Int. Journal of Business Science and Applied Management, Volume 7, Issue 3, 2012
The effects of economic crisis to logistics outsourcing
Dimitrios Folinas
Alexander TEI of Thessaloniki, Department of Logistics, Branch of Katerini
Kanellopoulou 2, 60 100, Katerini, Greece
Telephone: +30 23510 20940
Email: dfolinas@gmail.com
Dimitrios Aidonis
Alexander TEI of Thessaloniki, Department of Logistics, Branch of Katerini
Kanellopoulou 2, 60 100, Katerini, Greece
Telephone: +30 23510 20940
Email: daidonis77@gmail.com
Abstract
The aim of this paper is the investigation of the effects that the economic crisis has on the logistics services
sector in Greece. It presents and analyses the findings of a research, which, via a questionnaire, asked managers
at the examined sector first to identify the effects and second the practices and approaches that the managers
suggested to confront with these effects. The findings of the research revealed that the logistics’ service
providers have been significantly affected by the crisis and these effects have influenced all the main functional
areas of the logistics management (procurement, warehousing, inventory management, transportation and
distribution). Moreover, they are not optimistic about the future as they believe that the sector will be
significantly decreased in the next few years and the competition will be increased. Performance measurement
and optimizat ion of their logistics’ processes and functions and the decrease of the operation costs are
considered to be their weapons to this battle. This research can be considered as a pilot study, as the Greek
economy has been seriously affected during the global financial crisis. Worldwide, 3pl companies can use the
findings of this study in order to overcome potential difficulties that might face in near future.
Keywords: logistics, outsourcing, 3PL’s, economic crisis, Greece
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1 INTRODUCTION
The global crisis has had a huge impact in major sectors of the national economies such as banking,
insurance companies, car industries, real estate but most of all the trade (IMF, 2009; Shah, 2010). During the
last 5 years a great number of businesses at national level went bankrupt and closed, unemployment increased,
inflation rose, commodities became more expensive, taxes were increased, currencies were devaluated, and
people are being socially impoverished. Greece was among the first countries that was directly affected and
succumbed to the devastating effects of this economic downhill (Stournaras, 2010; Petsas, 2009).
The economic crisis in Greece has created -first of all- a serious crisis in demand. On the other hand the
existence of large layoffs and taxation led to short cash flows. This led to low consumption and therefore to low
demand creating a repeating circle which has critical side effects. These effects have influenced every aspect of
the Greek market; the consumption was dramatically decreased, every form of trade was downscaled and
production was downsized to a desperate degree and, inevitably, shipping and export were seriously damaged.
One of the pillars of the trade (and the consumption) is the management of logistics activities. Logistics’
management includes the effective and efficient management of all the activities for the storage, handling and
movement of products from the point of origin to the point of consumption.
Due to the criticality and complexity of the management of the logistics activities many companies decided
to outsource them to third parties; the Third Party Logistics (or simp ly 3PL’s) (Chris topher, 2005; Power,
Sharafali & Bhakoo, 2007). These are firms that are defined as “trade organizations, which provide services in
the fields of logistics, execution of separate operations or complex logistics functions (warehoused stock,
transportation, order management, physical distribution, etc. and accomplishment of integrated management of
logistics chains of the client-organizat ion” (Parashkevova, 2007).
According to the Council of Supply Chain Management Professionals the total global 3PL revenues last
year (2011) were approximately US$370 billion (CSCMP, 2012). Moreover, the findings of the 18th Annual
Survey of Third-Party Logistics Providers released at CSCMP Annual Global Conference revealed logistics
companies experienced improved economic conditions in the last 2 years. Key findings of the survey include: 1)
Logistics’ companies experienced improved economic conditions in 2010, with 88 percent of companies
surveyed in North America meeting or exceeding their revenue projections, as compared with only 50 percent in
2009, and 2) In Europe, economic conditions continued to be challenging for third-party logistics companies
with only 55 percent of companies surveyed meeting or exceeding their revenue growth projections for the year.
