates value and competitiveness for the sales company. However, similar to the French, they were neutral or in slight agreement when it came to LCL providing them with efficiency, effectiveness and differentiation / relevancy. (refer to Appendix D17) LCL adds value to the German Sales Company by providing background information and by providing a reliable and reasonable delivery process. The Germans feel that LCL enables the Sales Companies to be more competitive by providing background information. Some respondents do not know or disagree that LCL enables them to be more competitive. LCL can also add value to the end customer by providing background information and delivering Spare Parts promptly so that end-customers can minimize the down time of the machines which they bought for making money. (refer to Appendix D17)

4.6.2 Customer Accommodation For the German sales company, LCL satisfied the basic operational aspects at a higher level than the sales companies’ cumulative average except for the ‘right time’. (refer to Appendix D2)

Rankings in order of importance placed the ‘right product’ ahead of ‘right amount’, ‘right place’, ‘right condition’, ‘right price’ and finally ‘right time and information’. (refer to Appendix D3) Basic elements of Customer Service With Finished Products, the issues were mainly related to ‘availability’ where they felt that the stock availability was low and there is a low knowledge of what the service levels are. There was a low satisfaction on the stock lead time as well. In terms of ‘operational performance’, they were not satisfied with the handling of claims and also they felt that they were not informed of delays. On the whole, ‘service reliability’ was rated very high. (refer to Appendix D4) As for Spare Parts, the ratings were high on the whole for the basic elements of customer service. The main issue lies in the safety stock levels and there is low knowledge on the service levels. Additionally, the handling of claims was also rated lower than the other elements. (refer to Appendix D5) The Germans ranked the basic elements of customer service in the order of ‘availability’, ‘operational performance’ and ‘service reliability’ when asked to rank those items in order of importance. (refer to Appendix D6)



The Performance Gap shows that for Finished Products, the overall perception of the service level is lower than the expectations. However, there were a few items that met or exceeded the expectations, implying that they were satisfied in those areas. These are ‘punctuality’, ‘willingness to help’ and ‘personal attention’. On the whole the gap was marginal, indicating that satisfaction is within very close reach in Germany. (refer to Appendix G1) As with Finished Goods, the Spare Parts ratings in Germany indicated a small gap in perceptions and expectations of the service level provided by LCL and the perceptions fell slightly short of their expectations. There were also a few items across all 4 dimensions where satisfaction was achieved and these are ‘fulfillment of promises’, ‘correctness’, ‘freight forwarders’ willingness to help’, ’courtesy’, ‘attentiveness’, ‘operating hours’, ‘interests at heart’ and ‘personal attention’. (refer to Appendix G2) However, it is necessary to highlight that the expectation level for some of these items were low on the Likert scale to begin with. For example, the Germans did not expect the freight forwarders to help them with the unloading of Spare Parts or with the documentation. The Germans also have relatively lower expectations when it comes to the dimension of ‘empathy’. (refer to Appendix G2)

Performance Gap (Germany)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




The Expectation Gap shows that on balance, the Sales Companies and LCL have almost equal expectations for both Finished Products and Spare Parts. Upon closer inspection, we can see that for Finished Products, the Germans have lower expectations in the area of ‘reliability’ and for Spare Parts, expectations are lower for ‘empathy. Additionally, there is very low expectation of the freight forwarders’ willingness to help and this is reflected in the gap of 4 points. (refer to G3 and G5 for details)

Finished Products (Germany)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4



Spare Parts (Germany)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




As for the Perception Gap, the overall score of -0.5 and -0.75 scores for both Finished Products and Spare Parts indicate that perceptions from the German Sales Company were lower than LCL on the whole, by small margins. (refer to G4 and G6 for details) The German rankings of priority for the dimensions of service quality are in this order : ‘reliability’, ‘responsiveness’, then ‘assurance’ and ‘empathy’ at equal levels. Careful observation of their expectation ratings above indicate that they have lower expectations on the dimension of ‘empathy’ although their ranking of relative importance indicates that they view both ‘assurance’ and ‘empathy’ equally important. (refer to Appendix D13) On the whole, the Germans seem to be satisfied with the services of LCL and would not choose another service provider if given the choice. (refer to Appendix D14) They have indicated that although they have increasing expectations, these are communicated frequently via regular emails and telephone calls. Their expectations are also the same as their actual requirements. They only slightly agree that LCL always assesses their requirements. (refer to Appendix D14) There is a slight disagreement to the statement that there are country specific requirements and that LCL satisfies these. They were neutral about the statement that LCL understands the end customers’ requirements and processes. The Germans were also neutral about the provision of value-added services by LCL. (refer to Appendix D14)

4.6.3 Value Creation The German respondents made the strongest disagreement on the statement that LCL co-creates logistics value with them. Respondents had very diverse opinions on customer integration which involved joint-planning and sharing. But they did agree that they had developed some teamwork with LCL. Unfortunately, the German respondents did not agree that LCL has the logistics capabilities to customize services to suit their needs. (refer to Appendix D15)

4.7 The Sales Company in Norway The market in Norway is mainly a replacement market with 900 customers, of which 100 are key customers. The percentage of sales turnover represented by the key customers is 45% in the last financial year. In the past 5 years, the sales turnover trend started with gradual increases from NOK 58 million in 2006 to NOK 63 million in 2008, before it started to decline in the past 2 years to NOK 54 million last year. (refer to Appendix D16)

In Norway, customers are made up of both direct sales and sales partners. Quality is assumed by the customers to be good. Latest strategies is to focus on AHL (Apartment Housing Laundry), OPL (On-premise Laundry) health and OPL facility management with direct sales and sales partners supported by advertising and direct marketing. (refer to Appendix D16)


Of the four Sales Companies, Norway has the lowest number of employees at 15 persons. (refer to Appendix D16)

4.7.1 The Strategic Role of Logistics In Norway, the senior management feel that LCL’s strategic role in the supply chain is to make benefit for the end customers and in their opinion it has been fulfilled up to 70%. The Norwegian senior executive felt that one of the things LCL has done well in the past 2 years is to provide the flexibility to cater to customer’s special needs and requirements. However, they felt that LCL could have made more prompt alerts to the Sales Companies where delayed delivery times were concerned. (refer to Appendix D16) The Norwegian respondents slightly agreed that LCL plays a strategic role and creates value and competitive advantage for the sales company. However, for the efficiency, effectiveness and differentiation / relevancy of LCL, they tended to be neutral or only slightly agree. (refer to Appendix D17) For Norway, LCL can add value by providing expertise, speedy delivery of stocks and by building trust from end customers towards the Sales Companies. If the job is done correctly, customers trust the Sales Company and they will buy more. (refer to Appendix D17) The Norwegians expressed that LCL has the capability to deliver the right item to the right place and time and to speed up deliveries to serve customers better. (refer to Appendix D17)

For Norway, the value that LCL can add to the end customers is by arranging to deliver the right items at the right time to the right place. Additionally, LCL’s more in depth knowledge compared to the Sales Company can also add value to the end customers. (refer to Appendix D17)

4.7.2 Customer Accommodation The Norwegians generally rated the overall operational aspects of logistics delivery rather high except for ‘right condition’ implying some damage was experienced. (refer to Appendix D2)

Of the operational aspects of logistics, the ‘right product’ was rated most important, followed by ‘right place’ and then ‘right time’. The other aspects of ‘amount’, ‘condition’, ‘price’ and ‘information’ were then placed equally important. (refer to Appendix D3)

Basic elements of Customer Service On the basic elements of customer service, the ratings from the Norwegians for Finished Goods were rated higher for the ‘flexibility’, ‘information on delays’, ‘error-free invoices’, ‘shipments match orders’ and ‘shipments to correct location’. The main areas of concern is ‘damage free deliveries’ where the low rating again indicate that they have been experiencing a lot of goods arriving damaged. (refer to Appendix D4)


For Spare Parts, the ratings were fairly even throughout the basic elements of customer service and the ratings. The ratings were fairly good including their satisfaction with the stock lead times, which is backed up by the low expectation of a better stock lead time. (refer to Appendix D5) The Norwegians rated the element of ‘service reliability’ being the most important, followed by ‘availability’ and ‘operational performance’. (refer to Appendix D6)


The Performance Gap shows the overall perception by the Norwegians on the service level provided by LCL for Finished Products was slightly lower compared to their expectations. The gaps were small except for the dimension of ‘responsiveness’, implying that the attainment of satisfaction is within close reach. For the items of ‘courtesy’, ‘operating hours’ and ‘personal attention’, the perceptions met their expectations implying they are satisfied in those areas. (refer to Appendix H1 for details) For Spare Parts, the Norwegians have also rated their perceptions slightly lower than their expectations indicating a slight dissatisfaction generally. There were a few items on the ‘reliability’ and ‘empathy’ dimensions where their perceptions met their expectations, showing that the Norwegian Sales Company was satisfied. These are ‘correctness’, ‘accuracy’, ‘attentiveness’, ‘operating hours’ and ‘personal attention’. (refer to Appendix H2 for details)

Performance Gap (Norway)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




The Expectation Gap shows that for Finished Goods, the Norwegian Sales Company generally has a higher expectation than LCL. This is similar for Spare Parts on the whole except in terms of ‘reliability’ where their expectations are lower than LCL’s. (refer to H3 and H5 for details) As for the Perception Gap, there are some items in which the perceptions of both LCL and the Sales Company in Norway match. On average, the perceptions of the Sales Company were higher for Finished Products and lower for Spare Parts, when compared to LCL’s. (refer to H4 and H6 for details) The Sales Company in Norway ranked the importance of the four dimensions in the order of ‘reliability’ being highest, followed by ‘assurance’, ‘responsiveness’ and ‘empathy’. (refer to Appendix D13)

Finished Products (Norway)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4



Spare Parts (Norway)-4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4




On the whole, the Norwegians generally agreed that they are satisfied with the services provided by LCL and would not choose another forwarder if given the choice. They agree that they have increasing expectations but do not communicate this frequently except via emails occasionally. (refer to Appendix D14) They agree that there are country specific requirements and that LCL is aware of and satisfies them. The Sales Company in Norway also believe that LCL understands the end customers’ requirements and processes, citing the requirement by 90% of older buildings in Norway utilizing 230Watts instead of 400Watts power supply. LCL satisfies this need by rebuilding the machines to suit the local requirement. (refer to Appendix D14) The Norwegians also indicated that LCL provides value-added services and these are customized and provided for select customers. The value-added services are relevant to them, provide a competitive advantage and are a means to enhance efficiency, effectiveness and relevancy. (refer to Appendix D14)

4.7.3 Value Creation The Norwegian respondents had the most neutral stance on LCL’s ability to co-create value, integrate with customers and show logistics capabilities. With some real case examples, they slightly agreed that LCL tried to suit their urgent or special needs & requirements occasionally. (refer to Appendix D15)


LCL’s Strategic Role as a Value-adding

Supply Chain Process

5.0 ANALYSIS In the analysis section, the major theoretical concepts that were discussed in the Theoretical Framework will be applied to the case company. The discussion will revolve around established theory in application to the empirical findings tabled in the previous chapter. The case company’s relationships with the sales companies, its stance with regards to the strategic role of logistics, its approach to customer accommodation and the logistics capability for the creation of customer value, are examined in this section. Additionally, the level of customer satisfaction is reviewed from the perspective of the Sales Companies, LCL’s internal customers.

5.1 The Strategic Role of Logistics According to Jonsson (2008), logistics comprises 6 processes as seen below. The case company, LCL plays a strategic role within the supply chain to link supply chain units, particularly with the indispensible functions of “order to delivery” and “distribution”. Figure 28 illustrates LCL’s strategic role as a value-adding supply chain process focusing on the functions of customer order reception, order management, order acceptance, transport, invoicing, transport planning and stock keeping (highlighted in red). The key roles mentioned were identified in a focused interview with the Logistics Manager of LCL.

Figure 28 LCL’s strategic role in the logistics system with a focus on “order to delivery” and “distribution”

According to Zhao and Wang (2010), logistics services can be categorized into basic low-end services and high-end services in the logistics value chain. Based on the service description from the LCL management, LCL is at the position of offering basic low-end logistics services to the Sales Companies, such as transportation, warehousing, stock keeping, order handling, invoicing, and distribution, etc. These services tend to be isolated functions. Some of the respondents in France and Germany also perceived that LCL is offering typical basic low-end services which are also seen as the entry requirement for a logistics centre. Since such services are relatively routine and standard, it may be difficult for the Sales Companies to derive massive value or perceived benefit out of these services.

Supply

•Supplier selection•Issue purchase

order•Release purchase

order•Goods tracking•Material handling•Invoice control

Manufacturing

•Capacity planning•Materials

planning•Materials

handling•Production•Stock keeping

Order to delivery

•Customer order reception

•Order management

•Order acceptance•Materials

handling•Packing and

loading•Invoicing

Distribution


•Transport•Loading and off-

loading•Stock keeping•Product

configuring and installation

After sales

•Order management



•Goods reception•Materials

handling•Transport

Returns

•Identify product condition

•Disposition product



•Transport•Goods reception•Invoice crediting


In summary, it is more difficult to generate value for customers from basic low-end logistics services because achieving these tasks are seen by customers as basic requirements. Jonsson (2008) describes that in an internal perspective, the logistics system is limited to an internal supply chain consisting of materials supply, production and distribution, which are interconnected through internal customer-supplier relationships. LCL fairly fits into this description as such internal logistics service provider deals with narrow scopes of supply chain activities such as distribution, inventory and order handling. The focus of the internal logistics system is on the co-ordination among the supply chain units with the aim of creating efficiency and minimizing sub-optimization within the company. LCL is basically focused on the co-ordination and the creation of operational efficiency to fully deploy the internal resources.

Summary of opinions on the strategic role of LCL In Table 10 below, extracts of the opinions on the strategic role of logistics have been summarized for easy reference for analysis.

Although LCL only takes part in 2 processes of the supply chain in the organization, they play a strategic role for adding value to the internal customers which are the Sales Companies of Electrolux Laundry Systems. From the empirical findings, all 4 of the sample Sales Companies agreed that LCL plays a strategic role to them, particularly the UK and Germany which showed high levels of agreement in general. With superior logistics services, LCL creates value and brings competitiveness in the marketplace for the sales companies. LCL mainly deals with internal customers (Sales Companies) and seldom with end-customers. Markets like France did not agree that LCL creates end-customer value and competitiveness to them. On the other hand, the average opinions of the Sales Companies seem to be in line with LCL’s self-evaluation except for the fact that they are particularly discontented with the stock level of finished products and the availability of such stock.

The country with the highest agreement level is Norway, followed by the UK. However, the most discontented markets are Germany followed by France. Their grievances are mainly with the ability of LCL to gain efficiency, effectiveness and differentiation/relevancy.

To conclude, LCL does play a strategic role in ELS linking supply chain units such as production, distribution, warehousing, etc. However, they are only able to create efficiency, effectiveness and relevancy to the Sales Company only to a certain extent. From the Sales Company’s perspective, the main problem lies in “availability”, which is the capability to maintain appropriate stock levels. A recurring complain from the markets is that stocks are commonly unavailable, despite the promised level of availability. Serving internal customers within the same company does not generate direct value to end-customers but indirectly transfers customer value from the Sales Company to end-customers when the deliveries satisfy customers’ needs and requirements.


Table 10 Summary of opinions on the strategic role of LCL

Strategic Role of Logistics Services1 LCL plays a strategic role for the sales companies

2 LCL adds value to the sales companies

3 LCL enables the sales companies to be more competitive

4 LCL assists the sales companies to generate end-customer value

Efficiency5 LCL offers low priced distribution to the end-customers

6 LCL offers adequate options of freight forwarder

7 LCL links production and sales functions efficiently

8 LCL handles orders efficiently

9 LCL provides spare parts efficiently

10 LCL provides finished products efficiently

Effectiveness11 LCL offers the most suitable transportation options for the sales

12 LCL maintains an adequate stock level for finished products

13 LCL maintains an adequate stock level for spare parts

14 LCL enables the sales companies to sell more

Differentiation / Relevancy15 LCL improves the order handling process to make it easier for the sales

companies and end-customers




19 LCL adopts unique and distinctive ordering process agree disagree

neutral

LCL

Sale

s Com

pani

es

UK

Fran

ce

Ger

man

y

Nor

way


Based on the empirical findings from the open-ended questions and from the interviews with the management of both LCL and the Sales Companies, a summary of perceived value created by LCL as well as the perceived capabilities of LCL by the customers is presented in Table 11 below:

Table 11 Perceived value created by LCL and LCL’s capabilities

Summary of value created by LCL to Sales Companies (Internal Customers) Stock Keeping Availability of machines and spare parts Handle orders and provide information

Prompt and accurate information on delivery, costs, availability and other logistics support

Problem solving Develop solutions to sales companies when issues arise Promise keeping Deliver services according to the promised service levels,

particularly delivery time and availability Professional knowledge Expertise in relation to products, laundry systems technology,

and logistics arrangement Summary of Capabilities of LCL that enables the Sales Companies to be more competitive Fast delivery Provide fast and accurate delivery Information Proactive and accurate logistics information Problem solving Be a single point of contact for solutions in relation to delivery

and Finished Products / Spare Parts availability Flexibility Be flexible on delivery solutions Summary of how LCL can add value to end-customers Speed Quick delivery of Spare Parts to end-customers when machines

are down (reduce down time of end-customers’ machines) Flexibility Provide flexible delivery options

5.1.1 Value-adding process to link supply chain units Scholars suggest that a well-managed logistics function can be perceived by the customers as a value-adding process in the supply chain. LCL plays a strategic role in the supply chain mainly through the timeliness of delivery, flexibility, and problem solving capability. Superior logistics services also involve keeping high standards of service. However, some of the respondents from the Sales Companies reflected that LCL only provides basic logistics support and have not reached a high service standard. All of the Sales Companies concluded that there is room for improvement in LCL’s logistics services to create more value to the Sales Companies and indirectly create value to end-customers.

