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Today, as the market place has globalized, individual firms do not compete with each-other as independent entities. They compete with each-other as intrinsic part of supply chain. A firm's success depends upon its ability to manage, integrate and coordinate its business networks among supply chain members to provide high quality services to customers to satisfy their needs. Logistics helps an organization to gain competitive advantage over other organizations. These both factors i.e. globalization and logistics need strong relationship between supply chain and third party logistics. This relationship does not only help in cost reduction but also helps to improve service quality and operational efficiency. High service quality leads to high business performance, lower costs, customer satisfaction and thus more profit. In case of supply chains, service quality has impact on overall business process and growth of the organization along with customers, employees, suppliers or distributor. This research paper is about the impact of quality of service in supply chain with reference to 3rd party logistics and the service quality of an organization could be improved.
Purpose of the Study
The purpose of the study is to understand the impact of quality of service with reference to 3rd party logistics in supply chain of an organization.
Significance of the Study
Providing high quality of service or maximizing service at lowest cost requires a very strong commitment and trust to share more information among business partners. It requires integration of internal as well as external operations i.e. it requires integration and collaboration with customers and suppliers. Importance of service quality in supply chain to improve business profitability has not been researched much in past. So, it would be beneficial to study service quality and processes and activities associated with the delivery of product and services.
Review of Literature
At the beginning supply chains were paper chains as shown in diagram.
Manufacturers---> Warehouses--> wholesalers--> Retailers--> Customers
Linear nature of this supply chain made the interaction between front end and back end very difficult and time consuming. In this first customer placed order to retailer, then retailer checked whether stock of that product is enough or not, in case stock is not enough then retailer placed order to wholesaler. There might be possibility that wholesaler might have limited stock and had not in position to fulfill the order, then in that case wholesaler ordered to distributor and then distributor placed order to manufacturer. In this process, customers lose both time and money. Thus development of supply chains have undergone through many changes from simple and narrow purchase, logistics and transportation to much wider approach, focused mainly on customer service. Logistic plays a very vital role in supply chain that includes the purchasing, storing, transporting, and distribution of products. This traditional method of supply chain needed to be replaced to match the changing requirements i.e. to compete at global level. To compete at global level, the relationship between supply chain and third party logistic becomes extremely necessary, as 3rd party logistics uses external companies to carry out logistics functions which were earlier performed by the organizations. Third party logistics help the organizations to concentrate on their main activities which in turn help to lower the cost and improve the customer service.
The service quality is a relative term between customer expectations and evaluation of service experience. The service quality is measured using gap model and a multi-item scale also called SERVQUAL. SERVQUAL is used based on data collected in service industries which include credit cards, telephone services, retail banking, repair and maintenance of appliances. It includes five dimensions which are tangible, responsiveness, reliability, assurance and insurance. It has been also seen that there is no fixed measurement agreed by researchers to measure service quality. Different researchers have proposed different measurement side to measure different applications.
To measure service quality, different measurements like gap model and SERVQUAL has been tested by many researchers. Gap model is basically used to measure the gap between actually defined or projected service quality and the given service quality. This is mainly done to fill the gap, so as to improve the service quality and in turn improve the profitability. Gap analysis as a tool has been used and appreciated by so many researchers. Rho et al used gap analysis in 2001 to study the gap between manufacturing strategy and its impact on the performance of the company.
Most of the research in Service quality was customer-focused and was done mainly on the relevant of service quality in the context of supply chains. Most of the researches were single directional i.e. focused either on distribution or purchase activities. It has been also seemed that the bi-directional study i.e. the impact of service quality on an organization and distributor/supplier can help in fulfilling the main purpose of supply chains. It has been also seemed that most of the researchers agree that 3rd party logistic and service quality is very important in supply chain and they also observe that gap model is useful in many other applications which include service quality also. Although there are many models used by researchers to measure service quality but the gap model is the most acceptable service model in supply chains.
Research methodology was based on the review of literature and data collected from primary and secondary sources. The secondary sources of data were published reports, journal articles, magazines, books, and Internet. And the primary resources of data are through survey and through interview of employees.
Exploratory investigation is done to realize the necessity of service quality in supply chain, factors affecting service quality in supply chain and to find out the best methodology to measure service quality at assorted interface levels to develop an improvement program.
The proposed concrete model for the service quality with respect to supply chain comprises of: Supplier--> 3rd party logistic provider--> firm--> 3rd party logistic provider--> distributor--> 3rd party logistic provider--> end customer. This model has used the concept of service quality proposed by Parasuraman in 1985 and framework proposed by Gunasekaran and Nagi in 2003.