Although the penetration of 3PL services has increased in a global level, only 10% of Greek companies use
the services of this industry. This general data shows that logistics’ services outsourcing is not yet a common
practice among Greek companies (Gotzamani, Longinidis & Vouzas, 2010). Furthermore, during the last years
the 3PL market seems to have grown in complexity. As Selviaridis and Spring (2007) point out “Logistics
providers operate across a wide range of industries and many of them appear to have developed expertise in
multiple markets. They increasingly expand their offerings beyond core logistics services in order to
differentiate themselves from co mpetitors and secure higher profit margins”. At the same time 3PLs worldwide
have been operating already on a restraining environment. Gross (2009) identified a number of restraining
factors such as the high competition, the constantly increasing fuel costs, and other social and political issues
such as environmental regulations, infrastructure issues, terrorism and security. All the above factors can be also
applied in the Greek 3PL’s market. But it is obvious that the most critical factors which are now threatening the
3PL industry sources from the impacts of the current economic crisis and the drastic reduction of consumption.
The aim of this paper is the investigation of the effects that the economic crisis has on the logistics services
sector in Greece. It presents and analyses the findings of a research, which via a questionnaire asked managers
at the examined sector first to identify the effects, second to predict the future of the sector and third to present
the practices and approaches that the managers suggested to confront with these effects.
The remainder of this paper begins in section 2 with a presentation of the key results of similar researches
at global, EU and national level. These results will help to attain a good picture of the problems that
organizations of the examined sector have faced in the last 5 years as the financial economic crisis is a glob al
phenomenon. The next section describes analytically the findings of the research in Greece. Section 4 presents
the discussion of the findings while the paper concludes in the Conclusions’ part with arguments arising fro m
this study, useful managerial insights and definition of future research challenges for the authors.
2 RELEVANT WORK
The effect of financial economic crisis to the global and national markets has been the subject of many
research initiatives. There have also been researches focused on the logistics and the supply chain sector.
Specifically, there have been studies targeting either to logistics services providers (3/4 PL’s) or to operations /
logistics managers of companies in various business sectors. In this section the findings of researches at global
Dimitrios Folinas abd Dimitrios Aidonis
58
and EU level are synoptically presented. The findings are revisited and further discussed in the last section after
the analysis of the findings of the research in the Greek logistics sector.
The following table presents in chronological order the title, the year of publication or announcement, the
institution or the company that undertook the research, the sample and the key findings of the previous studies.
Table 1: Synopsis of previous researches
Title
Year
Institution
Sample
Key findings
European 3rd Party
logistics Market
Report 2008
2008
Eye for transport
Managers of 400 3&4
PL’s in Europe
• 75% believe that growth will be
lower the next 5 years
• 40% believe that the recovery in
global level won’t come before 2011
Crisis dominates
supply chain agenda
in 2009
2009
Capgemini
Consulting‘s
Managers of 300
enterprises (62% in
Europe, 16% in USA
& Canada, 13% in
Asia and 5% in Latin
America
• 65% argue that their companies’
strategy have been affected by the
economic crisis more than any other
factor
• More than one-third postponed
investments in ICT
The Smarter Supply
Chain of the Future
2008
IBM
Managers of 400
enterprises in USA,
West Europe and Asia
• There are 5 factors that characterize
today’s SCM : lower control of cost,
need for information visibility, high
risks, need for closer relationships
with other members of the SC and a
globalized market
• Moreover, the research emphasize
the high pressure that the logistics and
SC managers face today due to the
complex and dynamic business
environment and the high cost of
inter-enterprises logistics processes
Flexibility in Times
of Crisis-2009 / An
extended edition of
PRTM’s “Global
Supply Chain Trends
2008-2010”
2009
PRTM
Consulting‘s
Managers of 350
enterprises in USA,
West Europe and Asia
• One to two managers consider that
the main hurdles in the pursuing of
profits are the variability of markets
and the inability of making reliable
forecasting of demand
• The majority of managers (more
than 85%) argue that the complexity
of markets and supply chains will get
higher the next years
• Moreover, there are 5 challenges that
the managers need to face today: 1)
Customers are less loyal and more
sensible to specific brands; this lead to
a high variability. 2) Companies look
for foreign markets trying to serve the
global customer. 3) Companies try to
reduce and control of cost. 4)
Companies / members of the SC have
to cooperate, and 5) the majority of
SC are not totally integrated
The European
logistics third party
industry in 2009: The
provider CEO
perspective
2009
Lieb and Lieb
(under the
support of
Penske)
10 CEO’s (Chief
Executive Officers) of
the largest EU 3PL
companies
• All the CEO’s argue that their
companies have limited profitability
while 6 of them state that their
companies haven’t achieved their
targets.