The Strategic role of Logistics

Value-adding process to link

supply chain units

Efficiency, Effectiveness,

Relevancy (Differentiation)

Competitive advantage


5.1.2 Efficiency, effectiveness and relevancy/differentiation Scholars collectively suggest that logistics customer value is created through efficiency, effectiveness and relevancy/differentiation. The value customers receive from logistics activities also serves as an indicator of logistics performance which can be reflected in the gap analysis.

In the logistics context, efficiency means minimizing the ratio of resources (such as costs and manpower) utilized against derived results; effectiveness means accomplishing pre-determined objectives; and differentiation means gaining superiority when compared to competitors such as offering customized value-added services to cater to changing customers’ needs which also means relevancy. In the empirical findings, a discrepancy existed between the ratings of LCL and the Sales Companies on efficiency, effectiveness and differentiation/relevancy. LCL perceived that they performed at a higher level of efficiency, effectiveness and differentiation/relevancy than perceived by the Sales Companies. Respondents generally agreed that LCL linked sales and production as well as provided machines and spare parts efficiently but they reflected varied opinions on low cost distribution, carrier options and efficiency of order handling. Effectiveness of LCL’s transportation options and maintenance of stock levels was rated diversely by the Sales Companies reflecting positive and negative experiences. However, on the whole, most respondents agreed that LCL reviewed and improved their order handling process, delivery options, and stock levels irregularly. In conclusion, there is room for LCL to improve their efficiency, effectiveness, and differentiation/relevancy of their logistics services. 5.1.3 Competitive advantages Logistics service value focuses on the relationship of logistics service to customer service, capabilities and competitive advantage of an organization (Yazdanparast, Manuj and Swartz 2010). An inimitable competitive advantage can be sustainable as long as competitors cannot offer similar services. Through the provision of superior logistics services, LCL can create customer value which will lead to competitive advantages. Therefore, for LCL to gain a competitive advantage, the performance of logistics activities that LCL offers should be perceived as differentially superior to competitors in the same market segment (Figure 29). However, due to the fact that LCL serves only internal customers i.e. the Sales Companies, generating competitive advantage for the sales companies has not been an objective of LCL. According to Langley and Holcomb (1992), logistics service is an important element of customer service which helps the customer to maintain its current competitive position in the marketplace. This means that if the Sales Companies have to gain competitive advantage to compete in the professional laundry systems segment, LCL needs to play an indispensible role in providing superior logistics services that can allow the Sales Companies to be more competitive in their corresponding markets, which translates to helping them sell more or serve the end customers better. However, LCL failed to achieve this so far.


Therefore competitive advantages could not be generated for the Sales Companies. Figure 29 The Strategic Role of Logistics in an Organization

In the case of LCL, it plays a strategic role as a value-adding process to link production and sales through order to delivery and distribution. Due to the fact that LCL could not offer superior logistics services to the Sales Companies with high efficiency, effectiveness and differentiation/relevancy, customer value generated was relatively low which meant that competitive advantage for the Sales Companies was unable to be achieved.

5.2 Customer Accommodation Logistics contributes to an organization’s success by accommodating customers’ delivery and inventory availability expectations and requirements and the focus is on creating or adding value for the customer. The starting point is the basic level of customer service, progressing to customer satisfaction and ultimately, customer success. 5.2.1 Customer Service The focus of basic customer service levels is typically on operational aspects of logistics where the organization strives to provide the seven rights to its customers, which are the right amount, the right product, at the right time, at the right place, in the right condition, at the right price, with the right information (Bowersox, Closs and Cooper 2010). From the empirical findings, we have seen that the operational aspects of logistics were provided to customers at a high satisfaction level (ratings ranged from 82.4% to 94.4%). (refer to Appendix D2) Customer service at the basic level balances availability, operational performance and reliability for all customers. LCL has generally satisfied the basic elements of customer service to a good level except for ‘Availability’ (62.9% to 78.9%). For this element, stock availability and service level issues seem to be at the crux of the dissatisfaction of the services as experienced by the Sales Companies. Another area of concern relates to ‘Operational Performance’, in particular ‘flexibility’ (overall

Logistics (Value-adding process

linking supply chain units)

Superior logistics services

Efficiency, effectiveness,

differentiation / relevancy

Customer valueCompetitive advantageBusiness growth

Supply Chain


67.5%). Of the three basic elements of customer service, ‘Service Reliability’ scored the highest at 93.8%. (refer to Appendix D2) While there appears to be room for improvements in the basic requirements of customer service, it is apparent that LCL is attempting to attain the next level of customer accommodation, customer satisfaction. This is seen in its attempts to extend the focus from internal operational aspects to incorporate the customers’ expectations and its efforts in organizing visits and meetings with the Sales Companies to understand the local market, discuss issues, problems and customer needs. 5.2.2 Customer Satisfaction In the second level of customer accommodation, the focus shifts from measures of internal operational performance to external measures. A gap analysis is used to capture and analyze the perceptions and expectations of the customers to ascertain their satisfaction levels.

5.2.2.1 Gap Analysis - Summary

Figure 30 The internal logistics service gap model for LCL and the Sales Companies (Kong and Choe, 2011)


performance gap from the customers’ perspective

=-1.31 (Finished) =-1.06 (Spares)


=-0.28 (Finished) =-0.72 (Finished) =-0.06 (Spares) =-0.60 (Spares) performance gap from

the service provider’s perspective =-0.31 (Finished) =-0.39 (Spares)







Are the Sales Companies satisfied? Since the customer’s expectations of LCL’s performance were not met on the whole, this indicates that they are not satisfied. The size of the gap was -1.31 for Finished Products and -1.06 for Spare Parts respectively. Measured across a scale of 1-7, this represents a small gap, indicating that the level of dissatisfaction is small. The smaller this gap, the more satisfied the customers are and conversely, the larger the gap, the more dissatisfied they are. This means that the satisfaction level for Spare Parts was slightly higher than for Finished Products on the whole. Comparing the Sales Companies, the UK was most dissatisfied when it comes to Finished Products, while Norway was least dissatisfied. For Spare Parts, France had the highest dissatisfaction while the UK was the least dissatisfied. Despite their dissatisfaction, the Sales Companies on the whole have expressed that they would not choose another service provider even if they were given a choice, recognizing the commitment by LCL in providing logistics services. Some areas where the Sales Companies have suggested may improve their satisfactions levels include making the online tools more customer-friendly, improving the stock lead times and availability, informing the sales companies about delays or problems as soon as they happen to avoid them only eventually finding out from the end customers. Other examples include adding translations in other languages other than Swedish or English on product manuals for markets where other languages are more widely spoken and improving the appearance of the vehicles used by the sub-contractors. Generally, expectations are increasing but the sales companies were mostly neutral when asked if these were communicated frequently. Most of the respondents said that where there are increasing expectations, these are communicated via telephone, emails or during the annual meetings. Some respondents recommended that a formal structured feedback be implemented to channel increasing expectations periodically. A few suggested that a questionnaire such as this could be used in the future. (refer to Appendix D14) The limitations of customer satisfaction highlights that customers’ expectations may not be their real requirements. In the case of the Sales Companies, they have expressed on a scale of 7 that on an average 6 point that their expectations are the same as their requirements. (refer to Appendix D14) Another limitation highlighted is that satisfaction lies in the expectations and perceptions of individual customers and not all customers are equal implying that what satisfies one customer may not satisfy others and it is thus important to shift the focus from customers’ expectations to their real, individual requirements. In this case, the Sales Companies were neutral when asked if LCL assesses their requirements. (refer to Appendix D14) 5.2.3 Customer Success The third level of customer accommodation, the customer success platform, is built on customer needs and requirements where an intimate knowledge of customers’ needs and their operational requirements and a commitment by the service provider to enhance their customer’s ability to compete more successfully in the marketplace is needed.


The results of our questionnaire show that on average, LCL feel that they have an awareness of and satisfy these country specific requirements (refer to Appendix D14). For example, they are aware that Sweden and the UK require tail-lift trucks (specially equipped trucks) for deliveries. They are also aware that there are market requirements in France, the UK and in Germany for deliveries at a specific time of the day (day after the sale) which is used as a selling point by competitors since the economic crisis in 2008-2009. ‘Before 10am deliveries’ means that there is a small delivery window within which the deliveries must be made. However, as the warehouse is now in Sweden, the implementation of such a service requires a reorganization of the whole supply chain and involves different costs. The Sales Companies were generally neutral about LCL’s awareness about country specific requirements. They were also neutral on the whole when asked if LCL understands their customers (end customers’) requirements and processes. This means that they neither agree nor disagree on the whole. For both the above, Norway was the only exception as they agreed on a 6 out of 7 point scale that LCL is aware of the country-specific requirements and also understands the end customers’ requirements and processes. Norway cited a country based requirement where 90% of the old buildings in Norway require 230Watts powered machines rather than 400Watts as used in other countries and LCL rebuilds the machines accordingly. UK has special amendments on the global price list to suit the local market. (refer to Appendix D14 & D17) Achieving customer success may be possible through the provision of value-added services. On this note, LCL feels that they have provided value-added services in the area of Transport or Distribution. For example, LCL introduced a ‘control tower’ function where there is a designated, proactive single point of contact at the freight forwarders’ headquarter who monitors all of ELS’ shipments. This initiative was rolled out three years ago for selected markets and has apparently shown positive improvements when it came to on-time delivery performance and in terms of transport damages. To support this claim, transport damages for the UK has reduced from 8% in 2009 to 0.3% presently. (refer to Appendix D14 & D17) From the perspective of the Sales Companies on the whole, however, they have a neutral view about whether value-added services are provided by LCL. Norway and UK, on the other hand, agree that LCL provides value-added services. They also agree that the value-added services are relevant and provide them with competitive advantages and are a means to enhance efficiency, effectiveness and relevancy. (refer to Appendix D14 & D17) Norway gave examples of how LCL went out of their way 2 years ago to expedite an urgent delivery by sending the machine in a cab to catch an air freight shipment from Sweden to Germany to fulfill a 24hour delivery requirement for a customer that normally would utilize sea freight services. The UK also noted that LCL is developing e-tools, an online ordering system and price analysis, some of which have already been implemented since 1 Jan 2011. Another example cited by the British Sales Company is that when orders placed by UK to Sweden are not available in Sweden, LCL now automatically places those orders with the warehouse in Troyes, France for items and these are then shipped directly from France to the UK. They also commented that the value-added services were


done well and that such efforts result in high value generated for the customer. However, there is always room for improvements in general. 5.2.4 Summary on Customer Accommodation The responses show that LCL has been successful at accommodating their internal customers at the basic level of customer service and has been focused on achieving customer satisfaction. The results of the gap analysis reveal that while perception ratings of the level of service provided by LCL to the Sales Companies are high, these perceptions still fall below the expectations. By definition, this means customers are dissatisfied. However, the gaps are observed to be small and this means that the attainment of customer satisfaction is within close reach. Figure 31 LCL’s level of Customer Accommodation (modified from Ellinger et al, 1997) (Kong

& Choe, 2011)

Some initiatives are observed to be taken by LCL that imply an inclination towards customer success. For example, efforts are being made in developing a greater understanding of customers’ particular and specific requirements and the development and provision of value-added services. However, despite the awareness of the importance of an internal customer orientation, there is a general lack of focus on the end-customers in the operational divisions in ELS, and this includes LCL as a division. There is also a general perception that the responsibility of understanding the end customers is the role of the Sales Companies. This implies that LCL has not reached the level of customer success as a key element of customer success lies in understanding the customers’ customers (end customers) requirement and processes. This is to allow customers to in turn, provide a better product/service mix and compete successfully in the marketplace.

5.3 Value Creation Evidence from the previous analysis shows that logistics plays a vital role for an organization to gain competitive advantages and that winning organizations should aim at achieving customer success through superior logistics services. Thus it is essential for an organization to accommodate customers by creating value for them.

CUSTOMER SERVICE

CUSTOMER SATISFACTION

CUSTOMER SUCCESS

internal orientation

internal & external orientation

* internal , external & partnership orientation* customer expectations & requirements

Fini

shed

Goo

ds

Spar

e Pa

rts


Value Creation

Co-creation of value

Customer integration

Logistics capabilities

In the competitive business world, logistics service providers offering fixed sets of services along the value chain would simply not be competitive in the marketplace. According to Normann and Ramirez (2000), the focus of logistics functions should be on: “the value-creating system within which different economic actors (e.g. suppliers, customers, employees, business partners, etc.) work together to co-create value” Therefore, it is crucial to find out how value can be co-created. Evidence from the case company LCL will be used to explain the process of value co-creation.

Figure 32 The Value Creation Model (Kong and Choe, 2011)

Value Proposition Bowersox, Closs and Cooper (2010) define that customers have at least three perspectives of value – economic value, market value, and relevancy value.

Figure 33 Value Proposition (Bowersox, Closs and Cooper, 2010)

In the context of logistics, economic value means logistics efficiency. That means customers prefer high quality logistics services at a low price. From the empirical findings, LCL performed relatively well at linking production and sales, handling orders as well as providing finished products and spare parts efficiently. Achieving such efficiency may result in less human resources or man hours required to process the orders which brings economic value to the customers (Sales Companies). However, according to the responses of the Sales Companies, LCL could not quite achieve efficiency on low priced distribution and freight forwarder options as all the Sales Companies were compelled to enter into a service agreement with Bring Logistics, a designated freight forwarder selected by LCL. This is probably not the most economical choice for some of the markets. Market value is about presenting an attractive assortment of products at the right time and place to realize effectiveness which focuses on achieving economy of scope in product/service presentation. In the logistics context, market value means convenient service assortment and choice. Typical examples are the choice of freight forwarders and stock availability for the customers. Bring Logistics

Economic Value

Efficiency

Market Value

Effectiveness

Relevancy Value

Customized Service


is currently the only freight forwarder engaged by LCL to handle the distribution to the Sales Companies. Comments from some of the respondents reflected that they may choose another freight forwarder if they have other options. For availability of stock, Spare Parts performed better than Finished Products. In conclusion, LCL achieves some market value to customers by keeping adequate stock levels. Relevancy involves the customization of value-adding services that make a significant difference to customers. In the logistics context, relevancy is a unique product/service bundle customized for different customers. For example, the Sales Company in Norway mentioned in the interview that they received a special delivery arrangement for an urgent order which was much faster than the standard service level. However, as reflected by the other Sales Companies, LCL rarely offers customized logistics services to them apart from the standardized services provided. In conclusion, LCL offers weak relevancy value to the customers in general. Creating Customer Value through Supply Chain Management The linkage between logistics functions and customer value lies in the objective of supply chain management which is the synchronization of all supply chain activities to create customer value (Langley and Holcomb, 1992).

In the context of LCL, understanding customers' values and requirements is essential (Ellram and Cooper 1990; Tyndall et al. 1998). Supply chain units such as LCL needs to have a customer orientation which provides the basis for logistics services with a customer focus. This is even more so since they are a logistics hub. It is insufficient that only LCL accommodates customers. All related units in the supply chain such as production, procurement and after-sales service functions should also be customer-focused to co-create customer value. For LCL, which only serves internal customers, their customer orientation should extend beyond the Sales Companies, to the end-customers. The Sales Company in the UK urged LCL to proactively engage in dialogue with the end-customers in order to understand the concurrent needs and requirements of their customers. Although LCL is not supposed to extend their interface to end customers according to their service scope, they can indirectly understand the local markets and the end-customers’ needs & requirements through the local Sales Companies. Regular meetings to discuss this may be helpful. Summary of opinions for Value Creation In table 12, the opinions on value creation by LCL have been summarized. Elements for value creation are listed according to the flow of the theoretical framework in previous chapters.


Table 12 Summary of opinions on Value Creation by LCL

5.3.1 Co-creation of Value

Co-creating value from a Service-Dominant Perspective According to S-D logic (Vargo and Lusch, 2008), value is defined and co-created by customers rather than being embedded in the output. S-D logic perspective suggests that:

“customers and providers co-create value” Based on the S-D logic, it is suggested that value creation in the provision of logistics service is an interactive process and the organization and its customers exist in a relational context (Vargo and Lusch, 2008). This implies that logistics service providers have to maintain a 2-way relationship with the customers to generate value. Under the perspective of S-D logic, logistics involves frequent modification of offerings in order to create value for the customers. It is vital to examine the customer’s understanding of service value.

Co-creation of value1 LCL has on-going meetings with the sales companies to discuss on

distribution arrangement


3 LCL discusses with the sales companies on appropriate stock levels 4 LCL actively modifies transportation options offered to the sales

companies

5 LCL actively enhances the order handling processes

6 LCL actively meets with sales companies to understand their needs and requirements

Customer integration7 There is sharing of ideas, information and other resources between LCL

and the sales companies



Logistics capabilities10 LCL develops customer-specific programs to cater to difference in

customer demands


12 LCL is good at handling unique or unplanned customer requirements

13 LCL has the flexibility to adapt to unexpected operational circumstances agree disagree neutral

LCL

Sale

s Com

pani

es

UK

Fran

ce

Ger

man

y

Nor

way


Thus, service providers have to build close relationships with customers. Therefore, LCL can co-create value by establishing a close and mutually interactive relationship with the Sales Companies. Figure 34 Logistics service value co-creation process with 3 phases and 12

propositions (Vargo and Lusch, 2008)

Learning Phase In the learning phase, the logistics service provider focuses on the relationship design with the customers through mutual learning to understand each other. Learning enables logistics capabilities such as collaboration, agility, flexibility and innovation that are crucial for co-creating value. To engage customers in co-creation, the logistics service provider must plan and implement relationship experiences for customers that encourage active engagement of customers in designing logistics services. Thus, according to the first 3 propositions in the learning phase, the relationship design should reflect a high level of resource and time commitment and extensive dialogue and interaction between the service provider and customer. From the empirical findings, it is apparent that LCL has not contributed adequate effort in developing an interactive and collaborative relationship design with the customers (both internal and external customers). LCL lacks in the area of learning or understanding the Sales Companies in terms of delivery and distribution concerns, order handling, stock level requirements and customers’ needs and requirements. No established mechanism has been developed for LCL and the Sales Companies to learn and understand from each other, apart from the occasional market visits by the LCL senior executives and the telephone communication between relevant personnel of LCL and the Sales Companies when cumulative issues happen. Consequently, inactive engagement of customers in designing logistics services by LCL led to low level of resource and time commitment as well as a lack of dialogue and interaction between LCL and the Sales Companies.

