The Role of Logistics Capability Management and Supply Chain Integration in Improving Logistics Performance of Logistics Service Providers in Saudi Arabia

Abstract

Logistics service providers (LSPs) offer different logistics activities for clients from various industries. These activities include all logistical aspects of the business such as transportation, warehousing, packaging, and labelling that link organizations through supply chains. This critical role makes LSP vital to end-to-end supply chain operations. In recent years, the global and domestic demand for logistics services has increased, and companies have also shown an upward trend in outsourcing logistics-related activities to LSPs. Additionally, the customers of LSPs expect to obtain integrated market solutions with high-quality logistics performance (LP) that meet their different needs. The demands of LSPs’ clients are characterised by hesitation and heterogeneity, which sometimes exceed the LSP’s capabilities. This situation puts pressure on LSPs to deliver high-quality logistics performance to ensure customer satisfaction (CS). In the logistics literature, logistics capability management (LCM) is considered a vital aspect of supply chain management that provides a competitive advantage in quality and time differentiation. Therefore, LSPs need to adopt a competitive framework that focuses on those logistics capabilities that enable them to meet growing demand and the different needs of their customers. Although the logistics literature emphasises the concept of LCMs improving company performance, there are critical literature gaps, as most of the previous LCM studies focused mainly on the perspectives of the logistics customer. Equally important, the examination of the effects of LCM was limited to its individual dimensions such as demand management, capacity and resource management and operation management, and the overall picture of LCM was not visualised through all its dimensions together. Despite LP being the outcome directly related to the main activities of LSPs, only a few studies have examined the effects of LCM on LP. Additionally, there is a lack of studies examining factors that support LCM through drivers or enablers such as supply chain integration (SCI), and no study has suggested that SCI is an enabler of LCM for LSPs. To fill these gaps in the literature, this thesis aims to investigate the effects of SCI on LCM and the effect of both SCI and LCM on the LP and CS of LSPs in Saudi Arabia. It also examines the effect of LP on CS and the moderating effect of logistics complexity (LC) on the relationship between SCI and LCM. A conceptual framework was formed based on two main theories, namely, the relational view (RV) theory to link SCI with LCM and the resource-based view (RBV) theory to link LCM with LP. The conceptual framework includes five constructs: SCI, LCM, LP, CS and LC in the context of LSPs in Saudi Arabia and develops seven hypotheses. A quantitative approach was employed in this thesis to examine the relationships of constructs developed from previous studies in the conceptual framework and test hypotheses using a survey questionnaire. The questionnaire was translated using the forward‐backward translation procedure and was distributed to the executive managers of LSPs in Saudi Arabia via the internet, which yielded 452 valid responses (a 59.39% response rate). The data were analysed through three consecutive steps: data preparation (using IBM SPSS software), measurement model analysis and structural model analysis (using AMOS software). It was found that SCI significantly enables LCM and enhances LP and CS. This indicates that when LSPs adopt SCI as a strategy, it improves LP and CS in addition to its important role in enabling LCM. Additionally, LCM significantly positively affected LP and CS of LSP. By focusing on LCM through its ability to forecast demand, fulfil logistical requests and match them with capabilities and resources, LSPs can achieve better quality performance regarding what customers expect, which is reflected in their satisfaction. The results also indicate that LP has a significant positive effect on CS, which confirms that high-quality LP for LSPs is a source of CS. Additionally, the results indicate that LC has a significant negative effect in moderating the relationship between SCI and LCM; this shows that when LSPs operate in a highly complex logistics environment, the strength of the relationship between SCI and LCM diminishes making LSPs less likely to go for SCI when they have higher levels of LC. Logistics complexity includes multiple partners with high levels of interactions, heterogeneous activities and processes, and wide distribution of customers. The main academic contribution of this thesis is the enrichment of the LCM literature by providing a comprehensive understanding of the role of LCM from the viewpoint of LSPs. The thesis examined the effects of LCM on various aspects of LSPs’ performance (i.e., LP and CS), as well as enabling these capabilities through SCI, neither of which have been studied in the literature. Moreover, the results confirmed the crucial positive role of LCM in improving LP and obtaining CS in addition to the positive role that SCI has in enabling LCM. Therefore, the significance of LCM for LSPs could open the door for researchers to gain more insights into LCM. This thesis also contributes to theory development through the proposed constructs in the conceptual framework and the testing of hypotheses for their relationships. This thesis also has practical implications for LSPs, as the results demonstrate that adopting SCI as a strategy and focusing on LCM can optimise LP and maintain CS. Thus, LSPs must consider LCM a core competency in achieving superior LP and customer value creation. Policymakers should also develop the infrastructure related to the logistics services sector and enable digital transformation, as well as continuously develop and improve regulations and laws related to logistics activities in support of SCI and LCM of LSPs. This thesis contains three limitations regarding the generalisability of the results, the range of variables and measurements and the cross-sectional design of the study. Additionally, it recommends that future studies use the conceptual model of this thesis in different business environments and study the effect of LSPs on other aspects of performance, such as customer loyalty. This thesis also recommends using different research methods (such as mixed methods) to expand and enhance the findings of this thesis to contribute to the literature more comprehensively.