• 6 of them declare that their
customers moved their industries /
manufacturing units from China to
West and East Europe so as to
decrease their transportation costs
while 9 of them believe that this trend
will get higher the next years
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59
• 5 of them say that their companies
move to mergers and acquisitions the
last years
• 7 made job layoffs at 11.5%. Nine to
10 has made limited recruitments,
while only 2 to 10 reduce their
training programs
• 9 of them state that their companies
decrease their prices due to the
economic crisis
Global chief supply
chain officer strategy
2011
Eye for transport
Managers of major
companies
• There are 5 challenges that the
managers need to face today: 1)
Demand variability. 2) Ways to
reduce costs. 3) Visibility across the
SC. 4) Effective inventory
management, and 5) Increased
customers’ needs
• 41% declare that they won’t make
any new employments
• 24% keep low their work force
Furthermore, there are several research initiatives regarding the investigation of the effects of the economic
crisis in the Greek market. Even though these researches were not directly focused on the examined sector
useful conclusions have emerged regarding the trade activities which strongly interrelated to logistics activities.
Specifically (o rganizat ion’s websites: www.sbbe.gr/en/, www.gtp.gr, and www.sbtke.gr/)
According to the findings of the research that the Federation of Industries of Northern Greece (FING) had
carried out during May 15 and June 10 of 2009 the majority of companies in Northern Greece (more than 80%)
strongly believed that the economic crisis had negatively affected all the business activities.
During the same year another research by the Chamber of Small and Medium Sized Industries of
Thessaloniki produced similar results. Specifically, more than 50% of the respondents were pessimistic about
the future while the higher percentages came from the services sector (almost 70%).
The findings of the research that the Federation of Industries of Thessaly and Central Greece had
undertaken, at the first semester of 2011, confirmed the critical effects of the economic crisis on the Greek
market. More than 45% declared that there had been reduction in orders at 30%, while the 9.09% declared
reduction at 40%.
3 RESEARCH METHODOLOGY
This study is part of a large on-going research which has been conducted during the last 2 years. The
purpose of the main survey was to investigate the influence of the economic crisis to the logistics services sector
in Greece. The process of analysis revealed that the 3PL’s have been significantly affected by the crisis and
these effects have influenced all the main functional areas of the logistics management (procurement,
warehousing, inventory management, transportation and distribution) as well as the main logistics philosophies
and practices. These findings gave birth to two central questions:
To what extend and how did the crisis affect logistics management? Although the influence at global and
EU level is well documented from several previous researches (see Section 2), the investigation at national level
is an unexamined research territory.
To what extend and how did the crisis specifically affect the key functional areas of the logistics
management? The above question remains unclear.
To answer these research questions, one structured questionnaire (see Appendix 2) was used as a survey
instrument. It included a series of open and closed-ended questions, in a combination of structured and semi-
structured interviews. This approach, called “mixed method” or “mixed research”, was resulted in a co llect ion
of both quantitative and qualitative data. Descriptive statistics were employed in order to provide a basic
overview of the quantitative data. Qualitative data were analyzed with respect to their nature and the principles
of the analysis of such data.
The questionnaire was submitted to the logistics or operations managers of the Third Party Logistics
providers in Greece. The initial list of 3PL’s was taken from the o nline catalog of the e-journal of plant-
management online journal (www.plant-management.gr). This catalog consists of approximately 150 companies
that operate in this sector. Finally, 51 companies agreed to participate in this research. A corresponding number
of interviews were arranged with the managers of these companies from the 5th of September 2011 to the 25th
of March of the next year. There were 2 companies in which 2 managers were accepted to be interviewed; thus,
Dimitrios Folinas abd Dimitrios Aidonis
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the final number of the interviews was raised to 53, which can be considered sufficient. The questionnaire that
had been used included 19 questions and it was organized in the following 5 parts:
Part A: this part consists of questions that try to sketch the profile of the examined companies . It includes
questions about the place (town or area) of the company’s headquarters, the existence of branches and the
logistics services that the 3PL’s provide to their customers.
Part B: in this part managers were asked at first, to identify the effects of the economic crisis to the core
business activities, and second, particularly to the main logistics functional areas (procurement, warehousing,
inventory management and transportation and distribution).
Part C: this part includes questions focused on each of the above logistics areas. There were both open and
closed-ended questions so as to obtain a more complete view.