Learning phase

P1, P2, P3

Outcome phase

Factors affecting relationship

design

Relationship design

Customer / Provider benefits Characteristics of

service provided

P12

Innovation & execution phase

Design of value creating solution

Implementation of value creating

solution

P6, P7

P4, P5

P8, P9P10, P11


Innovation and execution phase In this phase, the logistics service provider utilizes the knowledge acquired in the previous learning phase to design and implement customized and innovative solutions that lead to value-creating service offerings for the customer. According to propositions 4 to 7 in the value co-creation process, the learning phase will lead to the innovation phase which requires knowledge gained through joint learning and the clarification of mutual expectations to generate asset specificities of the value creating activities. This leads to the higher quality of solutions implemented or service delivered. Also, the higher availability of relevant operational resources will lead to higher implementation quality or better service that matches customer requirements. In the case of LCL, there has not been significant learning gained through joint learning nor the clarification of mutual expectations. There is a low level of asset specificity and investment of operand and operant resources which results in relatively low implementation quality. This leads to the fact that services offered by LCL may not always match customers’ requirements or needs. Outcomes phase The learning and innovation achieved influences the performance of the service provider and also impact on the customer in terms of service quality, efficiency, effectiveness, and relevancy. In the outcomes phase, superior performance leads to competitive advantage and customer satisfaction which will motivate the service provider and customers to continue the relationship experience with the aim of achieving even more superior outcomes. It is not just the strategy but the execution of strategy and resulting innovation that leads to successful outcomes for an organization. According to the value co-creation propositions 8-12, the innovation phase leads to the outcomes phase when the co-created service offerings generate efficiency, effectiveness, and relevancy for both the logistics service provider and the customer. This will then lead to competitive advantages, higher customer satisfaction and the pursuit of additional learning opportunities to maintain the value co-creation process. Ultimately, the benefits will increase the motivation for continuing the win-win relationship as an on-going process. As a result of the failure of LCL to achieve superior performance through the learning and innovation process, it did not lead to the outcomes of efficiency, effectiveness and relevancy gained for LCL and the Sales Companies. This also means that competitive advantages could not be gained. Even if there is low customer satisfaction, the less desirable relationship would still be on-going regardless of whether the motivation to continue the relationship exists. This is because of the fact that the Sales Companies are the internal customers of LCL and there is no option for them to choose another logistics service provider. Thus, regardless of the quality of the logistics service performed by LCL, the Sales Companies (internal customers) will still be able to continue the relationship as an on-going process. As a result, we can conclude that the SD logic perspective cannot truly justify the value co-creation process for a service provider which only serves internal customers.


5.3.2 Customer integration and logistics capabilities According to Bowersox, Closs, and Stank (1999) customer-focused capabilities in the logistics context is “customer integration”. Customer integration enables organizations to build lasting distinctiveness and competitive advantage with customers of choice. An assessment of an organization’s own strengths and weaknesses in service capability relative to the needs and desires of top customers is the starting point of customer integration. Based on their capabilities, the organization is able to design suitable service offerings to different customers according to their varied needs and requirements. Thus, knowing the customers well is the key to providing unique and adaptive service offerings. Also important is the flexibly to deploy resources toward customer-valued activities that competitors cannot effectively match. The empirical findings show that LCL does not have enough knowledge about what different customers want. Therefore they could not develop suitable service offerings to different customers. Instead, LCL only offers traditionally offered standard logistics services across the board. In sum, LCL could not achieve customer integration. Customer integration involves "identifying the long-term requirements, expectations, and preferences of current and/or potential customers and markets and focusing on creating customer value". The following section assesses the four logistics capabilities of LCL within the concept of customer integration (See Figure 35 below). Figure 35 Logistics capabilities within the concept of Customer Integration (Bowersox, Closs, and Stank (1999)

Segmental Focus Capability Customer segmental focus capability enables logistics service providers to focus resources on meeting or exceeding the expectations of core customers by offering unique value-added services customized for the customers. LCL has apparently not shown such capabilities as they have been treating all the Sales Companies equally with a single set of standard service offerings. LCL also has not segmented the sales companies based on sales turnover nor relative importance of the markets. In sum, no customer segmentation has been developed as yet and LCL has been unable to allocate a suitable level of resources aimed at satisfying different core customers’ needs.

Segmental Focus Flexibility

Responsiveness Relevancy

Logistics Capabilities


Flexibility Flexibility is a capability to adapt to unexpected operational circumstances. LCL’s employees believe that they offer some flexibility to the customers. However, the Sales Companies perceive that LCL has not quite achieved the flexibility that the markets require. Therefore, LCL does not have the capability to adapt to unexpected operational circumstances such as demands on urgent deliveries required faster than the usual standard delivery time. Responsiveness Responsiveness is a capability to accommodate customers' unique and unplanned requirements. Similar to flexibility, LCL has not been achieving the level of responsiveness as demanded by the Sales Companies. Relevancy Relevancy is a capability of not only satisfying customers’ existing needs, but of also being prepared to satisfy customers’ emerging needs. The emerging needs of the Sales Companies can be addressed through actively reviewing and improving the order handling process, stock level and distribution solutions. Relevancy was the only capability that LCL could achieve and perform relatively well. The Sales Companies, particularly the UK and Norway, reflected that LCL made efforts to review and improve the order handling and the availability of stocks for both finished products and spare parts. The customers could also perceive positive changes in the distribution and delivery solutions.

In a nutshell, customer-focused capabilities are significantly related to organizational performance. Consistent success depends on an organization’s ability to create value for customers. Customer integration requires dramatically new ways of thinking and acting on the part of the management and the employees. Therefore LCL has to reform their standardized and routine operations to enable customer integration to succeed and win value from the Sales Companies.

5.3.2 Summary on Value Creation

Co-creation of value Although respondents from LCL perceived that they can create customer value through on-going meetings and actively modifying processes and routines, the Sales Companies did not think the same. Both France and Germany were very negative about LCL co-creating value. But respondents in the UK fully agreed that LCL co-created value with them somehow. Such diverse responses seemed to be based on previous relationship experiences between LCL and the Sales Companies, where it was good for the UK and bad for France and Germany. There has been minimal interaction between LCL and France and Germany respectively, which restricted their mutual learning and understanding, leading to the hindrance of the value co-creation process. However, respondents from the UK revealed in the interviews that they interacted a lot with LCL, particularly when issues accumulated. They did have some positive experiences where LCL solved their problems. They also commented that some employees in LCL tend to be very helpful. In summary, LCL has generally been unable to co-create value with the Sales Companies.


Customer integration The empirical findings show that LCL had not integrated with the Sales Companies very well because there is a lack of sharing of ideas, information or resources and they seldom jointly plan to anticipate and resolve operative problems. However, 3 out of 4 countries reflected that they have established teamwork with LCL which shows that LCL has the motivation to be more customer integrated.

Logistics Capabilities The empirical findings show diverse opinions on LCL’s logistics capabilities. Apart from the UK being neutral, the Norwegian respondents agreed that LCL has logistics capabilities. It was the opposite for the French and German respondents who mainly disagree with this view. This can be explained by the previous positive or negative experiences with LCL on customized and modified services, handling of unplanned and unique requirements, and the flexibility for adaptation to unexpected operational circumstances. In conclusion, LCL could not achieve value creation for internal customers through value co-creation, customer integration and logistics capabilities.

Concluding results for value creation by internal logistics providers The above analysis was based on the comparison of empirical findings and theories we have mentioned in the previous chapter. Below is a summary listing the capabilities and activities derived from the analysis that may apply to internal logistics service providers to create customer value. Table 13 List of capabilities and practices that may enable internal logistics service providers to create customer value for internal customers:

Logistics Capabilities Description Customer segmental focus Offer unique value-added services customized for the

customers Flexibility Adapt to unexpected operational circumstances Responsiveness Accommodate internal customers’ unique and unplanned

requirements Relevancy Prepared to satisfy customers’ emerging needs Speed and timeliness Fast delivery, prompt reply on delays, etc Problem solving Solve logistics problems for customers Reliability Deliver as promised Availability Keep stocks available when needed Information and communication Interaction between provider and customer Assurance Provide confidence and security to customers Professional knowledge Answer product and logistics related questions Empathy Attentive to and care for the customers Low price but high quality services Economic customer value Convenient service assortment More choices for customers Unique service bundle Customized for different customers Competitive advantage enabling Help customers to sell more and better compete in the


marketplace Review and improve processes and routines constantly

Gain internal efficiency

Mutual learning Mutual understanding of each other’s needs and requirements

Collaboration Collaborate with other supply chain units Innovation Offer innovative services Customer-focused Practices

Customer success orientation Develop customer-focused culture internally High service quality Set high internal standard Understand end-customers Learn customer’s customer needs and requirements

Strategic / Structural / Organizational Practices

Move from basic low-end logistics services to high-end services

Exceed entry requirements

Well-managed supply chain units Well-coordinated supply chain units Knowledge transfer Train employees with job related knowledge


6.0 CONCLUSIONS This chapter concludes the major findings from the Empirical Study and the Analysis. The linkage between logistics and customer value is explained and the purpose of the study is addressed. The research main question and sub-questions will also be answered in this section.

6.1 The Strategic role of logistics

Sub-question 1 : “What is the strategic role of logistics in an organization?” Based on Jonsson (2008), typical logistics system comprises of 6 supply chain processes – supply, manufacturing, order to delivery, distribution, after sales, and return. Each process contains routines and activities to add value to the supply chain. However, internal logistics mainly focuses on the co-ordination among materials supply, production and distribution with the aim of creating efficiency and minimizing sub-optimization within the organization (Jonsson, 2008). This internal customer-supplier relationship can be maintained based on internal resources, internal conditions and internal goals.

According to Zhao and Wang (2010), logistics services are divided into basic low-end services and high-end services in the logistics value chain. Internal logistics usually offers only basic low-end services such as transportation, inventory and packaging, which are mostly isolated functions. However, providers offering low-end services can create customer value through high quality customer service such as product availability, fast delivery, simple ordering processes and flexibility of distribution arrangement, which can help internal customers to achieve efficiency, effectiveness, and differentiation/relevancy (Langley and Holcomb, 1992). This will lead to facilitating the internal customers to gain a competitive advantage. To answer the sub-question of this research, we can conclude that logistics plays a significant role as a value-adding process by linking supply chain units of an organization. Superior logistics services generate customer value through achieving efficiency, effectiveness and differentiation/relevancy which can bring about competitive advantages to the organization. Inimitability of logistics superiority creates sustainable competitive advantages to the organization which can be one of the key success factors for business growth.

6.2 Customer Accommodation

Sub-question 2 : “How are customers accommodated through logistics services?” There are increasing levels of sophistication and commitments to accommodate customers through customer-driven service. As organizations become more sophisticated and more adaptive at leveraging logistical abilities, they move along the continuum from the basic customer service level towards achieving customer satisfaction and eventually reaching the ultimate goal of customer success. The following logistics service gap model is a modified framework to analyze the service gap between the logistics service provider and the customer for understanding the customer’s satisfaction level toward the services received.


Figure 36 The internal logistics service gap model (Kong and Choe, 2011)

To achieve customer success, understanding customer’s needs and requirements is essential which requires intimate knowledge of their needs and operational requirements, and a commitment by the logistics service provider to enable customer to compete more successfully in the marketplace (Bowersox, Closs and Cooper, 2010). Based on the above conclusion, the following proposition has been made: If customer value is to be achieved, then customer success has to be attained. Although logistics service is viewed as a competitive differentiator (Livingstone, 1992; Stern et al., 1993), it is insufficient to merely satisfy customers as “…even highly satisfied customers can go out of business, leaving a firm with a diminished customer base” (Fawcett and Fawcett, 1995). This means that satisfied customers are not always successful. For sustained operations, it is essential to provide services at the customer success level, which allows customers to in turn, succeed in their market place. 6.3 Value Creation

Sub-question 3 : “How is value created?” In order to create value for the customers, it is essential to know what kinds of value a logistics service provider can create. Bowersox, Closs and Cooper (2010) define that customers have at least three perspective of value: economic, market and relevancy. In the context of logistics, economic value can be created through logistics efficiency such as high quality logistics service at low cost or fast delivery. Market value represents effectiveness such as availability of stock or choice of carrier that can achieve economy of product/service scope. Relevancy value involves customizing value-adding services for different customers to cater their special & unique needs.


performance gap from

the internal customers’ perspective =(2)-(1)


=(4)-(1) =(2)-(3) performance gap from

the service provider’s perspective =(3)-(4)







Value co-creation process There are 3 phases in the value co-creation process – learning, innovation and execution, and outcome phases. The learning phase involves the logistics service provider designing a relationship with the customer through mutual learning and understanding to enable logistics capabilities such as collaboration, agility, flexibility, and innovation which can lead to value co-creation. Such relationship design requires a high level of resource and time commitment and extensive dialogue and interaction between the provider and the customer to plan and implement relationship experiences for the customer.

In the innovation and execution phase, the provider utilizes the knowledge acquired in the learning phase to design and implement customized and innovative solutions that lead to value-creating service offerings to the customer. Higher availability of relevant operational resources will lead to higher implementation quality with better service that matches customer requirements.

In the outcome phase, superior performance with co-created service offerings by the provider leads to customer satisfaction which generates efficiency, effectiveness and relevancy and creates a competitive advantage for the customer. The benefits of the co-created value motivate the relationship experience to be continued as an on-going process with the aim of achieving even more superior outcomes. It is the execution of strategy and resulting innovation that leads to successful outcomes.

However, in the context of internal logistics, the above mentioned co-creation relationship between the service provider and internal customer can still be on-going regardless if the outcome of the value co-creation is positive or negative. This is due to the fact that choosing another service provider is not an option to the internal customer.

Development of logistics capabilities through customer integration According to Bowersox, Closs and Stank (1999), customer integration is a customer-focused capability which enables an organization to build lasting distinctiveness and competitive advantage with customers of choice. The logistics service provider is able to use their capabilities to design suitable service offerings to different customers according to their varied needs and requirements. Knowing the customer well is the key to providing unique and adaptive services and to also flexibly deploy resources toward customer-valued activities that competitors cannot effectively match. Customer integration involves identifying the long-term requirements, expectations and preferences of customers and markets and focusing on creating customer value. Four logistics capabilities are the driving force in achieving value creation under the concept of customer integration:

• Customer segmental focus is a capability to focus resources on meeting or exceeding the expectations of core customers by offering unique value-added services customized for the customers.

• Flexibility is a capability to adapt to unexpected operational circumstances. • Responsiveness is a capability to accommodate customers’ unique and unplanned

requirements.


• Relevancy is a capability to not just satisfy customers’ existing needs, but also to be prepared to satisfy their emerging needs.

The higher the logistics capabilities of a service provider, the more value can be created to the customer. To answer the sub-question of this research, we can conclude that in the logistics context, customer value can be created through the value co-creation between the logistics service provider and the customer. Customer value can also be created through customer integration with logistics capabilities.

6.4 Summary

Main Question: How can an organization use logistics to create customer value? In the context of logistics where supply chain units are linked, superior logistics services create customer value by generating efficiency, effectiveness and differentiation/relevancy for the customers which is a source of competitive advantage in the marketplace. To modify and enhance logistics capabilities to create customer value that can create competitive advantages, customer success strategies must be adopted so that there is an intimate knowledge of customers’ needs and their operational requirements. Therefore if customer value is to be created, customer success strategies, the process of co-creation of value in the relational context between the logistics service provider and its customers, and logistics capabilities must be developed within the concept of customer integration to build lasting distinctiveness with customers of choice through the identification of customers’ long term and ongoing requirements and expectations.


7.0 MANAGERIAL RECOMMENDATIONS The section is dedicated to the strategic recommendations for the case company in addressing the research study area of the thesis and in particular the research questions. The objective is to offer suggestions on the projection of logistics as a driver of customer value by adopting customer success strategies and subsequently the steps to achieve value is laid out.

7.1 Relationship Marketing campaigns Much attention has been focused on making relationships and partnerships the dominant model for the interface between organizations and the marketplace (Christopher et al., 1992), where the most important relationship is with the customer, and the goal is a satisfied customer and a productive, enduring relationship. While there appears to be an internal customer orientation and an awareness of the importance of internal customer service, there is a general lack of focus on the end-customers in the operational divisions in ELS. In order to create a customer-focused mindset throughout the organization, the management may wish to implement a Relationship Marketing Strategy to emphasize the importance of understanding the customers, to all levels of employees within the organization. A relationship marketing approach involves treating each customer as a unique segment to maximize customer share and emphasizes the importance of retaining as well as attracting customers with the emphasis being placed on the development of long-term relationships with existing customers. The benefits for service oriented companies may be customers spending more, lower marketing costs, free positive word-of-mouth recommendation and overall increased employee retention. (Baron and Harris, 2003). ‘Part-time marketers’ is a term coined to describe the phenomenon that a large number of activities in relationship building are carried out company-wide. Some examples are delivering, installing, updating, repairing, servicing and maintaining goods or equipment, as well as billing, complaints handling, and customer education. These activities are crucial for maintaining and enhancing relationships with customers and other partners but are not part of the marketing function. (Grönroos, 1996). Inculcating a customer-focused mindset involves continuous emphasis by the management and is developed through training and the implementation of customer focused best practices throughout the organization. One suggestion could be joint sales calls by operational personnel to allow them to meet with customers and build a direct relationship and understanding of customer needs and preferences. LCL may wish to incorporate courtesy visits to the local customers when they travel to the respective sales companies for meetings. Other suggestions would be customer appreciation events involving all employees and also other social events to bridge the gap between the customers and employees that do not have direct interface with the customers. LCL may also wish to implement incentives to this aim where all employees including the operational divisions are rewarded for measures like increased sales or high customer satisfaction levels.