This model categorizes logistics into two parts:
Logistic Users- They are: manufacturer, distributor and supplier
Logistic Service Providers- They are: 3rd party logistic service providers i.e. couriers, logistic companies, transporters, etc. 3rd party logistic service providers are labeled as TPL1 between supplier and firm, TPL2 between distributor and firm, and TPL3 between customer and distributor.
Any transaction between supplier to firm or between firm and distributor or between customer and distributor is handled as the transaction between logistic user and logistic service provider
For conceptualizing this model, gap analysis is used as a tool. The gaps present in this model are of two types:
Forward gap- This gap is present in the same direction of the movement of a product in the context of very basic supply chain i.e. from supplier to firm, firm to distributor, and then from distributor to customers.
Reverse gap- This gap is present in the opposite direction of the basic supply chain i.e. from customer to distributor, distributor to firm, and from firm to supplier.
In diagram 1, we can see that there are two entities "A" and "B" which carry out different functions in supply chain. A forward gap i.e. from A to B might result from inadequate infrastructure facilities, poor processes, etc. of entity "A" and may have impact on "B". In reverse gap entity "B" will have impact on entity "A" due to inefficiencies of different processes at "B".
In this model, the very basic supply chain would be from the 1st supplier to the 1st customer. This model has following entities:
Supplier: Supplies products i.e. goods and services to the firm.
3rd party: An external agency responsible to handle transactions between logistic user & logistic service provider.
Firm: The one whose goods or services are thought over for study.
Distributor: The one who is responsible for distributing the products of a firm to customers as per their requirements.
Customer: The one who purchases products or services from distributor of the firm.
When the expectation of service quality by the customers is less or equal to perception of service quality by towards process or product or service or organization then service quality provided by an organization is said to be of satisfactory level. Customer satisfaction is basically the perception of the customer of the value received from an organization.
These gaps i.e. forward and reverse have been identified at different interfaces like TPL1 and firm, supplier and TPL1, TPL2 and firm, etc. Many service quality gaps have been identified because of various sources which affect each interface gap.
The Main model on the basis of gap analysis
This model talks about different interface gaps between the logistic service provider, customer and the logistic user, i.e. between supplier, firm, TPL1, TPL2, TPL3, distributor and customer. This model tells about relationships between main activities of the supply chain necessary for the delivery of adequate quality of service to the customer.
The different interfaces in this model are reiterated as follows:
Interface gap (Forward) 1.1F
Between Supplier - 3rd party logistics1: logistic user - logistic service provider
This interface gap adjoins the transaction between TPL1 and supplier and of suppliers. This gap arises mainly due to improper communication, poor co-ordination between supplier and 3rd party logistics, inadequate technical specifications, incomplete procedures, improper utilization of tools or equipments, etc. at the end of customers.
Interface gap (Reverse) 1.1R
Between 3rd party logistic1 - Supplier: Logistic service provider - Logistic User
This interface gap adjoins the transaction between Suppliers and TPL1. This gap arises mainly due to bad transfer mechanism at TPL1, indecent delivery terms, communication gaps, slow in responding to suppliers, etc.
Interface gap (Forward) 1.2F
Between 3rd party logistic1 - Firm: Logistic service provider - Logistic User
This interface gap adjoins the transaction between firm and 3rd party logistic1 and between the processes of 3rd party logistics1. This gap arises due to poor coordination between different functions, bad management policies and procedures, communication gap between different functions, inadequate facilities, bad planning, inadequate sharing of vision of the organizations, etc at 3rd party logistics.
Interface gap (Reverse) 1.2R
Between firm - 3rd party logistic1: logistic user - logistic service provider
This interface gap adjoins the transaction the 3rd party logistic and firm as well as opposite transaction between different departments within a firm. This gap arises due to bad communication, poor work culture, rigid hierarchical structure, and improper managed wage structure at the firm.
Gaps measurement of service quality in supply chain
To measure service quality gaps and various interfaces in supply chain involve dealing with quantitative and qualitative data as discussed in main model.
Numerous researchers have used DEA techniques and statistical analysis to evaluate performance and benchmarking of various types of entities pursued in various activities in various contexts in supply chain and service quality.