Part D: in this part managers were asked to make their predictions about the future trends (next 1 to 2
years) of their companies and the logistics services providers sector.
Part E: in this part we asked the managers to present the decisions they will be taking in the next 1 to 6
months regarding Logistics Management and Supply Chain Management issues in order to confront with the
negative effects of the economic crisis.
For all of the above, quantitative statistical analysis methods were applied except Part C in which both
quantitative and qualitative statistical analysis methods were conducted.
4 FINDINGS
4.1 Part A: Profile of the sample
According to the responses the majority of the companies are located in Attica (55 percent) while the rest
are located in Thessaloniki (33 percent) and other regions (such as Volos, Theva and Eveia). This was expected
because of the population of these areas, the high intensity of commerce activities and certainly because in both
of them the central ports, railway and aviation facilities of the country have their operations. Furthermore, 45%
of them have branches in other towns providing their logistics services to other geographical areas in Greece; for
example if the 3PL is located in Attica it has a branch in Thessaloniki and vice-versa. Moreover, most of them
(72%) provide logistics services to other countries such as to the Balkan countries, Italy, Russia and Turkey.
The above findings justify the expansive strategy of the examined companies and the central role of the Greek
companies in the above area.
According to the results (multiple answers per participant were allowed) the main logistics services that the
companies of the sample offer to their clients are: Transportation (88%), Distribution (88%), Warehousing
(83%), Customs activities (50%), Packaging (48%), Insurance services (42%), and Coding / Labeling (42%).
These finding are expected and aligned with the findings of the last ICAP sector report (2009).
4.2 Part B: General effects on logistics and supply chain management
Then, the managers were asked to identify the general effects of the economic crisis to the Logistics and
Supply Chain Management. According to the results (Figure 1) managers have applied more strict procedures
and criteria for the selection of customers (more than 60 percent indicated this as of a “Very high” or of “High”
importance). This is critical due to the fact that almost half of them have terminated the cooperation with
customers that have been proved inefficient during the financial crisis period. The reduction of prices for the
provided services to the market was reported as the second most significant effect (M=4.246).
Furthermore, the means of the following: the shrinkage of their customers’ base, the postponing or
suspension of investments and the overall reduction of operations were more than 3,9 (in a 5-point scale) so they
appeared to be important effects for the supply chain and logistics managers. On the other hand the reduction of
staff (both part-time and full-time) present the lower mean (Table 2).
Table 2: General effects on logistics and supply chain management (means)
Logistics and Supply Chain Management
Stricter selection of customers
Reduction of prices offering to customers
Shrinkage of customers market
Postponing or suspension of investments
Reduction of operations
Increase of competition
Termination of cooperation with inefficient customers
Increase of operations costs
Reduction of part-time staff
Reduction of full-time staff
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Figure 1: General effects on logistics and supply chain management (percentages %)
To the question “In which degree the main logistics functional areas has been negatively affected by the
current economic slowdown?” half of the respondents answered that all the functions have been significantly
impacted (as illustrated in Table 3 and in Figure 2). Procurement (more than 75 percent) and Warehousing
(more than 70 percent) seemed to be the areas that have been mostly affected.
Figure 2: General effects on key logistics areas (percentages %)
Table 3: General effects on key logistics areas (means)
Logistics area
Warehousing
Transportation and Distribution
Procurement
Inventory Management
4.3 Part C: Effects on specific logistics activities
Subsequently, managers were asked to concentrate to each of the following key logistics functional areas:
1) Procurement, 2) Warehousing, 3) Inventory Management, and 4) Transportation / Distribution in order to
assess how they have been affected by the economic crisis. At first, using closed-ended questions, they were
asked to determine the effect to specific and pre-defined effects at each area. Secondly, using open-ended
questions to express their opinion -but in this case- based in any other effects that they believe were significant.
Answers to Closed - Ended Questions
Procurement: More of the participants list the pursuit of cheaper suppliers (more than 90 percent agreed
that the effect was “Very high” and “High” with the mean of 5,341 in a 6-point scale) as the leading
consequence of the economic crisis in the Procurement area. They also reported the continuous monitoring and
performance measurement as the result of the reduction of the demand (cited by 85 percent with the mean of
5.00 in a 6-point scale). Table 4 illustrates the effects of the economic crisis in the Procurement activities
(means and percentages in the Likert scale).