7.2 Co-create value through pro-active understanding of the customers and the markets

As expressed by some of the interviewees, it is essential for LCL to learn and understand the customers (both Sales Companies and end-customers including distributors) and the markets in a pro-active manner. This can be achieved by conducting regular surveys like the one we used in this study, market visits to meet with key functional heads, key customers of the Sales Companies and possibly to visit the production plants or warehouses. Apart from the above formal tactics, LCL can consider informal ways such as organizing team building or socializing activities between the employees of LCL and the Sales Companies. Increased interaction in informal occasions can enhance the quality and depth of mutual understanding and may facilitate the future working relationship to become more positive, cooperative, smooth, open, efficient and effective.

Sentiments and opinions collected from both formal and informal occasions should be categorized and analyzed for on-going strategy planning and service improvement. The more LCL learns and understands the customers and the markets, the better LCL can equip themselves to serve the Sales Companies and also help them to sell more.

7.3 Customer Segmentation Different customers may require different approaches for customer accommodation and so customers should be segmented based on those different needs. It is essential to understand the differing requirements of different market segments as each market will attach different importance to different service elements. In our study, we have seen that LCL and the Sales Companies have a shared understanding of the order of priorities when it comes to the basic elements of customer service and also the four dimensions of service quality. However, when comparing each country’s rankings, we have identified that each market has differing priorities when it comes to even the basic elements of customer service and the basic operational aspects of logistics and deliveries. For example, ‘availability’ is the most important element of customer service for the UK, German and French Sales Companies, Norway ranked ‘service reliability’ as most important. LCL may wish to take these aspects into consideration when developing solutions for customers by segmenting them based on their needs. “Whilst it should be the objective of any logistics system to provide all customers with the level of service that has been agreed or negotiated, it must be recognized that there will inevitably need to be service priorities.” (Christopher 2005). LCL should also consider segmenting customers into differing levels of commitment and priorities according to the size of the market or by profitability. The different levels of priorities assigned to each tier will determine the level or extent of service beyond the common service offerings. Where limited costs or resources are available, priorities should be placed on the top tier customers. This segmentation will also be the criteria for the implementation of value-added services. “It is because of the multivariate nature of customer service and because of the widely differing requirements of specific markets that it is essential for any business to have a clearly identified policy towards customer service” (Christopher, 2005)


7.4 Develop Logistics Capabilities As reflected in the empirical findings, LCL has not yet developed logistics capabilities that enable them to become more efficient, effective and relevant to the customers. Apart from the above suggestions on customer segmentation, logistics capabilities can be developed through providing flexibility to the customers by adapting to unexpected operational circumstances. For instance, making special arrangements for urgent deliveries, or implementing flexible extended working hours at LCL to cater to the customers in different time zones and with irregular working hours. Responsiveness is a logistics capability that accommodates customers’ unique and unplanned requirements. To develop this, LCL may consider engaging one or two dedicated managers to deal with special and unplanned needs such as helping the Sales Companies to actively follow-up with the production planners to speed up the availability of delayed items. Ownership is the key. If a designated person owns a problem, he/she is responsible for developing a solution in the best possible way from the routine and the system. To gain the relevancy capability, learning and anticipating customers’ needs is the key. Emerging needs of customers can be addressed through actively reviewing and improving the processes and procedures in LCL. Understanding the interactions between the Sales Companies and LCL can be achieved by setting up regular or ad hoc meetings to mutually discuss future needs and requirements. For example, the Sales Companies may alert LCL that there will be regulatory changes on logistics in their markets or LCL may announce to the Sales Companies on the upcoming integration with the Food Services Division. Well planned company strategies and objectives should be communicated in a structured manner, such as via short videos, emails, internal workshops, company newsletters and the like.

7.5 Performance Management Performance management includes activities that ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, an employee or even the processes to build a product or service. Developing a realistic performance management system for LCL can facilitate the effective delivery of strategic and operational goals. It can motivate employees, identify training needs, and improve management control.

7.6 Performance Measurement Performance measurement is critical to the success of almost any organization because it creates understanding, moulds behaviour and leads to competitive results. World-class performance requires superior process measurement both within the firm and across organizational boundaries (Fawcett and Cooper, 1998). LCL should decide on the particular area(s) that it seeks to measure, after which it should establish clear measurement criteria to be measured at pre-determined intervals. This should then be analyzed for continuous improvements. Alternatively, we propose that the questionnaire prepared for the purpose of this research be employed for the periodical assessment of the customers’ sentiments with the objective of narrowing the gaps between their perceptions and expectations.


7.7 Integrative Management Integrative management is not a new concept. However, it has been gaining a lot of attention across all aspects of business operations in the past decade. The essence of integrated management is to focus on process or aggregate achievement instead of merely optimizing functional achievement. According to Enarsson (2006),

“integration in supply chain means that the different actors work together towards the market; it does not mean changing partners, but that they shall instead create development within a common system. This means that there is no competition, because close integration implies that new companies cannot join existing chains.”

Since the industrial revolution, attaining best practice has focused managerial attention on functional specialization which is the case of LCL now. They have traditionally been structured into departments to facilitate work focus, routinization, specialization, standardization, and control. Bowersox, Closs, and Cooper (2010) argue that integrative process management seeks to identify and achieve lowest total cost or highest effective processes by capturing trade-offs that exist between functions. Integrated management is particularly practical for logistics and supply chain management. Its main focus is lowest total process cost or best aggregate outcome, but not merely departmental or functional individual performance. Thus, LCL may consider planning for the future strategies based on a holistic perspective of maximizing customer value or service quality together as a team to achieve the most efficiency, effectiveness and relevancy/differentiation. Strategic direction on achieving common measurable goals and performance targets should be set and communicated to all employees regularly. Cross-functional interactions could be increased to ensure mutual understanding and better cooperation.

7.8 Training & workshops To kick-start the value co-creation process, mutual learning between LCL and the Sales Companies through training and workshops is recommended. Responses from most interviewees revealed that there has been little or no training sessions arranged during the course of their service in Electrolux. It will be beneficial for LCL to organize trainings for selected relevant employees of LCL and the Sales Companies in relation to products and spare parts, logistics and order handling processes, sales information and techniques and as we have mentioned earlier, customer-orientation. As reflected by some of the interviewees, professional laundry knowledge of LCL is a great value added to the Sales Company. Such knowledge should be codified into training manuals and transferred to the Sales Companies through systematic training to relevant staff. Nowadays, best-practice sharing is an effective way to carry out organizational learning. Workshops can be organized for selected employees in LCL and the Sales Companies to share ideas, sales techniques, market information, product knowledge and solutions at work. This is also one of the ways to co-create value and is an essential process to gain insight on how to serve the Sales Companies better through customizing services that suits their needs and requirements that are reflected in the best-practice sharing.


8.0 FURTHER RESEARCH Throughout the research, a wide area of study has been gleaned through in the effort to develop a deep understanding of Logistics, Customer Accommodation theories and Value Creation. In the following section, we discuss several areas that has not been included in the study but might enrich the study by further research.

8.1 Correlation between customer value and organic growth While we have shown that logistics services may be strategically used to create customer value in our case company and have seen the progressive increase in sales revenues over the past five years, there has been little evidence to suggest a correlation between customer value and organic growth. Future research may be focused on studying the observable patterns of organic growth and its link to the customer value developed over a period of time.

8.2 Cross cultural influence on perceived customer satisfaction This study was carried out to capture the opinions and perceived customer satisfaction levels from a group of respondents spanning across five different countries. The comparisons made to the ratings given may be enriched by a closer examination of the cross-cultural or cross-national differences that may influence the perceptions of service quality. Hofstede’s cultural dimensions could perhaps be used as a basis to shed some light onto the impact of the differing values across cultures on service perceptions. Several other studies in Services Marketing using macro-level analyses have also highlighted the impact of culture on service quality perceptions, satisfaction and behavioural intentions. A discussion of the impact of this has not been included in our research but may perhaps complement future research to further enrich our analysis. 8.3 The relationship design for internal logistics According to Yazdanparast, Manuj and Swartz (2010), the first phase of value co-creation process is learning phase which involves the relationship design between service provider and customer. Their theory only accounts for the relationship designed between external service providers and external customers. There are no existing researches that address how internal logistics service providers can design a relationship that enables the creation or co-creation of value with their internal customers. 8.4 The impact of stock outs It is apparent from the case study that the frequent occurrence of stock outs is a cause of discontentment in the eyes of many of the internal customers. Some have claimed that there is a possibility of loss of sales due to this. However, a detailed study of the full impact of stock outs may reveal or confirm the severity of stock outs to sales opportunities in particular industries.


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Vargo, Stephen L. and Lusch, Robert F. (2004a) ‘Evolving to a New Dominant Logic for Marketing’, Journal of Marketing 68 (January): 1 – 17.

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10.0 APPENDICES

Appendix A : Questionnaire for Logistics Center Ljungby (LCL) The Strategic Role of Logistics Services Please indicate your level of agreement to the following statements (0=Do not know, 1=Strongly disagree, 4=Neutral, 7=Strongly agree)

1 LCL plays a strategic role for the sales companies 0 1 2 3 4 5 6 7 2 LCL adds value to the sales companies 0 1 2 3 4 5 6 7

2.1 What kinds of value does LCL add to the sales companies? 3 LCL enables the sales companies to be more competitive in

the marketplace 0 1 2 3 4 5 6 7

3.1 How does LCL enable the sales companies to be more competitive? (What are the capabilities of LCL that makes the sales companies competitive?)


0 1 2 3 4 5 6 7

4.1 How does LCL assist the sales companies to generate end-customer value?

Efficiency

5 LCL offers low priced distribution to the end-customers 0 1 2 3 4 5 6 7 6 LCL offers adequate options of freight forwarder 0 1 2 3 4 5 6 7 7 LCL links production and sales functions efficiently 0 1 2 3 4 5 6 7 8 LCL handles orders efficiently 0 1 2 3 4 5 6 7 9 LCL provides spare parts efficiently 0 1 2 3 4 5 6 7

10 LCL provides finished products efficiently 0 1 2 3 4 5 6 7 Effectiveness

11 LCL offers the most suitable transportation options for the sales companies 0 1 2 3 4 5 6 7

12 LCL maintains an adequate stock level for finished products 0 1 2 3 4 5 6 7 13 LCL maintains an adequate stock level for spare parts 0 1 2 3 4 5 6 7 14 LCL enables the sales companies to sell more 0 1 2 3 4 5 6 7

Differentiation / Relevancy 15 LCL improves the order handling process to make it easier

for the sales companies and end-customers 0 1 2 3 4 5 6 7

16 LCL actively reviews the stock level of spare parts to ensure the availability to end-customers 0 1 2 3 4 5 6 7

17 LCL actively reviews the stock level of finished products to ensure the availability to the sales companies 0 1 2 3 4 5 6 7

18 LCL actively improves the distribution solutions to the sales companies and end-customers 0 1 2 3 4 5 6 7

19 LCL adopts unique and distinctive ordering process 0 1 2 3 4 5 6 7 Customer Accommodation Please indicate your level of agreement (0=Do not know, 1=Strongly disagree, 4=Neutral, 7=Strongly agree or percentage (%) where indicated) with regards to the following statements and also rank the relative importance (1=highest position) where relevant




To elaborate if relevant 24. Are there any other factors that would affect the level of satisfaction? 25. If prefer to choose another service providers (if responded ‘agree’ to question 11)

Please elaborate / motivate the above response 26. If expectations are increasing? (if responded ‘agree’ to question 12)

How frequent is this happening? How is the information on the changes in expectations channeled? Do you have recommendations on how this should be channeled?

27. If expectations do not match with actual requirements (if responded ‘disagree’ to question 14) Have the expectations been raised or lowered? Has it been adjusted due to your needs, service provider’s reputation, word of mouth etc? Kindly state the reasons for this.

28. If there are requirements which are country / branch specific (if responded ‘agree’ to question 16) Can you describe these?

29. If there are Value added services (if responded ‘agree’ to question 19) Can you provide some examples of these? How do you rate the performance of those value added services? If not, do you think LCL should be providing value added services to you and why? Please describe the specific value added service(s) that you think should be provided?

Value Creation Please indicate your level of agreement to the following statements (0=Do not know, 1=Strongly disagree, 4=Neutral, 7=Strongly agree)

Co-creation of value 1 LCL has on-going meetings with the sales companies to

discuss on distribution arrangement 0 1 2 3 4 5 6 7

2 LCL has on-going meetings with the sales companies to fine tune the order handling process 0 1 2 3 4 5 6 7

3 LCL discusses with the sales companies on appropriate stock levels 0 1 2 3 4 5 6 7

4 LCL actively modifies transportation options offered to the sales companies 0 1 2 3 4 5 6 7

5 LCL actively enhances the order handling processes 0 1 2 3 4 5 6 7


6 LCL actively meets with sales companies to understand their needs and requirements 0 1 2 3 4 5 6 7

Customer integration 7 There is sharing of ideas, information and other resources

between LCL and the sales companies 0 1 2 3 4 5 6 7

8 There is joint planning to anticipate and resolve operational problems between LCL and the sales companies 0 1 2 3 4 5 6 7

9 There is already established teamwork between LCL and the sales companies 0 1 2 3 4 5 6 7

Logistics capabilities 10 LCL develops customer-specific programs to cater to

difference in customer demands 0 1 2 3 4 5 6 7

11 LCL maintains and modifies its operations based on the changing expectations of customers 0 1 2 3 4 5 6 7

12 LCL is good at handling unique or unplanned customer requirements 0 1 2 3 4 5 6 7

13 LCL has the flexibility to adapt to unexpected operational circumstances 0 1 2 3 4 5 6 7

Background Information of the LCL (these additional questions were only applicable to the Management representative)

1. What is the strategic role of LCL within the supply chain of Electrolux Laundry Systems? 2. To what extent has LCL fulfilled this strategic role? 3. Please give examples of what LCL has done well in the past 2 years. 4. In my opinion, the strategies should have been or should have included __________. 5. Please describe your latest departmental strategies. 6. Please provide the annual sales turnover of LCL for the past 5 financial years. 7. Please indicate the current permanent headcount of LCL.

Appendix B : Questionnaire for the Sales Companies The Strategic Role of Logistics Services Please indicate your level of agreement to the following statements (0=Do not know, 1=Strongly disagree, 4=Neutral, 7=Strongly agree)

1 LCL plays a strategic role for the sales companies 0 1 2 3 4 5 6 7 2 LCL adds value to the sales companies 0 1 2 3 4 5 6 7

2.1 What kinds of value does LCL add to the sales companies? 3 LCL enables the sales companies to be more competitive in

the marketplace 0 1 2 3 4 5 6 7

3.1 How does LCL enable the sales companies to be more competitive? (What are the capabilities of LCL that makes the sales companies competitive?)


0 1 2 3 4 5 6 7

4.1 How does LCL assist the sales companies to generate end-customer value?


Efficiency

5 LCL offers low priced distribution to the end-customers 0 1 2 3 4 5 6 7 6 LCL offers adequate options of freight forwarder 0 1 2 3 4 5 6 7 7 LCL links production and sales functions efficiently 0 1 2 3 4 5 6 7 8 LCL handles orders efficiently 0 1 2 3 4 5 6 7 9 LCL assists end-customers to obtain spare parts efficiently 0 1 2 3 4 5 6 7

10 LCL delivers finished products to end-customers efficiently 0 1 2 3 4 5 6 7 Effectiveness

11 LCL offers the most suitable transportation options for sales companies 0 1 2 3 4 5 6 7

12 LCL maintains an adequate stock level for finished products 0 1 2 3 4 5 6 7 13 LCL maintains an adequate stock level for spare parts 0 1 2 3 4 5 6 7 14 LCL enables the sales companies to sell more 0 1 2 3 4 5 6 7

Differentiation / Relevancy 15 LCL improves the order handling process to make it easier

for sales companies and end-customers 0 1 2 3 4 5 6 7

16 LCL actively review the stock level of spare parts to ensure the availability to end-customers 0 1 2 3 4 5 6 7

17 LCL actively review the stock level of finished products to ensure the availability to the sales companies 0 1 2 3 4 5 6 7

18 LCL actively improves the distribution solutions to the sales companies and end-customers 0 1 2 3 4 5 6 7

19 LCL adopts unique and distinctive ordering process 0 1 2 3 4 5 6 7 Customer Accommodation

Please indicate your level of agreement (0=Do not know, 1=Strongly disagree, 4=Neutral, 7=Strongly agree or percentage (%) where indicated) with regards to the following statements and also rank the relative importance (1=highest position) where relevant



To elaborate if relevant 24. Are there any other factors that would affect the level of satisfaction? 25. If prefer to choose another service providers (if responded ‘agree’ to question 11)

Please elaborate / motivate the above response 26. If expectations are increasing? (if responded ‘agree’ to question 12)

How frequent is this happening? How is the information on the changes in expectations channeled? Do you have recommendations on how this should be channeled?

27. If expectations do not match with actual requirements (if responded ‘disagree’ to question 14)


Have the expectations been raised or lowered? Has it been adjusted due to your needs, service provider’s reputation, word of mouth etc? Kindly state the reasons for this.

28. If there are requirements which are country / branch specific (if responded ‘agree’ to question 16) Can you describe these?

29. If there are Value added services (if responded ‘agree’ to question 19) Can you provide some examples of these? How do you rate the performance of those value added services? If not, do you think LCL should be providing value added services to you and why? Please describe the specific value added service(s) that you think should be provided?