Questionnaire for research:
Total time taken in supply chain
Utilization of the capacity of supply chain
Number of orders which are not fulfilled in the supply chain
Number of timely delivery of orders
Processing time taken to dissolve the customer's query
Time to collect payment by supply chain's members
Inventory turnover ratio
Customer and employee satisfaction
Total percentage of delayed order
ANATYSIS OF THE SURVEY DATA
Statistical Analysis: Data collected by conducting surveys, and data present on internet, magazines and journals, data analysis can be carried out using statistical package like LISREL, SPSS, etc. These statistical techniques to understand the data gathered is very old and had been used by many researchers in past to reduce data by factor analysis and to track out relation among various entities and also for other applications in other contexts.
Gaps in service quality
Main reasons for the gap in service quality
Impact of gap in service quality
Measures which could be taken
1.1.1 F- Communication gap between Supplier and TPL1
This gap arises due to lack of training, bad vision, communication gap, inadequate attention to firm's job, etc from Supplier to TPL1
Dissatisfied TPL1 from suppliers, reduction in the supply of goods and services, crumbling effect on efficiency and quality of the supply chain
Order should be delivered on time. Rejection work should be less at supplier's side as well as TPL1. Information should be shared between both, proper training should be given.
1.1.1 R-Communication gap between TPL1 and Supplier
This gap arises due to lack of necessary communication from TPL1 to Supplier. Reasons for this gap could be requirements of a firm are not cleared to TPL1; staffs are not properly trained at TPL1 end, lack of infrastructure at supplier's side.
Due to this gap, supplier loses its trust for a firm's work.
1.1.2 F- Gap between supplier perception and TPL expectation
This gap arises due to incorrect perceptions of supplier about TPL's expectations. Reasons for this gap could be inadequate training, communication gap, bad experience in past at the end of supplier, etc.
This gap may cause loss to TPL1 and the firm in the context of late delivery, unfinished or no delivery, etc.
Survey could be done to understand the expectation of supplier and TPL1, what kind of training is required, what level of inventory should be maintained, etc.
1.1.2 R- Supplier Perception-TPL expectation
This gap arises due to TPL expectations to get delivery on time specified by him and time taken by supplier to supply the product. And also sue to poor coordination between supplier and TPL
Loss to firm and TPL1 in the form of finishing the customer requirements, more inventory, delay in production, etc.
1.1.3 F - Specification gap between Top management and Functional heads
This gap arises due to top management's inability at the side of supplier to convert its expectations into specifications. Reasons for this gap improper planning, bad experience, bad structure of the organization, untrained professionals, etc
Dissatisfied functional heads like finance, operations, etc which in turn results in inefficient and poor quality service delivery by supply chain.
Survey of satisfaction of employees working for different functional departments at the end of supplier. Survey could also be done to understand what motivates employees. Survey on information sharing could also be done. Survey of no of orders delayed and reasons for that delay.
1.1.3 R - Specification gap between Top management and Functional heads
This gap arises due to difference in perceptions among functional heads about the objective of management of delivery to fulfill the requirements of the firm. Reasons for this gap could be low salary, bad work culture, absence of motivation, etc.
Top management's objectives may not be fulfilled which may affect the supplier's business and finally inefficient and poor service quality.
1.1.4 both R and F: communication Gap between inter functions
This gap arises due to lack of coordination and communication among different functional department. Reasons for this gap could be unsatisfied employees, improper training, poor education, etc.
Nature of gap could be reverse or forward may also cause gap among different functions. It may also lead to system failure, delivery of bad service quality, etc.
Survey to assessing infrastructure, received payment, finished orders, training, motivation of employees, number of transactions which were inter functional, etc.
1.1.5 F - Gap between functional heads and employees working in different departments
This gap arises due to lack of bolster from the staff, problems with processes, quality, poor employee management, etc by different functional heads.
This may lead to dissatisfied customers and thus poor and inefficient service quality.
Survey of employee satisfaction, data that assures quality service, training needed, sufficient inventory analysis, etc.
1.1.5 R - Gap between functional heads and employees working in different departments
This gap arises due to lack of interest of employees, insufficient infrastructure to complete task in proper way, personal hindrance, very poor involvement of management, etc.
This may results in unsatisfied customers, employees, poor support from employees to work effectively and efficiently.
1.1.6 F - External gap due to communication between TPL1, firm and Supplier's marketing function
Expectations of customers are based on how an organization communicates about itself in the market. Reasons for this kind of gaps could be negligence of suppliers to market itself properly, poor customer knowledge, no or inadequate training given to employees to improve quality of service, etc.
