Logistics Service Quality: How important it is for your business?

Service quality is a pivotal aspect of just about any industry out there. However, for logistics companies, service quality is irreplaceable.

In this blog, we’ll be exploring exactly what logistics service quality is and why it’s so important in the logistics world to satisfy customer.

In today’s context of a global dynamic market, many companies are considering to outsource their non-core activities to specialist firms, which helps to focus on the core area of their businesses. Depending upon the nature of the business, outsourcing of non-core activities may include financial services, information technology management, manufacturing, logistics and human resource management. This increasing phenomenon of outsourcing non-core activities initiates the opportunity for new entrants in the market to fulfil the requirement of new services, especially in the area of logistics to improve overall operational efficiency. 

Most of the manufacturing firms deal with logistics as a function that can be outsourced to logistics service providers due to the growth and complexity of today’s supply chains.

The specific responsibilities typically assumed by logisticians includes:

• Inbound and outbound transportation
• Purchasing, 
• Demand management, 
• Order processing courier services, 
• Inventory management, 
• Materials handling, 
• Packaging, 
• Warehousing, 
• Distribution and return logistics

Let’s start by explaining what exactly logistics service quality is and what are the important attributes to be considered for logistics service quality.

What is logistics service quality?

Service quality is abstracted as the difference between customers’ expectations for service performance before the service encounter and their perceptions of the actual service received. Consequently, Logistics service quality is defined as an instrument to measure customer perceived value that is created by the service provider. Logistics services can be used to value supplier and customer relationships by influencing satisfaction, increasing customer loyalty & market share and service performance.

Logistics service quality has two measures that can create a strong impact on the logistic industry to satisfy customer:

1. Operational Logistics service Quality

Operational logistics and service is an internal operation-oriented measure. Excellent customer service gains the benefits of customer satisfaction, loyalty and increased sales. Increasing customer service requires a flexible and fast response, which depends on both fast data processing and effective material handling. In these exertions, firms attempt to gather as many goods and information resources as possible for processing with available capacity to fulfill the needs and demands of customers. It is comprised of the operational component that embraces the service’s physical features, which means characteristics of delivery that capture and define time, place and procedure of the performed services.

2. Relational logistics service quality

Relational logistics service quality is an external market-oriented dimension that tends to understand the needs of the customer through the relationship. It is defined as the buyer perception of their service provider’s relational activities that create closer bonding with the firm which help them understanding each other’s expectations and mutually develop logistics activities that will cost-effectively provide quality services to meet expectation. More to that, it’s an assurance to customer that the service provider must have courtesy and knowledge of employees that will enhance the ability to convey trust and confidence; responsiveness that the service provider will provide rapid service and assist customer; and caring that will show service provider attention and consideration provision to its each customer.

The Importance of Logistics Service Quality to satisfy the Customer

Customers usually seek value through availing the right sets of products or services, economically, whereas the right logistics service can create value by accommodating customers’ delivery requirements in a cost-effective manner.In the last decade, the increase in globalization has led the industries to furious competition. Remarkably, the hype in the competition is not only because of growing businesses, but it is mainly due to more knowledgeable and demanding customers. 

As valuing your customers is essential, but to understand what customer’s value the most is the key to maximize overall value. Value is delivered to the customers in numerous ways other than just the core product or services. Customers build a relationship with the organization that provides great value and tends to stay in a relationship with the existing supplier. More satisfied customers are less likely to switch to competitors than unsatisfied customers. In fact, it has been researched that achieving a customer satisfaction through excellent service quality is one of the vital factor of logistics service quality and this means that the firms are usually more progressive operationally and also more aware of customer’s needs and wants. It is worth to establish relationships with a customer, because when service provider gains information of customer’s needs and wants, after getting marketing intelligence, the service provider will be able to manage operational activities cost-effectively.Nevertheless, the logistics industry has become the backbone of any business by creating core values that is ensuring the availability of the right products or services, at the right time, with the right quantity to the right customer, which leads to customers’ satisfaction. However, the services provided by the logisticians and quality of services can be easily imitated by the competitors. Therefore, the logistics industry not only has to provide high end-to-end services, but it also has to plan and build a long-term strategic relationship with the customers, which can be beneficial in increasing the customer satisfaction and competitiveness.

The logistics firms need to put their extreme efforts in utilising their service capabilities for establishing a long-term relationship with their business customers to attain their loyalty and satisfaction. The firms that focus on the interpersonal relationship aspects can keep customers in a relationship for a longer period because they want to. Logistics service providers might consider the ways to improve the quality and services so that the customers might not think of switching to other competitors. Logistics service providers can also think about planning regular meetups with the customers, updating them with the recent development of the product and distributing discount vouchers or loyalty cards. This will increase the retention of the customers and create a friendly bond between B2B customers, enhancing customer satisfaction and loyalty simultaneously, it can be concluded that service quality is highly essential in building customer satisfaction and loyalty. Increased quality can be very important in establishing a positive long-term relationship with the customer. Besides, it should be noted that logistics service dimensions i.e. (relational and operational) logistics service quality cannot be ignored by the logistics service providers.

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Article by Sehrish Huma a supply chain researcher, reviewer, blog writer and a certified supply chain professional member (PSCM) of Institute of Supply Chain Management (IoSCM). Globally, contributes articles as an author to different institutes of supply chain and specifically writes articles for IoSCM’s magazine in Supply Chain Outlook. Winner of the 2019 annual IoSCM Award ‘Contribution to the Institute’.