Value Creation Please indicate your level of agreement to the following statements (0=Do not know, 1=Strongly disagree, 4=Neutral, 7=Strongly agree)

Co-creation of value 1 LCL has on-going meetings with the sales companies to

discuss on distribution arrangement 0 1 2 3 4 5 6 7

2 LCL has on-going meetings with the sales companies to fine tune the order handling process 0 1 2 3 4 5 6 7

3 LCL discusses with the sales companies on appropriate stock levels 0 1 2 3 4 5 6 7

4 LCL actively modifies transportation options offered to the sales companies 0 1 2 3 4 5 6 7

5 LCL actively enhances the order handling processes 0 1 2 3 4 5 6 7 6 LCL actively meets with sales companies to understand their

needs and requirements 0 1 2 3 4 5 6 7

Customer integration 7 There is sharing of ideas, information and other resources

between LCL and the sales companies 0 1 2 3 4 5 6 7

8 There is joint planning to anticipate and resolve operative problems between LCL and the sales companies 0 1 2 3 4 5 6 7

9 There is already established teamwork between LCL and the sales companies 0 1 2 3 4 5 6 7

Logistics capabilities 10 LCL develops customer-specific programs to cater difference

in customer demands 0 1 2 3 4 5 6 7

11 LCL maintains and modifies its operations based on the changing expectations of customers 0 1 2 3 4 5 6 7

12 LCL is good at handling unique or unplanned customer requirements 0 1 2 3 4 5 6 7

13 LCL has the flexibility for adaptation to unexpected operational circumstances 0 1 2 3 4 5 6 7

Background Information of the Sales Company (these additional questions were only applicable to the Management representative) 1. What is the strategic role of LCL within the supply chain of Electrolux Laundry Systems? 2. To what extent has LCL fulfilled this strategic role? 3. Please give examples of what LCL has done well in the past 2 years.


4. What do you think LCL should have done differently in the past 2 years? 5. Please describe your market. Is it a growth-oriented market or a product replacement

market? 6. Please provide the approximate no. of total customers and no. of key customers. 7. What is the percentage of sales turnover represented by the key customers in the last

financial year? 8. How do your end-customers make business or benefit through the Electrolux laundry

systems? 9. Can you describe the typical needs and requirements of your end-customers in terms of

quality, cost and time? 10. Please describe your latest sales strategies. 11. Please provide the annual sales turnover of this sales company for the past 5 financial years. 12. Please indicate the current permanent headcount of this sales company.

Appendix C : Empirical Data for Logistics Centre Ljungby (LCL)

Appendix C1 : The Strategic Role of Logistics Services

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

Resp

onde

nt D

Resp

onde

nt E

Resp

onde

nt F

MeanStrategic Role of Logistics Services 1 2 3 4 5 6 7

1 LCL plays a strategic role for the sales companies 5 6 6 7 6 7 6.172 LCL adds value to the sales companies 6 6 6 7 6 7 6.333 LCL enables the sales companies to be more competitive in the

marketplace5 5 6 7 6 4 5.50

4 LCL assists the sales companies to generate end-customer value 6 5 5 7 6 4 5.50

Efficiency 1 2 3 4 5 6 75 LCL offers low priced distribution to the end-customers 5 6 5 0 0 7 5.756 LCL offers adequate options of freight forwarder 6 6 5 0 0 6 5.757 LCL links production and sales functions efficiently 6 5 5 0 0 4 5.008 LCL handles orders efficiently 5 6 6 7 5 5 5.679 LCL provides spare parts efficiently 5 6 6 7 5 6 5.83

10 LCL provides finished products efficiently 5 6 6 7 5 5 5.67Effectiveness 1 2 3 4 5 6 7

11 LCL offers the most suitable transportation options for the sales 5 6 6 6 0 6 5.8012 LCL maintains an adequate stock level for finished products 6 6 4 5 5 7 5.5013 LCL maintains an adequate stock level for spare parts 6 5 4 4 5 6 5.0014 LCL enables the sales companies to sell more 6 6 6 6 5 4 5.50

Differentiation / Relevancy 1 2 3 4 5 6 715 LCL improves the order handling process to make it easier for the sales

companies and end-customers5 5 4 6 6 4 5.00


5 5 5 5 6 7 5.50


6 6 5 5 0 7 5.80


5 6 6 5 0 5 5.40

19 LCL adopts unique and distinctive ordering process 5 4 5 4 0 4 4.40

LCL

Mean

Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree)


Appendix C2 : Overall logistics deliveries (percentage ratings)

Appendix C3 : Overall logistics deliveries (ranking of importance)

Ratings of the level of agreement in percentage (%)

1.0 Overall logistics deliveries

No. Description

1.1 LCL satisfies overall logistics deliveries with the right amount 99% 80% 95% 99% 95% 99% 94.5%1.2 LCL satisfies overall logistics deliveries with the right product 99.5% 85% 100% 99% 95% 99% 96.3%1.3 LCL satisfies overall logistics deliveries at the right time 97% 85% 95% 99% 85% 85% 91.0%1.4 LCL satisfies overall logistics deliveries to the right place 97.5% 95% 95% 99% 99% 95% 96.8%1.5 LCL satisfies overall logistics deliveries in the right condition 99.6% 95% 98% 99% 95% 99% 97.6%1.6 LCL satisfies overall logistics deliveries at the right price - 100% 99% 100% 95% 85% 95.8%1.7 LCL satisfies overall logistics deliveries with the right information 99% 90% 95% 99% 90% 60% 88.8%

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Rank in order of importance (1 = highest)

1.0 Overall logistics deliveries

No. Description

1.1 LCL satisfies overall logistics deliveries with the right amount 1 4 6 1 1 2 41.2 LCL satisfies overall logistics deliveries with the right product 1 5 1 1 1 1 11.3 LCL satisfies overall logistics deliveries at the right time 1 1 4 1 1 5 31.4 LCL satisfies overall logistics deliveries to the right place 1 3 5 1 1 4 41.5 LCL satisfies overall logistics deliveries in the right condition 1 2 3 1 1 3 21.6 LCL satisfies overall logistics deliveries at the right price 7 6 7 1 1 7 71.7 LCL satisfies overall logistics deliveries with the right information 1 7 2 1 1 6 6

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Appendix C4 : Basic elements of customer service – Finished Products

Appendix C5 : Basic elements of customer service - Spare Parts


2.0 Basic elements of customer service (Availability, Operational Performance & Service Reliability)

No. Description

2.1 Stocks of Finished Products and Spare Parts are always available when needed 95% 95% - 95% 85% 80% 90.0%2.2 The correct safety stock levels of Finished Producst A/B/C or Spare Parts are held 95% 95% - 95% 85% 98% 93.6%2.3 I know what the service level is today. (service level = promised level of availability) 100% 100% - 95% - 100% 98.8%2.4 I perceive or experience that the service level is correct. (service level = promised level of availability) 100% 95% - 95% 90% 50% 86.0%

2.5 Customers are happy with the stock lead time (from Order to Pick-up availability / Despatch) 95% 80% - 90% 80% 95% 88.0%2.6 Customers expect a better stock lead time (from Order to Pick-up availability / Despatch) 95% 100% - 95% 90% 5% 77.0%2.7 Flexibility is high (ability to accommodate special situations and unusual or unexpected customer requests) 80% 75% - 90% 90% 85% 84.0%

2.8 LCL handles claims / returns very promptly 90% 70% - 80% 90% 70% 80.0%2.9 LCL informs customers of delays 80% 75% - 80% 99% 50% 76.8%

2.10 Malfunction recovery is high (ability to quickly implement contingency plans when a failure occurs in the supply chain) 95% 70% - 90% 85% 50% 78.0%

2.11 Deliveries are damage free (measures how many shipments arrive without damaged products) 99% 95% - 99% 90% 95% 95.6%2.12 Customers should receive shipments within the promised time. 98% 100% 95% 99% 90% 95% 96.2%2.13 Customers are satisfied with the responses. 95% 70% - 50% 95% 60% 74.0%2.14 Responses to customers are correct and easy to understand 97% 80% - 90% 95% 60% 84.4%2.15 Customers are satisfied with the transportation time. 96% 80% - 90% - 80% 86.5%2.16 Invoices are error-free (measures what percentage of invoices contain no errors) 99% 80% - 90% 98% 80% 89.4%2.17 Shipments alway match orders (measures how many shipments contain the exact amount of product

ordered) 99% 90% - 90% 99% 100% 95.6%

2.18 Shipments are always shipped to correct location (measures how many shipments are made to the customer’s selected location) 100% 95% 95% 90% 99% 100% 96.5%

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2.0 Basic elements of customer service (Availability, Operational Performance & Service Reliability)

No. Description

2.1 Stocks of Finished Products and Spare Parts are always available when needed 95% 95% - 85% 85% 95% 91.0%2.2 The correct safety stock levels of Finished Producst A/B/C or Spare Parts are held 97% 95% - 90% 85% 85% 90.4%2.3 I know what the service level is today. (service level = promised level of availability) 100% 100% - 80% - 100% 95.0%2.4 I perceive or experience that the service level is correct. (service level = promised level of

availability) 100% 95% - 80% 90% 50% 83.0%

2.5 Customers are happy with the stock lead time (from Order to Pick-up availability / Despatch) 95% 80% - 80% 80% 95% 86.0%2.6 Customers expect a better stock lead time (from Order to Pick-up availability / Despatch) 95% 100% - 95% 90% 5% 77.0%2.7 Flexibility is high (ability to accommodate special situations and unusual or unexpected customer

requests) 80% 75% - 90% 90% 75% 82.0%

2.8 LCL handles claims / returns very promptly 90% 70% - 80% 90% 85% 83.0%2.9 LCL informs customers of delays 80% 75% - 75% 99% 50% 75.8%

2.10 Malfunction recovery is high (ability to quickly implement contingency plans when a failure occurs in the supply chain) 95% 70% - 90% 85% 50% 78.0%

2.11 Deliveries are damage free (measures how many shipments arrive without damaged products) 100% 95% - 99% 85% 99% 95.6%2.12 Customers should receive shipments within the promised time. 95% 100% 98% 99% 90% 95% 96.2%2.13 Customers are satisfied with the responses. 95% 70% - 50% 95% 60% 74.0%2.14 Responses to customers are correct and easy to understand 97% 80% - 90% 95% 60% 84.4%2.15 Customers are satisfied with the transportation time. 100% 80% - 90% - 100% 92.5%2.16 Invoices are error-free (measures what percentage of invoices contain no errors) 99% 80% - 90% 98% 90% 91.4%2.17 Shipments alway match orders (measures how many shipments contain the exact amount of

product ordered) 100% 90% - 90% 96% 100% 95.2%

2.18 Shipments are always shipped to correct location (measures how many shipments are made to the customer’s selected location) 100% 95% 98% 90% 98% 100% 96.8%

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Appendix C6 : Basic elements of customer service (ranking of importance)

Appendix C7 : Expectations and Perceptions – Finished Products


3.0 Basic elements of customer service

No. Description

3.1 Availability : the capacity to have inventory when desired by a customer 1 1 1 1 1 1 13.2 Operational performance : deals with the time required to deliver a customer’s order 1 3 3 1 2 3 33.3 Service reliability : a firm’s ability to perform all order-related activities and provide critical info 1 2 2 1 3 2 2

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Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree) Mean Mean

4.0 Expectations & 5.0 Perceptionsa) Reliability 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7Fulfillment of promises 6 7 7 7 7 7 6.83 7 7 5 6 7 5 5 5.83 6Interest 6 7 6 7 7 7 6.67 7 7 6 6 7 7 5 6.33 6Correctness 6 7 7 7 7 6 6.67 7 6 6 6 7 6 5 6.00 6Punctuality 6 7 7 7 7 7 6.83 7 7 6 6 7 6 6 6.33 6Accuracy 6 7 7 7 7 6 6.67 7 6 6 6 7 6 6 6.17 6b) ResponsivenessTime allotment 6 7 6 7 7 6 6.50 7 7 5 5 5 5 3 5.00 5Promptness 6 7 6 7 7 7 6.67 7 6 5 5 5 7 5 5.50 6Willingness to help 7 7 7 7 7 7 7.00 7 7 7 6 7 7 7 6.83 7Freight forwarders' Willingness to help 5 7 4 7 7 5 5.83 6 5 7 4 6 7 4 5.50 6Response 5 7 5 7 7 7 6.33 6 6 6 6 5 5 6 5.67 6c) AssuranceConfidence 6 7 5 7 6 7 6.33 6 6 7 7 7 6 5 6.33 6Security 6 7 5 7 7 7 6.50 7 6 6 7 7 6 4 6.00 6Courtesy 6 7 5 7 7 7 6.50 7 6 6 6 7 7 7 6.50 7Knowledge 6 7 5 7 6 6 6.17 6 6 6 6 7 6 5 6.00 6d) Empathy Attentiveness 5 5 5 7 7 4 5.50 6 6 6 6 7 6 3 5.67 6Operating Hours 5 6 5 1 6 5 4.67 5 5 6 5 7 6 6 5.75 6Personal Attention 6 6 5 7 6 5 5.83 6 6 6 6 7 5 4 5.67 6Interests at heart 6 7 5 7 6 6 6.17 6 7 7 6 7 6 4 6.17 6Needs 7 7 5 7 6 7 6.50 7 7 6 6 7 6 4 6.00 6

LCLPerceptions

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Appendix C8 : Expectations and Perceptions – Spare Parts

Appendix C9 : Dimensions of service quality

Appendix C10 : General questions on Customer Accommodation

Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree) Mean Mean4.0 Expectations & 5.0 Perceptionsa) Reliability 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7Fulfillment of promises 6 7 7 7 7 7 6.83 7 7 5 6 7 5 5 5.83 6Interest 6 7 6 7 7 7 6.67 7 7 6 6 7 7 5 6.33 6Correctness 6 7 7 7 7 6 6.67 7 6 6 6 7 6 5 6.00 6Punctuality 6 7 7 7 7 7 6.83 7 7 6 6 7 6 6 6.33 6Accuracy 6 7 7 7 7 6 6.67 7 6 6 6 7 6 6 6.17 6b) ResponsivenessTime allotment 6 7 6 7 7 6 6.50 7 7 5 5 5 5 3 5.00 5Promptness 6 7 6 7 7 7 6.67 7 6 5 5 5 7 5 5.50 6Willingness to help 7 7 7 7 7 7 7.00 7 7 7 6 7 7 7 6.83 7Freight forwarders' Willingness to help 5 7 4 7 7 5 5.83 6 5 7 4 6 7 4 5.50 6Response 5 7 5 7 7 7 6.33 6 6 6 6 5 5 6 5.67 6c) AssuranceConfidence 6 7 6 7 6 7 6.50 7 6 7 7 7 6 5 6.33 6Security 6 7 6 7 7 7 6.67 7 6 6 7 7 6 4 6.00 6Courtesy 6 7 6 7 7 7 6.67 7 6 6 6 7 7 7 6.50 7Knowledge 6 7 6 7 6 6 6.33 6 6 6 6 7 6 5 6.00 6d) Empathy Attentiveness 5 5 6 7 7 4 5.67 6 6 6 6 7 6 3 5.67 6Operating Hours 5 6 6 1 6 5 4.83 5 5 6 5 7 6 6 5.75 6Personal Attention 6 6 6 7 6 5 6.00 6 6 6 6 7 5 4 5.67 6Interests at heart 6 7 6 7 6 6 6.33 6 7 7 6 7 6 4 6.17 6Needs 7 7 6 7 6 7 6.67 7 7 6 6 7 6 4 6.00 6

LCLPerceptions

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No. Description

6 Reliability : Ability to perform the promised service dependably and accurately 1 1 2 1 1 1 17 Responsiveness : Willingness to help customers and provide prompt service 1 3 3 1 2 2 28 Assurance : Knowledge and courtesy of employees and their ability to inspire trust and confidence 1 4 1 1 3 3 3

9 Empathy : Caring, individualized attention the firm provides for its customers 1 2 4 1 4 4 4

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MeanNo. Description 0 1 2 3 4 5 6 710 I am overall satisfied with the services of LCL 5 5 6 5 6 5 5.33 511 Customers would choose another service provider if given the choice 5 5 4 0 1 6 4.20 412 Customers have increasing expectations 6 6 5 2 5 5 4.83 513 The information on increased expectations are being communicated frequently 5 4 5 2 2 2 3.33 314 Customers' expectations on the service levels are the same as their actual requirements 4 1 6 0 6 3 4.00 415 LCL always assesses customer requirements 5 6 5 7 5 2 5.00 516 There are country/branch specific requirements and LCL is aware of and satisfies these 5 6 6 2 4 5 4.67 517 LCL understands the customer's customers (end customer) requirements and processes 5 6 5 0 6 6 5.60 618 LCL is committed to providing the customers (sales companies) with logistics services 5 6 6 6 7 6 6.00 619 LCL provides value-added services 5 6 6 7 1 6 5.17 520 LCL provides customized value-added services 4 5 6 7 1 5 4.67 521 LCL provides value-added services for select customers 5 5 6 7 1 0 4.80 522 The value added services are relevant to the customer and provides a competitive advantage 6 6 6 6 1 6 5.17 523 The value added services are a means to enhance efficiency, effectiveness and relevancy 5 5 6 6 1 7 5.00 5


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Appendix C11 : Co-creation of Value

Appendix C12 : Open-ended Questions for Management

Combined responses from 2 senior executives 8. What is the strategic role of LCL within the supply chain of Electrolux Laundry Systems?

• Overall role is to be the seller of equipment for laundry equipment and spare parts • LCL takes on the responsibility from the factory and seller and to be the last part of the

sourcing sector. • As a consequence of this overall role, LCL supplies to the customers with order tools,

information etc • LCL maintains inventory & acts as a switchboard between Sales & Production

9. To what extent has LCL fulfilled this strategic role?

• LCL had fulfilled it to a certain level. LCL is a ‘square’ organization that fulfilled the major requirements of the sales companies. However, LCL does not have all the flexibility demanded by the market. Overall performance was good. LCL also fulfilled its strategic role through collecting information, training staff and execution of logistics supports.

10. Please give examples of what LCL has done well in the past 2 years. • Clarification of the range for finished products and spare parts. • Reduced the logistics costs by having one central warehouse for spare parts (demanded

by former President). • New transport services became more efficient and resulted in cost savings • Higher service levels for spare parts, while service levels for finished products have been

more stable than before. • Improved purchase process for spare parts.

