TOTAL VARÓN

Logistics outsourcing is a contractual relationship with the third party based on certain specified performance criteria. (Bolumole 2003). As per Bowersox et al. (2010), accommodating their client’s requirement in a cost-efficient manner is deemed to be the primary rationale for the 3PL operations. 3PL logistics arrangements by the virtue of their nature identifies and prioritizes the activities required to accommodate their customers logistical needs better than their competitors by getting the seven rights to its clients: ‘the right quantity of the right product at the right time at the right place in the right condition at the right price with the right information’. According to James et al (1990, 1996), the whole supply chain or the logistics channel is more than just a mere marketing channel and it is specifically designed by the virtue of the logistics agreement between the 3PL provider and the client to ensure the smooth flow of logistics activities to fulfill the customer’s needs. These logistics relationships require both parties to contribute to specific investments that are rudimentary to fulfilling the objective of these relationships. Fulfilling customer needs and servicing their requirements are the main essence of the logistics partnership arrangements, a happy and satisfied customer is ready for a long-term business relationship with its provider compared to the unhappy customers.

The literature review has covered significant numbers of related articles on logistics outsourcing and logistics outsourcing relationship that was carried out by scholars and researchers from all over the world. Some of them are like: (Hofenk et al. (2011 Adobor, H. (2006); Alrubaiee (2010); Autry (2010); Barnes (2001); and Daugherty, P. J. (2011) have concentrated on the overall logistics relationships. Equally, some researchers have focused specifically on the precise relationship element of third party logistics like: Davis-Sramek et

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al. (2008) on ‘loyalty’; Gligor and Holcomb (2013) on ‘personal relationships’; Hartmann and Grahl, A. (2011) on ‘flexibility’; Jin, et al. (2014) on ‘IT-capability’; Rostami et al. (2014) on ‘customer satisfaction’; and Wallenburg et al. (2011) on ‘Commitment and trust’. These studies concentrating on different regions, cultures, and business scenarios worldwide , however, although illuminating, none of these researches have focused on either or supported the research gap that further investigation is required to analyze the effect of customer relationship management on client retention in third party logistics outsourcing industry in unique New Zealand business context.

CHAPTER THREE – INDUSTRY TRENDS AND ENVIRONMENT

3.1 Introduction

Compelled by globalization and information technology advances, third party logistics services have experienced unprecedented growth, Yeung, et al. (2012). According to Koh and Tan (2005), the annual growth in the logistics outsourcing sector in China has been 25% on average, leading both the U.S. (10–15% annual 3PL growth) and the rest of the world (5– 10%). Businesses rely on outside logistics specialists to deliver goods to their customers so that they can focus on their core businesses. Logistics clients can create competitive advantage by forming long-term relationships with 3PL providers (Coates and McDermott, 2002; Lambert et al. 1999; Yeung, 2008). As per academics like Richardson (1990a), Sheffi (1990), Bardi and Tracey (1991), Lieb and Randall (1996), Dapiran et al (1996), Boyson et al (1999), Bhatnagar et al (1999), Larson and Gammelgaard (2001), Arroyo et al (2006), Jiang and Qureshi (2006), Selviaridis and Spring (2007), Sohail and Sohal (2003) have closely studied the 3PL outsourcing business in the global context. According to them, the third party logistics (3PL) outsourcing sector in last two decades (1990-2010) has been studied with a lot more interest than it was done in the past and the trend is growing more than ever due to the changing global business environment. Global business volume has a lot more influence on the overall logistics outsourcing decisions as the more goods and services move across from one place to another the most outsourcing opportunities get created.

The academics and scholars and the industry experts tried to explain and define outsourcing in many different ways. It could mean an easy transactional decision for a business incapable of operating profitably or it could be a big strategic decision for companies in a very

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competitive industry (for example car manufacturing, consumer electrical products manufacturer). The client deciding to concentrate on their core strength and cement their business reputation is the other leading reason for outsourcing. We are aware of the trend of big businesses outsourcing their manufacturing, assembling, and core and non-core operations to third parties to tap into cheaper resources or raw materials in different parts of the world. For example, readymade garments retailers (Wall-mart, K-mart, Sears, JC Penny, H&M) flocking into Bangladesh, India, Cambodia due to the abundance of cheap labor and resources and government incentives. Moreover, New Zealand businesses (ANZ, Dell, Spark NZ) outsourcing their ‘call centers’ to third world countries like Philippines, India to tap into the low-wage workforce there.

In next section (3.2) we also look to explore deep into the effect and impact of the common relationship drivers that glue the logistics outsourcing businesses together above and beyond each party’s contractual obligations. We discuss them in the light of the businesses practices in the New Zealand logistics industry scenario and also the current trend in Australasia and global industry and the emerging issues in logistics relationships and the environment in the 3PL industry worldwide.