Short‐run vs long‐run trade‐offs in outsourcing relationships

Abstract

Purpose – The purpose of this paper is to report on a study of a shipper's dilemma as a customer. Shippers desire both lower costs and good service levels, and this dilemma may lead in the long run to a trade‐off consideration between staying loyal to existing service providers and seeking cost reductions from competing providers.Design/methodology/approach – A model was devised from the literature exploring how a shipper's propensity to switch logistics service providers may be affected by perceptions of service elements and logistics cost reductions. The model was tested with survey data from 235 Finnish industrial firms and analysed using structural equation modelling.Findings – Findings indicate that in the short‐run trade‐offs do not exist, but there may be a propensity to trade‐off in the long run. Further, quality of service is a more important factor for customers than participating in tight price competition.Research limitations/implications – The data were collected from one country and further ...