MeanCo-creation of value 1 2 3 4 5 6 7

1 LCL has on-going meetings with the sales companies to discuss on distribution arrangement

6 5 5 5 3 6 5.00


5 5 5 5 5 2 4.50

3 LCL discusses with the sales companies on appropriate stock levels 4 5 4 4 3 1 3.504 LCL actively modifies transportation options offered to the sales

companies5 4 5 0 3 4 4.20

5 LCL actively enhances the order handling processes 5 4 4 3 5 4 4.176 LCL actively meets with sales companies to understand their needs and

requirements5 5 5 3 5 2 4.17

Customer integration 1 2 3 4 5 6 77 There is sharing of ideas, information and other resources between LCL

and the sales companies5 4 7 4 3 4 4.50


5 4 4 4 3 4 4.00


4 5 5 5 5 2 4.33

Logistics capabilities 1 2 3 4 5 6 710 LCL develops customer-specific programs to cater to difference in

customer demands4 4 5 0 3 6 4.40


5 5 6 5 3 4 4.67

12 LCL is good at handling unique or unplanned customer requirements 4 4 6 5 6 5 5.0013 LCL has the flexibility to adapt to unexpected operational circumstances 4 5 6 5 5 4 4.83

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• Employed skilled people from different backgrounds. • Increased availability of spare parts & finished products and decreased inventory

11. In my opinion, the strategies should have been or should have included __________. • Flexibility towards customers

12. Please describe your latest departmental strategies.

• Increase communication with the former food service department in order to well-integrate laundry and food into “Electrolux Professional” with a single common setup.

• Maintain inventory and act as a switchboard between Sales & Production

13. Please provide the annual sales turnover of LCL for the past 5 financial years. Year Annual net sales (in Million SEK) 2006 983 2007 1021 2008 926 2009 893 2010 823

14. Please indicate the current permanent headcount of LCL. Year Full time employees 2008 30 2009 29.3 2010 30 2011 28


Appendix D : Empirical Data for the Sales Companies

Appendix D1 : The Strategic Role of Logistics Services

Appendix D2 : Overall logistics deliveries (percentage ratings)

Appendix D3 : Overall logistics deliveries (ranking of importance)

MeanStrategic Role of Logistics Services 1 2 3 4 5 6 7

1 LCL plays a strategic role for the sales companies 7 7 7 7 7 6 4 7 6 6 7 7 5 5 4 6.132 LCL adds value to the sales companies 5 5 7 7 7 3 4 7 4 5 0 7 5 5 4 5.363 LCL enables the sales companies to be more competitive in the marketplace 5 3 4 3 4 2 2 6 4 5 5 7 6 6 6 4.534 LCL assists the sales companies to generate end-customer value 5 5 3 4 3 2 0 6 4 5 4 7 6 6 5 4.64

Efficiency 1 2 3 4 5 6 75 LCL offers low priced distribution to the end-customers 3 4 4 4 5 3 3 2 4 4 0 5 5 5 5 4.006 LCL offers adequate options of freight forwarder 3 0 2 4 3 0 5 5 4 4 0 3 5 5 5 4.007 LCL links production and sales functions efficiently 5 5 5 5 5 3 5 1 4 3 4 0 5 5 5 4.298 LCL handles orders efficiently 4 5 5 5 5 4 4 2 5 2 0 6 4 4 5 4.299 LCL provides spare parts efficiently 6 6 5 5 5 4 0 6 5 4 4 6 5 5 5 5.07

10 LCL provides finished products efficiently 5 4 5 5 0 4 0 6 4 4 4 0 5 5 5 4.31Effectiveness 1 2 3 4 5 6 7

11 LCL offers the most suitable transportation options for the sales companies 5 0 5 4 5 3 5 5 4 3 1 6 4 3 5 4.4012 LCL maintains an adequate stock level for finished products 4 3 3 3 0 2 4 0 4 3 5 0 5 5 5 3.8313 LCL maintains an adequate stock level for spare parts 4 0 3 4 3 3 0 5 5 3 4 5 5 5 5 4.5014 LCL enables the sales companies to sell more 5 5 5 4 5 1 1 6 4 4 3 4 5 5 5 4.33

Differentiation / Relevancy 1 2 3 4 5 6 715 LCL improves the order handling process to make it easier for the sales

companies and end-customers5 5 5 5 5 0 1 7 4 0 1 6 4 4 5 4.38


0 0 6 5 6 3 0 5 5 2 4 4 5 5 5 4.58


4 4 6 6 0 2 4 0 4 2 3 0 4 4 5 3.69


6 5 6 6 6 0 0 3 5 4 3 6 4 4 5 4.85

19 LCL adopts unique and distinctive ordering process 6 0 4 4 5 0 0 3 5 4 3 0 4 3 5 4.18

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Ratings of the level of agreement in percentage (%)1.0 Overall logistics deliveries MeanNo. Description1.1 LCL satisfies overall logistics deliveries with the right amount 85% 97% 97% 86% 91.0%1.2 LCL satisfies overall logistics deliveries with the right product 88% 98% 98% 86% 92.5%1.3 LCL satisfies overall logistics deliveries at the right time 86% 79% 79% 86% 82.4%1.4 LCL satisfies overall logistics deliveries to the right place 95% 97% 100% 86% 94.4%1.5 LCL satisfies overall logistics deliveries in the right condition 89% 91% 82% 71% 83.2%1.6 LCL satisfies overall logistics deliveries at the right price 77% 96% 90% 86% 87.4%1.7 LCL satisfies overall logistics deliveries with the right information 88% 94% 98% 86% 91.5%

Sales Companies

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Rank in order of importance (1 = highest)1.0 Overall logistics deliveries MeanNo. Description1.1 LCL satisfies overall logistics deliveries with the right amount 1 2 2 4 21.2 LCL satisfies overall logistics deliveries with the right product 1 1 1 1 11.3 LCL satisfies overall logistics deliveries at the right time 4 2 6 3 41.4 LCL satisfies overall logistics deliveries to the right place 5 4 3 2 31.5 LCL satisfies overall logistics deliveries in the right condition 3 5 4 4 51.6 LCL satisfies overall logistics deliveries at the right price 6 7 5 4 61.7 LCL satisfies overall logistics deliveries with the right information 7 6 6 4 7

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Appendix D4 : Basic elements of customer service - Finished Products

Appendix D5 : Basic elements of customer service - Spare Parts

Appendix D6 : Basic elements of customer service (ranking of importance)


2.0Basic elements of customer service (Availability, Operational Performance & Service Reliability) Mean

No. Description2.1 Stocks of Finished Products and Spare Parts are always available when needed 77% 50% 68% 71% 66.3%2.2 The correct safety stock levels of Finished Producst A/B/C or Spare Parts are held 82% 50% 60% 64% 63.9%2.3 I know what the service level is today. (service level = promised level of availability) 93% 100% 30% 71% 73.6%2.4 I perceive or experience that the service level is correct. (service level = promised level of

availability) 80% 70% 30% 71% 62.8%

2.5 I am happy with the stock lead time (from Order to Pick-up availability / Despatch) 82% 45% 50% 75% 62.9%2.6 I expect a better stock lead time (from Order to Pick-up availability / Despatch) 87% 100% 100% 29% 78.9%2.7 Flexibility is high (ability to accommodate special situations and unusual or unexpected customer

requests) 62% 43% 80% 86% 67.5%

2.8 LCL handles my claims / returns very promptly 88% 85% 60% 71.5% 76.0%2.9 I am informed of delays 83% 85% 70% 86% 81.1%

2.10 Malfunction recovery is high (ability to quickly implement contingency plans when a failure occurs in the supply chain) 83% 65% 85% 64% 74.1%

2.11 Deliveries are damage free (measures how many shipments arrive without damaged products) 87% 94% 90% 57% 81.9%

2.12 I am receiving my shipments within the promised time. 83% 85% 88% 71% 81.7%2.13 I am satisfied with the responses. 80% 40% 75% 78.5% 68.4%2.14 Responses from LCL are correct and easy to understand 90% 90% 85% 72% 84.1%2.15 I am satisfied with the transportation time. 67% 65% 95% 71% 74.4%2.16 Invoices are error-free (measures what percentage of invoices contain no errors) 95% 90% 95% 86% 91.5%2.17 Shipments alway match orders (measures how many shipments contain the exact amount of

product ordered) 90% 95% 95% 86% 91.5%

2.18 Shipments are always shipped to correct location (measures how many shipments are made to the customer’s selected location) 95% 93% 95% 93% 93.8%

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2.0 Basic elements of customer service (Availability, Operational Performance & Service Reliability) Mean

No. Description2.1 Stocks of Finished Products and Spare Parts are always available when needed 83% 80% 80% 71% 78.6%2.2 The correct safety stock levels of Finished Producst A/B/C or Spare Parts are held 87% 79% 0% 71% 59.1%2.3 I know what the service level is today. (service level = promised level of availability) 97% 60% 0% 86% 60.8%2.4 I perceive or experience that the service level is correct. (service level = promised level of

availability) 85% 75% 100% 71% 82.8%

2.5 I am happy with the stock lead time (from Order to Pick-up availability / Despatch) 87% 40% 80% 86% 73.2%2.6 I expect a better stock lead time (from Order to Pick-up availability / Despatch) 97% 97% 100% 29% 80.6%2.7 Flexibility is high (ability to accommodate special situations and unusual or unexpected customer

requests) 80% 42% 90% 86% 74.4%

2.8 LCL handles my claims / returns very promptly 90% 73% 70% 71% 76.1%2.9 I am informed of delays 82% 65% 80% 86% 78.2%

2.10 Malfunction recovery is high (ability to quickly implement contingency plans when a failure occurs in the supply chain) 87% 67% 80% 71% 76.1%

2.11 Deliveries are damage free (measures how many shipments arrive without damaged products) 88% 77% 90% 86% 85.3%

2.12 I am receiving my shipments within the promised time. 92% 87% 90% 86% 88.6%2.13 I am satisfied with the responses. 83% 60% 85% 71% 74.8%2.14 Responses from LCL are correct and easy to understand 88% 87% 85% 71% 82.8%2.15 I am satisfied with the transportation time. 80% 87% 100% 71% 84.4%2.16 Invoices are error-free (measures what percentage of invoices contain no errors) 95% 100% 95% 86% 94.0%2.17 Shipments alway match orders (measures how many shipments contain the exact amount of

product ordered) 88% 94% 95% 86% 90.9%

2.18 Shipments are always shipped to correct location (measures how many shipments are made to the customer’s selected location) 98% 93% 99% 86% 93.9%

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Appendix D7 : Expectations and Perceptions - Finished Products


3.0 Basic elements of customer service MeanNo. Description3.1 Availability : the capacity to have inventory when desired by a customer 1 1 1 2 13.2 Operational performance : deals with the time required to deliver a customer’s order 2 3 2 3 33.3 Service reliability : a firm’s ability to perform all order-related activities and provide critical info 3 1 3 1 2

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Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree) Mean Mean4.0 Expectations & 5.0 Perceptions 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7a) Reliability Fulfillment of promises 7 7 7 7 6.88 7 6 5 6 6 5.54 6Interest 7 6 7 7 6.63 7 5 3 6 6 4.88 5Correctness 7 7 7 7 6.88 7 5 5 6 6 5.46 5Punctuality 7 7 6 7 6.63 7 5 5 7 5 5.38 5Accuracy 7 6 7 7 6.75 7 6 7 6 6 5.92 6b) ResponsivenessTime allotment 7 5 7 7 6.25 6 5 4 5 4 4.21 4Promptness 7 7 7 7 6.63 7 5 5 5 5 5.00 5Willingness to help 7 6 7 7 6.75 7 6 5 7 6 5.67 6Freight forwarders' Willingness to help 7 6 7 7 6.54 7 3 7 5 6 5.08 5Response 7 7 7 7 7.00 7 3 5 3 4 3.54 4c) AssuranceConfidence 7 7 7 7 6.63 7 5 5 6 6 5.33 5Security 7 6 7 7 6.50 7 6 6 5 6 5.67 6Courtesy 6 6 7 7 6.46 6 7 7 7 7 6.54 7Knowledge 6 7 7 7 6.58 7 5 4 6 6 5.13 5d) Empathy Attentiveness 7 6 6 7 6.38 6 5 5 6 6 5.17 5Operating Hours 7 6 7 7 6.63 7 5 5 6 7 5.54 6Personal Attention 7 6 6 7 6.29 6 4 5 7 7 5.58 6Interests at heart 6 6 7 7 6.46 6 6 4 6 6 5.50 6Needs 6 7 7 7 6.71 7 5 4 6 6 5.13 5

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Appendix D8 : Expectations and Perceptions - Spare Parts

Appendix D9 : Expectation Gap (LCL and the Sales Companies) Finished Products Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree)


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Expectations

4.0 Expectations Average 0 1 2 3 4 5 6 7 Average 0 1 2 3 4 5 6 7 Gap -7 -6 -5 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 5 6 7a) Reliability 6.73 7 6.75 7 -0.02

4.1 Fulfillment of promises 6.83 7 6.88 7 -0.044.2 Interest 6.67 7 6.63 7 0.044.3 Correctness 6.67 7 6.88 7 -0.214.4 Punctuality 6.83 7 6.63 7 0.214.5 Accuracy 6.67 7 6.75 7 -0.08

b) Responsiveness 6.47 7 6.63 7 -0.174.6 Time allotment 6.50 7 6.25 6 0.254.7 Promptness 6.67 7 6.63 7 0.044.8 Willingness to help 7.00 7 6.75 7 0.254.9 Freight forwarders' Willingness to help 5.83 6 6.54 7 -0.71

4.10 Response 6.33 6 7.00 7 -0.67c) Assurance 6.38 6 6.54 7 -0.17

4.11 Confidence 6.33 6 6.63 7 -0.294.12 Security 6.50 7 6.50 7 0.004.13 Courtesy 6.50 7 6.46 6 0.044.14 Knowledge 6.17 6 6.58 7 -0.42

d) Empathy 5.73 6 6.49 6 -0.764.15 Attentiveness 5.50 6 6.38 6 -0.884.16 Operating Hours 4.67 5 6.63 7 -1.964.17 Personal Attention 5.83 6 6.29 6 -0.464.18 Interests at heart 6.17 6 6.46 6 -0.294.19 Needs 6.50 7 6.71 7 -0.21

Average 6.33 6 6.60 7 -0.28

LCL Sales Companies Expectation Gap (LCL-Sales Companies)


Appendix D10 : Perception Gap (LCL and the Sales Companies) Finished Products

Appendix D11 : Expectation Gap (LCL and the Sales Companies) Spare Parts

Appendix D12 : Perception Gap (LCL and the Sales Companies) Spare Parts

5.0 Perceptions Average 0 1 2 3 4 5 6 7 Average 0 1 2 3 4 5 6 7 Gap -7 -6 -5 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 5 6 7a) Reliability 6.13 6 5.43 5 -0.70

5.1 Fulfillment of promises 5.83 6 5.54 6 -0.295.2 Interest 6.33 6 4.88 5 -1.465.3 Correctness 6.00 6 5.46 5 -0.545.4 Punctuality 6.33 6 5.38 5 -0.965.5 Accuracy 6.17 6 5.92 6 -0.25

b) Responsiveness 5.70 6 4.70 5 -1.005.6 Time allotment 5.00 5 4.21 4 -0.795.7 Promptness 5.50 6 5.00 5 -0.505.8 Willingness to help 6.83 7 5.67 6 -1.175.9 Freight forwarders' Willingness to help 5.50 6 5.08 5 -0.42


5.11 Confidence 6.33 6 5.33 5 -1.005.12 Security 6.00 6 5.67 6 -0.335.13 Courtesy 6.50 7 6.54 7 0.045.14 Knowledge 6.00 6 5.13 5 -0.88


Average 6.02 5.30 -0.72

LCL Sales Companies Perception Gap (Sales Companies - LCL)

4.0 Expectations Average 0 1 2 3 4 5 6 7 Average 0 1 2 3 4 5 6 7 Gap -7 -6 -5 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 5 6 7

a) Reliability 6.73 7 6.75 7 -0.024.1 Fulfillment of promises 6.83 7 7.00 7 -0.174.2 Interest 6.67 7 6.83 7 -0.174.3 Correctness 6.67 7 6.67 7 0.004.4 Punctuality 6.83 7 6.67 7 0.174.5 Accuracy 6.67 7 6.58 7 0.08

b) Responsiveness 6.47 6 6.31 6 0.164.6 Time allotment 6.50 7 6.42 6 0.084.7 Promptness 6.67 7 6.67 7 0.004.8 Willingness to help 7.00 7 6.83 7 0.174.9 Freight forwarders' Willingness to help 5.83 6 4.63 5 1.21



d) Empathy 5.90 6 6.05 6 -0.154.15 Attentiveness 5.67 6 5.67 6 0.004.16 Operating Hours 4.83 5 6.33 6 -1.504.17 Personal Attention 6.00 6 5.58 6 0.424.18 Interests at heart 6.33 6 5.83 6 0.504.19 Needs 6.67 7 6.83 7 -0.17

Average 6.41 6 6.47 6 -0.06

Sales Companies Expectation Gap (LCL-Sales Companies)LCL

5.0 Perceptions Average 0 1 2 3 4 5 6 7 Average 0 1 2 3 4 5 6 7 Gap -7 -6 -5 -4 -3 -2 -1 -0.75 -0.5 -0.25 0.25 0.5 0.75 1 2 3 4 5 6 7

a) Reliability 6.13 6 5.63 6 -0.505.1 Fulfillment of promises 5.83 6 6.00 6 0.175.2 Interest 6.33 6 5.33 5 -1.005.3 Correctness 6.00 6 6.00 6 0.005.4 Punctuality 6.33 6 5.50 6 -0.835.5 Accuracy 6.17 6 5.33 5 -0.83

b) Responsiveness 5.70 6 5.03 5 -0.685.6 Time allotment 5.00 5 5.33 5 0.335.7 Promptness 5.50 6 5.25 5 -0.255.8 Willingness to help 6.83 7 5.58 6 -1.255.9 Freight forwarders' Willingness to help 5.50 6 4.04 4 -1.46




Average 6.02 6 5.41 6 -0.60

LCL Sales Companies Perception Gap (Sales Companies - LCL)


Appendix D13 : Dimensions of service quality

Appendix D14 : General questions on Customer Accommodation

Appendix D15 : Co-creation of value

Appendix D16 : Open-ended Questions for Management

Responses from a senior executive in each market 1. What is the strategic role of LCL within the supply chain of Electrolux Laundry Systems?