This may results in poor performance of the firm, TPL1, late delivery, poor inventory management and thus in turn poor and inefficient service quality in supply chain.
Survey could be done to find out the reasons for delay of payment collection process, failure of delivery of orders, training requirements, etc.
1.1.6 R - External gap due to communication between TPL1, firm and Supplier's marketing function
This gap arises due to communication gap between the supplier's marketing department and firm's requirements. Reasons of this types of gaps are inadequate training given to employees, poor planning, bad coordination, etc by 3rdparty logistics to fulfill the requirements of firms and suppliers
This may damage the relationship among suppliers, firms and 3rdparty logistics. They may lose trust on each-other which in turn results in poor and in efficient service quality in supply chain.
Data envelopment analysis: This is very difficult and time consuming to measure the achievements of an organization especially in the case when the organization has large number of inputs and outputs. This becomes more difficult when the association among inputs and outputs are multifaceted. This is a model which involves mathematical calculations on collected data to find out the relationship or association among inputs and outputs to understand what could be done to improve the productivity and quality of products or services with minimum incurred cost i.e. resources in the form of inputs. This analysis can be used to improve the performance and efficiency of service quality in supply chain of an organization.
Benefits of the model:
The above discussed model is very useful in understanding the gaps present in the supply chain because of which an organization does not perform well as it is expected to perform. This model tells what gaps are present among logistic user, firm, supplier and logistic service provider and what measures could be taken to eradicate or at least minimize these gaps so that the organization performs well and could use all its resources in efficient manner. This model also helps the organization to understand what things need to be outsourced and from where so that incurred cost of manufacturing is least.
This model also helps to understand the problems in existing supply chain and what could be done to eradicate those problems and improve the supply chain process.
This model can also be used to benchmark the process and gaps in order to minimize the service quality gaps in the supply chain. This can also be used to benchmark different functions within an organization.
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
The proposed model is very beneficial in the context of basic supply chain to improve the service quality in supply chain of an organization by reducing various gaps discussed above. The improvement in service quality requires involvement of everyone in the organization. The improvement in service quality leads to better management of inventory, better relationship between customers and the firm, between firm and 3rd party logistic and between firm and the supplier. There is possibility that the same can be spread out to analyze and improve the entire supply chain of an organization.
The gaps present in various types of the organizations are of different types which depend on the hierarchy followed by the organization and working environment of the organization.
There is a need to consider that both distributor and supplier deal with 3rd party logistic and gaps depend on this. But both supplier and distributor might deal with other organizations also and then the type of gap will be different and must be identified and minimized in order to provide better service to customers. This model is very flexible to handle this situation within an organization.
It would be more beneficial if the activities of 3rd party logistics1, 3rd party logistics2, and 3rd party logistics3 are executed by single logistic service provider as it will give more benefit to customers as all activities will be done by only one logistic service provider.
The model proposed is developed on the basis of gap analysis to improve the proficiency and effectiveness of the quality of service in supply chain of an organization. This model is very much capable of removing out all the gaps present at various levels which renders the quality of service offered to the customers in the supply chain. This model also assists an organization to evaluate each factor before taking decision about the product i.e. whether to manufacture that product or outsource that product. This model highlights both unidirectional and bi-directional gaps present at various levels of the supply chain and produce hindrance to deliver good quality of service. It also helps an organization to improve its relationship with suppliers, customers and third party logistics. This also helps the organization to improve the performance of entire supply chain and fulfill customer requirements and providing good quality of services to customer which are beyond their expectations.
The proposed model is basically service quality model which forms the foundation for improving the service of supply chain in general and more specifically the service quality of 3rd party logistics service provider. This model is developed based on the data gathered through the survey done and discussions with professionals, and through the data gathered through internet, magazines, books, etc.
It is necessary to use this model as a base to research for a better model to improve the entire supply chain process as there is tremendous opportunity available to develop supply chain process in far better way so that customer satisfaction and specification could be met in more advanced and easy way. Lots of research could also be done to find out the consequences of each type of gaps and how to minimize those gaps so that their impacts get reduced. There is also a need to find out more severe gaps and less severe gaps with respect to type of the organizations and their impacts on the organization i.e. which gaps could be ignored and which gaps are needed to be removed in order to provide better service quality in the supply chain.
There is also an exigency to identify how different gaps at different interfaces control the entire supply chain of an organization i.e. both within the organization and outside the organization.