Market Responses UK To link the manufacturing facility, sales companies and end customers

France To determine the level of stock Germany To set standards to maintain a well-working supply chain

Rank in order of importance (1 = highest)Mean

No. Description6 Reliability : Ability to perform the promised service dependably and accurately 1 1 1 1 17 Responsiveness : Willingness to help customers and provide prompt service 2 1 1 3 28 Assurance : Knowledge and courtesy of employees and their ability to inspire trust and confidence 3 3 3 2 3

9 Empathy : Caring, individualized attention the firm provides for its customers 4 4 3 3 4

Germ

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MeanNo. Description 1 2 3 4 5 6 710 I am overall satisfied with the services of LCL 5 5 5 6 6 4 4 6 6 5 6 6 6 6 6 5.47 611 I would choose another service provider if given the choice 4 3 1 1 1 1 0 6 2 0 1 0 1 1 1 1.77 212 I have increasing expectations 7 7 7 7 7 6 3 4 1 0 6 0 5 6 5 5.46 613 The information on increased expectations are being communicated frequently 5 5 7 7 7 6 3 4 1 0 7 4 2 2 2 4.43 414 My expectations on the service levels are the same as my actual requirements 7 6 7 7 7 6 6 3 7 7 7 6 6 6 6 6.27 615 LCL always assesses our requirements 0 4 5 5 6 2 3 4 3 5 5 0 5 0 4 4.25 416 There are country/branch specific requirements and LCL is aware of and satisfies these 7 4 4 3 3 3 3 4 1 0 3 0 6 6 6 4.08 417 LCL understands my customers' (end customers) requirements and processes 5 5 4 3 3 1 2 5 6 5 3 5 6 6 6 4.33 418 LCL is committed to providing the customers (sales companies) with logistics services 7 6 5 5 5 5 6 5 6 6 6 0 6 6 6 5.71 619 LCL provides value-added services 5 5 5 5 5 4 4 4 2 4 3 0 6 6 6 4.57 520 LCL provides customized value-added services 3 4 5 5 5 0 4 4 2 3 3 0 6 6 6 4.31 421 LCL provides value-added services for select customers 3 3 5 5 5 0 0 4 2 3 4 0 6 6 6 4.33 422 The value added services are relevant to us and provides a competitive advantage 3 4 6 7 7 0 3 4 2 4 4 0 6 6 6 4.77 523 The value added services are a means to enhance efficiency, effectiveness and relevancy 0 5 6 7 7 0 7 4 2 4 7 0 6 6 6 5.58 6


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MeanCo-creation of value 1 2 3 4 5 6 7

1 LCL has on-going meetings with the sales companies to discuss on distribution arrangement

5 5 6 5 6 3 2 5 4 2 1 0 4 4 4 4.00


3 0 6 5 6 3 2 5 4 2 1 0 4 4 5 3.85

3 LCL discusses with the sales companies on appropriate stock levels 3 4 6 5 5 1 2 1 4 5 1 0 3 3 4 3.134 LCL actively modifies transportation options offered to the sales companies 5 5 5 5 5 0 2 1 4 4 1 0 4 3 4 3.205 LCL actively enhances the order handling processes 3 6 6 4 6 0 2 1 4 4 4 0 4 4 5 3.536 LCL actively meets with sales companies to understand their needs and

requirements4 3 5 4 5 3 2 1 4 3 1 0 5 5 5 3.57

Customer integration 1 2 3 4 5 6 77 There is sharing of ideas, information and other resources between LCL and

the sales companies6 5 5 4 6 3 2 5 4 4 1 6 4 4 4 4.20


3 5 5 5 5 4 2 1 4 4 1 6 4 4 5 3.87


5 5 5 5 5 4 2 1 4 5 5 6 4 4 5 4.33

Logistics capabilities 1 2 3 4 5 6 710 LCL develops customer-specific programs to cater to difference in customer

demands3 4 4 4 5 0 2 1 4 4 1 0 5 4 5 3.54


3 5 5 4 5 2 2 1 4 4 1 0 5 4 5 3.57

12 LCL is good at handling unique or unplanned customer requirements 2 4 5 4 5 2 4 1 4 4 3 4 5 4 5 3.7313 LCL has the flexibility to adapt to unexpected operational circumstances 3 5 4 4 4 2 4 1 4 4 5 4 5 4 5 3.87


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Norway To make benefit for the end customers

2. To what extent has LCL fulfilled this strategic role? Market Responses UK Fulfilled linkage between manufacturing and sales companies but not

fulfilled the understanding of end-customers’ needs and requirements France Unable to fulfill the “A” product delivery promise which was supposed to

be delivered in 48 hours but took up to 8 days. Poorly fulfilled.

Germany Made effort to improve distribution but improvement has not been noticed yet.

Norway 70% fulfilled

3. Please give examples of what LCL has done well in the past 2 years. Market Responses UK A lot well-done, particularly the reduction of delivery time and costs,

improvement on spare parts deliveries, and openness to discuss with and accept viewpoints from the sales company in UK.

France Must have something well-done, but did not know what. Germany Tried to keep “A-B-C” products in stock (3 different types of promised

delivery time) but not doing so well. Unable to keep promise on the availability of “A” products.

Norway Provided flexibility to cater customer’s special needs and requirements.

4. What do you think LCL should have done differently in the past 2 years? Market Responses UK Communicate with end-customers to gain a viewpoint from their

perspective and more focus on market requirements instead of Electrolux’s requirements

France Did not know Germany Inventory of “A” products should be kept available at all time. Norway Make prompt alert to sales company on delayed delivery time.

5. Please describe your market. Is it a growth-oriented market or a product replacement

market? Market Responses UK Traditionally a growth market but product replacement market is

growing. Ratio around 50/50 currently. France Declining market. More to the replacement market but still have new

projects. LCL should place emphasis on replacement market. Germany Mainly replacement market. Norway Replacement market.


6. Please provide the approximate no. of total customers and no. of key customers. Market Responses UK 5000 customers with 20 key customers (including Spare Parts)

100 customers with 15 key customers (just Finished Products) France 1000 total customers and 65 distributors as key accounts. Sales company

in France issues invoice to distributors only. Germany 2000 total customers including spare parts. Around 50 key customers Norway 900 total customers and 100 key customers

7. What is the percentage of sales turnover represented by the key customers in the last

financial year? Market Responses UK 70% France 85% (from distributors) Germany 33%, and it is growing Norway 45%

8. How do your end-customers make business or benefit through the Electrolux laundry systems? Market Responses UK 65% are dealers/resellers of ELS products. 35% direct end-customers France Coin-ops, care segments/OPL=On-premises laundry, facility management

segment, sheltered workshop segment, elderly home segment. Germany Customers use ELS equipments to run their business such as contract

cleaners or nursing homes…to make money Norway Direct sales and sales partners

9. Can you describe the typical needs and requirements of your end-customers in terms of quality, cost and time? Market Responses UK Quality = shorten down time of the laundry equipment

Cost = “Value-for-money” (Cost is important but not deciding factor) Time = delivery time is the key differentiator in the market

France Best quality at lowest cost with shortest due time Germany Customers expect high quality for a reasonable price with shortest

delivery time Norway Quality is assumed to be good

10. Please describe your latest sales strategies. Market Responses UK Moving more lower value orders through indirect channels and focusing

on direct sales on major groups, contracts and high value projects


France To keep project sales and develop replacement sales which we are bad. New channels (new on-premise laundry segment like HORECA which requires better delivery lead time) (HORECA = Hotel/Restaurant/Catering)

Germany Focusing on core segments (contract cleaners, nursing homes & commercial laundries)

Norway AHL (Apartment Housing Laundry), OPL (On-premise Laundry) health and OPL facility management with direct sales and sales partners supported by advertising and direct marketing

11. Please provide the annual sales turnover of this sales company for the past 5 financial years. UK France Germany Norway

Year Million GBP Million EUR Million EUR Million NOK 2006 12 31.8 9-10 58 2007 12.5 29.5 9-10 60 2008 12 28.6 9-10 63 2009 11 26.5 9-10 56 2010 11.5 24 9-10 54

12. Please indicate the current permanent headcount of this sales company.

UK France Germany Norway Full time employees 48 32 25 15

Appendix D17 : Open-ended questions for all respondents How does LCL create value to sales companies and end-customers?

Q: What kinds of value does LCL add to the Sales Companies?

Perceived value to the Sales Companies LCL Respondent A Availability and lead time Respondent B Seller of machines, support through delivery & order processing, confirming costs

to transport, provide general support, info, technical support, solve problems / connect to the right person

Respondent C Professional support and competence Respondent D Information (eg. Production related info, missing components, delivery info etc) Respondent E Services, support and time etc. included in logistics Respondent F The service of getting delivery, price & other information. To have transport

arranged, tracking of deliveries & claims on items delivered wrongly or damaged (claims process)

UK Respondent A Good logistics is an entry requirement in the market Respondent B Availability of machines, particularly from Thailand production plant Respondent C Deliver machines and products on time Respondent D Customers are interested in the products being delivered on time and that

problems are solved when needed Respondent E Meetings & feedback on certain issues on spare parts France


Respondent A Disagree Respondent B Provide support when problems occur and find a solution Respondent C High level of service needed to be a premium choice company, spares needed in

short time Respondent D Neutral Germany Respondent A a mostly reliable, reasonable delivery process Respondent B Do not know Respondent C Provide background information Norway

Respondent A Build trust from end-customers towards the sales company. If done correctly, customers trust the sales company and they will buy more

Respondent B Expertise of LCL and the speed of delivery of stock required Respondent C Neutral

Q: How does LCL enable the sales companies to be more competitive? (What are the capabilities of LCL that makes the sales companies competitive?)

Capabilities of LCL to offer competitiveness to the sales companies LCL Respondent A Availability and lead time Respondent B One stop solution to obtain support from LCL Respondent C LCL acts as a speaking partner in logistic matters to find and develop solutions to

give sales companies a better possibility to act as the number 1 choice on the market. To be a centre of knowledge and order matters.

Respondent D Provide information proactively, such as shipment and delivery details Respondent E Delivery performance and flexibility Respondent F LCL provides common, centralized services of transport bookings, claims, checking

delivery times with the factory. It becomes an advantage as LCL sees the complete picture and also they save costs by reducing staff at each Sales Company. Through LCL, sales companies have a direct link to production units and can therefore obtain real delivery dates instead of going through a reseller.

UK

Respondent A 1) Direct deliveries to end users 2) 24hours parts delivery 3) Flexibility for delivery options

Respondent B By having the right stock levels, product availability and on-time delivery Respondent C disagree Respondent D The capabilities that they should have are deliveries of Spares and Finished

Products. (The current performance lets the Sales Companies down) Respondent E Neutral France

Respondent A Disagree Respondent B Disagree Respondent C Customer satisfaction on the service level Respondent D Neutral Germany

Respondent A Disagree Respondent B Do not know Respondent C Provide background information


Norway

Respondent A Arrange to deliver the right items at the right time to the right place. Respondent B Speeding up delivery to serve customers faster Respondent C Speeding up delivery to serve customers faster

Q: How does LCL assist the sales companies to generate end-customer value?

Source of end-customer value from LCL LCL Respondent A Transport solution, reliability, trust Respondent B Transport & delivery solutions Respondent C By performing correct service according to the agreed service level Respondent D Information (always try to inform the department and Sales Companies that we

work with information flow from 7am-4pm) Respondent E Customer focus (both sales companies and end-customers) Respondent F LCL adds the same value to end customer as the Sales Companies. UK

Respondent A Flexible delivery options and standard of packaging Respondent B Quick supply of spares

(end customers usually have 1 machine / finished product delivery but many deliveries of spares)

Respondent C Neutral Respondent D Disagree Respondent E Disagree France

Respondent A Disagree Respondent B To bring a high level of service, to answer the need (availability & delivery

time)…disagree Respondent C By guaranteeing a high utility rate for the product ie. When there is a breakdown,

we need the spare parts to be shipped fast (and machine fixed fast) Respondent D Neutral Germany

Respondent A Deliver spare parts promptly so that end-customers can minimize the down time of the machine they bought for making money

Respondent B Do not know Respondent C Provide background information Norway

Respondent A Arrange to deliver the right items at the right time to the right place. Respondent B LCL’s more in depth knowledge than sales company’s Respondent C LCL’s more in depth knowledge than sales company’s


Appendix E : Empirical Data for the Sales Companies in the UK

Appendix E1 : Expectations and Perceptions - Finished Products

Appendix E2 : Expectations and Perceptions - Spare Parts

Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree) Mean Mean4.0 Expectations & 5.0 Perceptions 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7a) Reliability Fulfillment of promises 7 7 7 0 0 7.00 7 6 6 5 0 0 5.67 6Interest 7 7 7 0 0 7.00 7 5 5 5 0 0 5.00 5Correctness 7 7 7 0 0 7.00 7 6 6 4 0 0 5.33 5Punctuality 7 7 7 0 0 7.00 7 5 6 4 0 0 5.00 5Accuracy 7 7 7 0 0 7.00 7 6 6 5 0 0 5.67 6b) ResponsivenessTime allotment 7 7 7 0 0 7.00 7 5 6 5 0 0 5.33 5Promptness 7 7 7 0 0 7.00 7 6 4 5 0 0 5.00 5Willingness to help 7 7 7 0 0 7.00 7 6 4 7 0 0 5.67 6Freight forwarders' Willingness to help 6 7 7 0 0 6.67 7 4 1 5 0 0 3.33 3Response 7 7 7 0 0 7.00 7 6 3 5 0 0 4.67 5c) AssuranceConfidence 7 7 7 0 0 7.00 7 6 5 5 0 0 5.33 5Security 7 7 7 0 0 7.00 7 7 5 5 0 0 5.67 6Courtesy 5 7 7 0 0 6.33 6 7 6 7 0 0 6.67 7Knowledge 5 7 7 0 0 6.33 6 5 5 5 0 0 5.00 5d) Empathy Attentiveness 7 7 7 0 0 7.00 7 6 3 5 0 0 4.67 5Operating Hours 7 7 7 0 0 7.00 7 5 4 5 0 0 4.67 5Personal Attention 6 7 7 0 0 6.67 7 5 3 5 0 0 4.33 4Interests at heart 5 7 7 0 0 6.33 6 7 6 5 0 0 6.00 6Needs 5 7 7 0 0 6.33 6 5 5 5 0 0 5.00 5

PerceptionsU K

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Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree) Mean Mean4.0 Expectations & 5.0 Perceptions 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7a) Reliability Fulfillment of promises 7 0 0 7 7 7.00 7 6 0 0 6 5 5.67 6Interest 7 0 0 7 7 7.00 7 5 0 0 6 6 5.67 6Correctness 7 0 0 7 7 7.00 7 6 0 0 5 5 5.33 5Punctuality 7 0 0 7 7 7.00 7 6 0 0 5 5 5.33 5Accuracy 7 0 0 7 7 7.00 7 6 0 0 4 4 4.67 5b) ResponsivenessTime allotment 7 0 0 7 7 7.00 7 6 0 0 6 6 6.00 6Promptness 7 0 0 7 7 7.00 7 6 0 0 6 6 6.00 6Willingness to help 7 0 0 7 7 7.00 7 6 0 0 6 6 6.00 6Freight forwarders' Willingness to help 5 0 0 6 5 5.33 5 6 0 0 4 4 4.67 5Response 7 0 0 7 7 7.00 7 6 0 0 5 5 5.33 5c) AssuranceConfidence 7 0 0 7 7 7.00 7 6 0 0 5 5 5.33 5Security 7 0 0 7 7 7.00 7 7 0 0 6 6 6.33 5Courtesy 5 0 0 7 7 6.33 6 7 0 0 7 7 7.00 7Knowledge 5 0 0 7 7 6.33 6 6 0 0 6 6 6.00 6d) Empathy Attentiveness 7 0 0 6 6 6.33 6 6 0 0 6 6 6.00 6Operating Hours 7 0 0 7 7 7.00 7 6 0 0 6 6 6.00 6Personal Attention 6 0 0 6 6 6.00 6 5 0 0 6 6 5.67 6Interests at heart 5 0 0 7 7 6.33 6 7 0 0 6 6 6.33 6Needs 5 0 0 7 7 6.33 6 6 0 0 6 6 6.00 6

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Appendix E3 : Expectation Gap - LCL and Sales Company (UK) - Finished Products Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree)

Appendix E4 : Perception Gap - LCL and Sales Company (UK) – Finished Products


a) Reliability 6.73 7 7.00 7 -0.274.1 Fulfillment of promises 6.83 7 7.00 7 -0.174.2 Interest 6.67 7 7.00 7 -0.334.3 Correctness 6.67 7 7.00 7 -0.334.4 Punctuality 6.83 7 7.00 7 -0.174.5 Accuracy 6.67 7 7.00 7 -0.33

b) Responsiveness 6.47 6 6.93 7 -0.474.6 Time allotment 6.50 7 7.00 7 -0.504.7 Promptness 6.67 7 7.00 7 -0.334.8 Willingness to help 7.00 7 7.00 7 0.004.9 Freight forwarders' Willingness to help 5.83 6 6.67 7 -0.83



d) Empathy 5.73 6 6.67 7 -0.934.15 Attentiveness 5.50 6 7.00 7 -1.504.16 Operating Hours 4.67 5 7.00 7 -2.334.17 Personal Attention 5.83 6 6.67 7 -0.834.18 Interests at heart 6.17 6 6.33 6 -0.174.19 Needs 6.50 7 6.33 6 0.17

Average 6.33 6 6.82 7 -0.49

Expectation Gap (LCL-UK)United Kingdom (UK)LCL



b) Responsiveness 5.70 6 4.40 4 -1.305.6 Time allotment 5.00 5 5.33 5 0.335.7 Promptness 5.50 6 5.00 5 -0.505.8 Willingness to help 6.83 7 5.67 6 -1.175.9 Freight forwarders' Willingness to help 5.50 6 3.33 3 -2.17




Average 6.02 6 5.08 5 -0.94

Perception Gap (UK - LCL)LCL United Kingdom (UK)


Appendix E5 : Expectation Gap - LCL and Sales Company (UK) - Spare Parts

Appendix E6 : Perception Gap - LCL and Sales Company (UK) – Spare Parts



b) Responsiveness 6.47 6 6.60 7 -0.134.6 Time allotment 6.50 7 7.00 7 -0.504.7 Promptness 6.67 7 7.00 7 -0.334.8 Willingness to help 7.00 7 7.00 7 0.004.9 Freight forwarders' Willingness to help 5.83 6 5.00 5 0.83


4.11 Confidence 6.50 7 7.00 7 -0.504.12 Security 6.67 7 7.00 7 -0.334.13 Courtesy 6.67 7 6.33 6 0.334.14 Knowledge 6.33 6 6.33 6 0.00

d) Empathy 5.90 6 6.40 6 -0.504.15 Attentiveness 5.67 6 6.33 6 -0.674.16 Operating Hours 4.83 5 7.00 7 -2.174.17 Personal Attention 6.00 6 6.00 6 0.004.18 Interests at heart 6.33 6 6.33 6 0.004.19 Needs 6.67 7 6.33 6 0.33

Average 6.41 6 6.67 7 -0.26

Expectation Gap (LCL-UK)LCL United Kingdom (UK)



b) Responsiveness 5.70 6 5.60 6 -0.105.6 Time allotment 5.00 5 6.00 6 1.005.7 Promptness 5.50 6 6.00 6 0.505.8 Willingness to help 6.83 7 6.00 6 -0.835.9 Freight forwarders' Willingness to help 5.50 6 4.67 5 -0.83


5.11 Confidence 6.33 6 5.33 5 -1.005.12 Security 6.00 6 6.33 5 0.335.13 Courtesy 6.50 7 7.00 7 0.505.14 Knowledge 6.00 6 6.00 6 0.00

d) Empathy 6.03 6 6.00 6 -0.035.15 Attentiveness 5.67 6 6.00 6 0.335.16 Operating Hours 6.67 7 6.00 6 -0.675.17 Personal Attention 5.67 6 5.67 6 0.005.18 Interests at heart 6.17 6 6.33 6 0.175.19 Needs 6.00 6 6.00 6 0.00

Average 6.02 6 5.78 6 -0.24

Perception Gap (UK - LCL)LCL United Kingdom (UK)


Appendix F : Empirical Data for the Sales Companies in France

Appendix F1 : Expectations and Perceptions - Finished Products

Appendix F2 : Expectations and Perceptions - Spare Parts


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Appendix F3 : Expectation Gap - LCL and Sales Company (France) - Finished Products Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree)

Appendix F4 : Perception Gap - LCL and Sales Company (France) - Finished Products


a) Reliability 6.73 7 6.40 7 0.334.1 Fulfillment of promises 6.83 7 7.00 7 -0.174.2 Interest 6.67 7 6.00 6 0.674.3 Correctness 6.67 7 6.50 7 0.174.4 Punctuality 6.83 7 6.50 7 0.334.5 Accuracy 6.67 7 6.00 6 0.67

b) Responsiveness 6.47 6 6.00 6 0.474.6 Time allotment 6.50 7 4.50 5 2.004.7 Promptness 6.67 7 6.50 7 0.174.8 Willingness to help 7.00 7 6.00 6 1.004.9 Freight forwarders' Willingness to help 5.83 6 6.00 6 -0.17

4.10 Response 6.33 6 7.00 7 -0.67c) Assurance 6.38 6 6.25 6 0.13


d) Empathy 5.73 6 6.20 6 -0.474.15 Attentiveness 5.50 6 6.00 6 -0.504.16 Operating Hours 4.67 5 6.00 6 -1.334.17 Personal Attention 5.83 6 6.00 6 -0.174.18 Interests at heart 6.17 6 6.00 6 0.174.19 Needs 6.50 7 7.00 7 -0.50

Average 6.33 6 6.21 6 0.11

LCL Expectation Gap (LCL-France)France


a) Reliability 6.13 6 4.80 5 -1.335.1 Fulfillment of promises 5.83 6 5.00 5 -0.835.2 Interest 6.33 6 3.00 3 -3.335.3 Correctness 6.00 6 4.50 5 -1.505.4 Punctuality 6.33 6 5.00 5 -1.335.5 Accuracy 6.17 6 6.50 7 0.33

b) Responsiveness 5.70 6 4.90 5 -0.805.6 Time allotment 5.00 5 3.50 4 -1.505.7 Promptness 5.50 6 5.00 5 -0.505.8 Willingness to help 6.83 7 4.50 5 -2.335.9 Freight forwarders' Willingness to help 5.50 6 7.00 7 1.50




Average 6.02 6 4.81 5 -1.21

Perception Gap (France - LCL)LCL France


Appendix F5 : Expectation Gap - LCL and Sales Company (France) Spare Parts

Appendix F6 : Perception Gap - LCL and Sales Company (France) Spare Parts


a) Reliability 6.73 7 6.60 7 0.134.1 Fulfillment of promises 6.83 7 7.00 7 -0.174.2 Interest 6.67 7 6.33 6 0.334.3 Correctness 6.67 7 6.67 7 0.004.4 Punctuality 6.83 7 6.67 7 0.174.5 Accuracy 6.67 7 6.33 6 0.33


4.10 Response 6.33 6 7.00 7 -0.67c) Assurance 6.54 7 6.42 6 0.13


d) Empathy 5.90 6 6.40 6 -0.504.15 Attentiveness 5.67 6 6.33 6 -0.674.16 Operating Hours 4.83 5 6.33 6 -1.504.17 Personal Attention 6.00 6 6.33 6 -0.334.18 Interests at heart 6.33 6 6.00 6 0.334.19 Needs 6.67 7 7.00 7 -0.33

Average 6.41 6 6.46 6 -0.05

Expectation Gap (LCL-France)LCL France



b) Responsiveness 5.70 6 5.30 5 -0.405.6 Time allotment 5.00 5 5.33 5 0.335.7 Promptness 5.50 6 5.00 5 -0.505.8 Willingness to help 6.83 7 5.33 5 -1.505.9 Freight forwarders' Willingness to help 5.50 6 5.50 6 0.00


5.11 Confidence 6.33 6 5.00 5 -1.335.12 Security 6.00 6 5.67 6 -0.335.13 Courtesy 6.50 7 6.00 6 -0.505.14 Knowledge 6.00 6 4.33 5 -1.67


Average 6.02 6 5.17 5 -0.85

Perception Gap (France - LCL)LCL France


Appendix G : Empirical Data for the Sales Companies in Germany

Appendix G1 : Expectations and Perceptions - Finished Products

Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree) Mean Mean4.0 Expectations & 5.0 Perceptions 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7a) Reliability Fulfillment of promises 6 7 0 6.50 7 7 5 0 6.00 6Interest 6 7 0 6.50 7 6 5 0 5.50 6Correctness 7 7 0 7.00 7 6 6 0 6.00 6Punctuality 5 7 0 6.00 6 6 7 0 6.50 7Accuracy 7 7 0 7.00 7 5 6 0 5.50 6b) ResponsivenessTime allotment 7 7 0 7.00 7 4 5 0 4.50 5Promptness 6 7 0 6.50 7 5 5 0 5.00 5Willingness to help 7 7 0 7.00 7 7 7 0 7.00 7Freight forwarders' Willingness to help 7 7 0 7.00 7 5 4 0 4.50 5Response 7 7 0 7.00 7 3 3 0 3.00 3c) AssuranceConfidence 6 7 0 6.50 7 6 5 0 5.50 6Security 7 6 0 6.50 7 6 4 0 5.00 5Courtesy 7 7 0 7.00 7 6 7 0 6.50 7Knowledge 7 7 0 7.00 7 6 6 0 6.00 6d) Empathy Attentiveness 5 7 0 6.00 6 5 6 0 5.50 6Operating Hours 7 7 0 7.00 7 5 7 0 6.00 6Personal Attention 6 6 0 6.00 6 6 7 0 6.50 7Interests at heart 6 7 0 6.50 7 6 6 0 6.00 6Needs 7 7 0 7.00 7 6 6 0 6.00 6

Germany

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

PerceptionsGermany

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

Expectations


Appendix G2 : Expectations and Perceptions - Spare Parts

Appendix G3 : Expectation Gap - LCL and Sales Company (Germany) - Finished Products Scale of questionnaire: 0 - 7 (0 = I do not know, 1 = strongly disagree, 4 = neutral, 7 = strongly agree)


Germany

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

PerceptionsGermany

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

Expectations


a) Reliability 6.73 7 6.60 7 0.134.1 Fulfillment of promises 6.83 7 6.50 7 0.334.2 Interest 6.67 7 6.50 7 0.174.3 Correctness 6.67 7 7.00 7 -0.334.4 Punctuality 6.83 7 6.00 6 0.834.5 Accuracy 6.67 7 7.00 7 -0.33

b) Responsiveness 6.47 6 6.90 7 -0.434.6 Time allotment 6.50 7 7.00 7 -0.504.7 Promptness 6.67 7 6.50 7 0.174.8 Willingness to help 7.00 7 7.00 7 0.004.9 Freight forwarders' Willingness to help 5.83 6 7.00 7 -1.17


4.11 Confidence 6.33 6 6.50 7 -0.174.12 Security 6.50 7 6.50 7 0.004.13 Courtesy 6.50 7 7.00 7 -0.504.14 Knowledge 6.17 6 7.00 7 -0.83


Average 6.33 6 6.69 7 -0.36

LCL Germany Expectation Gap (LCL-Germany)


Appendix G4 : Perception Gap - LCL and Sales Company (Germany) - Finished Products

Appendix G5 : Expectation Gap - LCL and Sales Company (Germany) - Spare Parts

Appendix G6 : Perception Gap - LCL and Sales Company (Germany) – Spare Parts


a) Reliability 6.13 6 5.90 6 -0.235.1 Fulfillment of promises 5.83 6 6.00 6 0.175.2 Interest 6.33 6 5.50 6 -0.835.3 Correctness 6.00 6 6.00 6 0.005.4 Punctuality 6.33 6 6.50 7 0.175.5 Accuracy 6.17 6 5.50 6 -0.67

b) Responsiveness 5.70 6 4.80 5 -0.905.6 Time allotment 5.00 5 4.50 5 -0.505.7 Promptness 5.50 6 5.00 5 -0.505.8 Willingness to help 6.83 7 7.00 7 0.175.9 Freight forwarders' Willingness to help 5.50 6 4.50 5 -1.00



d) Empathy 6.03 6 6.00 6 -0.035.15 Attentiveness 5.67 6 5.50 6 -0.175.16 Operating Hours 6.67 7 6.00 6 -0.675.17 Personal Attention 5.67 6 6.50 7 0.835.18 Interests at heart 6.17 6 6.00 6 -0.175.19 Needs 6.00 6 6.00 6 0.00

Average 6.02 6 5.61 6 -0.41

Perception Gap (Germany - LCL)LCL Germany



b) Responsiveness 6.47 6 5.80 6 0.674.6 Time allotment 6.50 7 7.00 7 -0.504.7 Promptness 6.67 7 7.00 7 -0.334.8 Willingness to help 7.00 7 7.00 7 0.004.9 Freight forwarders' Willingness to help 5.83 6 1.00 1 4.83



d) Empathy 5.90 6 5.00 5 0.904.15 Attentiveness 5.67 6 4.00 4 1.674.16 Operating Hours 4.83 5 6.00 6 -1.174.17 Personal Attention 6.00 6 4.00 4 2.004.18 Interests at heart 6.33 6 4.00 4 2.334.19 Needs 6.67 7 7.00 7 -0.33

Average 6.41 6 6.20 6 0.21

Germany Expectation Gap (LCL-Germany)LCL


a) Reliability 6.13 6 6.20 6 0.075.1 Fulfillment of promises 5.83 6 7.00 7 1.175.2 Interest 6.33 6 6.00 6 -0.335.3 Correctness 6.00 6 7.00 7 1.005.4 Punctuality 6.33 6 6.00 6 -0.335.5 Accuracy 6.17 6 5.00 5 -1.17

b) Responsiveness 5.70 6 4.80 5 -0.905.6 Time allotment 5.00 5 6.00 6 1.005.7 Promptness 5.50 6 6.00 6 0.505.8 Willingness to help 6.83 7 6.00 6 -0.835.9 Freight forwarders' Willingness to help 5.50 6 1.00 1 -4.50




Average 6.02 6 5.21 5 -0.81

LCL Germany Perception Gap (Germany - LCL)


Appendix H : Empirical Data for the Sales Companies in Norway

Appendix H1 : Expectations and Perceptions - Finished Products


Norway

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

PerceptionsNorway

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

Expectations


Appendix H2 : Expectations and Perceptions – Spare Parts

Appendix H3 : Expectation Gap - LCL and Sales Company (Norway) – Finished Products

Appendix H4 : Perception Gap - LCL and Sales Company (Norway) – Finished Goods


Norway

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

ExpectationsNorway

Resp

onde

nt A

Resp

onde

nt B

Resp

onde

nt C

Perceptions



b) Responsiveness 6.47 6 6.70 7 -0.234.6 Time allotment 6.50 7 6.50 7 0.004.7 Promptness 6.67 7 6.50 7 0.174.8 Willingness to help 7.00 7 7.00 7 0.004.9 Freight forwarders' Willingness to help 5.83 6 6.50 7 -0.67



d) Empathy 5.73 6 6.60 7 -0.874.15 Attentiveness 5.50 6 6.50 7 -1.004.16 Operating Hours 4.67 5 6.50 7 -1.834.17 Personal Attention 5.83 6 6.50 7 -0.674.18 Interests at heart 6.17 6 7.00 7 -0.834.19 Needs 6.50 7 6.50 7 0.00

Average 6.33 6 6.70 7 -0.37

Expectation Gap (LCL-Norway)LCL Norway


Appendix H5 : Expectation Gap - LCL and Sales Company (Norway) – Spare Parts

Appendix H6 : Perception Gap - LCL and Sales Company (Norway) – Spare Parts


a) Reliability 6.13 6 5.70 6 -0.435.1 Fulfillment of promises 5.83 6 5.50 6 -0.335.2 Interest 6.33 6 6.00 6 -0.335.3 Correctness 6.00 6 6.00 6 0.005.4 Punctuality 6.33 6 5.00 5 -1.335.5 Accuracy 6.17 6 6.00 6 -0.17

b) Responsiveness 5.70 6 4.70 5 -1.005.6 Time allotment 5.00 5 3.50 4 -1.505.7 Promptness 5.50 6 5.00 5 -0.505.8 Willingness to help 6.83 7 5.50 6 -1.335.9 Freight forwarders' Willingness to help 5.50 6 5.50 6 0.00


5.11 Confidence 6.33 6 6.00 6 -0.335.12 Security 6.00 6 6.00 6 0.005.13 Courtesy 6.50 7 6.50 7 0.005.14 Knowledge 6.00 6 6.00 6 0.00

d) Empathy 6.03 6 6.20 6 0.175.15 Attentiveness 5.67 6 6.00 6 0.335.16 Operating Hours 6.67 7 6.50 7 -0.175.17 Personal Attention 5.67 6 6.50 7 0.835.18 Interests at heart 6.17 6 6.00 6 -0.175.19 Needs 6.00 6 6.00 6 0.00

Average 6.02 6 5.68 6 0.34

Perception Gap (Norway - LCL)LCL Norway


a) Reliability 6.73 7 6.40 6 0.334.1 Fulfillment of promises 6.83 7 7.00 7 -0.174.2 Interest 6.67 7 7.00 7 -0.334.3 Correctness 6.67 7 6.00 6 0.674.4 Punctuality 6.83 7 6.00 6 0.834.5 Accuracy 6.67 7 6.00 6 0.67




d) Empathy 5.90 6 6.40 6 -0.504.15 Attentiveness 5.67 6 6.00 6 -0.334.16 Operating Hours 4.83 5 6.00 6 -1.174.17 Personal Attention 6.00 6 6.00 6 0.004.18 Interests at heart 6.33 6 7.00 7 -0.674.19 Needs 6.67 7 7.00 7 -0.33

Average 6.41 6 6.55 6 -0.14

Expectation Gap (LCL-Norway)LCL Norway


a) Reliability 6.13 6 5.60 6 -0.535.1 Fulfillment of promises 5.83 6 6.00 6 0.175.2 Interest 6.33 6 5.00 5 -1.335.3 Correctness 6.00 6 6.00 6 0.005.4 Punctuality 6.33 6 5.00 5 -1.335.5 Accuracy 6.17 6 6.00 6 -0.17

b) Responsiveness 5.70 6 4.40 4 -1.305.6 Time allotment 5.00 5 4.00 4 -1.005.7 Promptness 5.50 6 4.00 4 -1.505.8 Willingness to help 6.83 7 5.00 5 -1.835.9 Freight forwarders' Willingness to help 5.50 6 5.00 5 -0.50


5.11 Confidence 6.33 6 6.00 6 -0.335.12 Security 6.00 6 6.00 6 0.005.13 Courtesy 6.50 7 6.00 6 -0.505.14 Knowledge 6.00 6 6.00 6 0.00

d) Empathy 6.03 6 6.00 6 -0.035.15 Attentiveness 5.67 6 6.00 6 0.335.16 Operating Hours 6.67 7 6.00 6 -0.675.17 Personal Attention 5.67 6 6.00 6 0.335.18 Interests at heart 6.17 6 6.00 6 -0.175.19 Needs 6.00 6 6.00 6 0.00

Average 6.02 6 5.50 6 -0.52

Perception Gap (Norway - LCL)LCL Norway


Appendix I : Warehouse visit in Ljungby, Sweden (8 April 2011) Appendix J : Power Point presentations provided by LCL (March 2011)

Appendix K : Interviews (face-to-face) at LCL (8 & 9 April 2011)

Appendix L : Interviews (telephone) (from 21 April – 13 May 2011)

Linnæus UniversitySE-391 82 Kalmar/SE-351 95 VäxjöTelefon 0772-28 80 00

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