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Table 4: Effects on specific logistics activities (means)
Area
Level of effect
Mean
Procurement
Finding less expensive suppliers
5,341
Continuous monitoring and performance measurement
5,012
Development of close relationships
4,571
Stricter selection of suppliers
4,380
Reduction of suppliers
3,855
Warehousing
Fewer commodities per order
4,557
Lower profits per order / per customer
4,442
Reduction of operations
3,800
Reduction of part-time staff
3,621
Increase of frequencies of receivings
3,322
Inventory
management
Drastic reduction of inventory
4,710
Prevalence of pull philosophy
4,222
Reduction of management costs
4,156
Inability of reliable demand forecasting
3,821
Non keeping inventory stock
3,541
Transportation and
Distribution
Reduction of orders size / lot size
4,988
Finding alternative transportation mean
3,980
Planning of distribution network based on the demand
3,436
Completeness is not the highest priority
2,915
In the Warehousing the responses were more widely dispersed (Table 5). “ Fewer co mmodities per order”
was the item that the managers believe it is the most significant effect of the economic crisis (55 percent).
Furthermore, one-third of respondents reported the lower profits per order / customer has been significantly
affected by the weakening of demand for goods (Table 4).
The radical reduction of inventory levels is the main result of the economic crisis according to the logistics
and operations managers. More than two-thirds evaluate it as “Very high” and “High”. The dominance of Pull
philosophy that transitions the organizations from forecasting demand to pulling based on actual customer
demand was their second choice. This was expected because Pull practices aims to reduce both cycle time and
inventory to improved customer service levels. Furthermore, more than 60 percent reported the reduction of
management costs as one of the most critical effect of the economic crisis in the Inventory Management (Table
4).
According to the responses (more than three to four managers) the reduction of orders and / or lot size is
the main effect of the economic crisis into the Transportation and Distribution area (Figure 7). The research for
other transportation means is the second most significant effect (more than 55 percent). On the contrary to have
a full truckload is not the highest priority (only less than 25 percent of the respondents believe that with the
mean of 2,915 as it presented at Table 4).
Answers to Open Questions
In order to have a clear picture regarding the impacts of economic crisis to the key logistics functions we
asked managers to provide their thoughts about how the daily activities and the corresponding decisions have
been affected. After synthesizing the answers of the respondents Table 5 is developed highlighting the key
findings.
Table 5: Effects on specific logistics activities (key findings)
Area
Key findings
Importance
Procurement
Partnerships with a small number of strategic suppliers
High
Prevalence of cost as the main criterion
High
Decline of the phenomenon of economies of scale
Medium
Warehousing
Implementation of Just-In-Time and pull practices
High
Drastic reduction of inventory levels
High
Raise of the frequency of orders and the receipt of smaller quantities
High
Inventory
management
Drastic reduction of inventory levels
High
Prevalence of pull philosophy
High
Unreliable forecasting of demand
High
Transportation and
Distribution
Find alternative and cheaper transportation means
High
Redesign of distribution networks
Medium
Need of higher capacities, facilities and expertise
Medium
It is stated that the most critical effect of the global crisis is the reduction of demand. According to Tanaka
(2009) and Yi (2009) every time that the G.D.P. is reduced by 1 unit the global trade is also reduced by 1 unit.
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Since the last 2 years the G.D.P. has fallen by 2 units the global demand has been analogically reduced. This
automatically led to the reduction of the quantity of products that are produced, transported, stored, distributed
and traced. Therefore, the reduction of demand led to the decrease of the logistics system as a whole. Regarding
each logistics functional area managers reported the following views:
Procurement
Three key impacts have been reported by the managers: first, their will to have a small number of strategic
suppliers, second the prevalence of cost as the main criterion for the selection of the suppliers and, third the
decline of the phenomenon of economies of scale (costing less per unit if many units are ordered). The
suppliers’ base is being reduced; the chase for better and cheaper suppliers is becoming a high priority, as well
as, the constant monitoring of their performance and the establishment of close (win-win) relationships. As a
manager argued “these relationships will support the collaborative planning and introduction of new products
and services in the markets and the sharing of risks”.
Furthermore, the majority of the respondents consider the cost management (cost reduction) as a number
one priority (or “key target” as one manager stated). Smaller nu mber of respondents identified the decrease of
the practice of economies of scale; maybe it would not be beneficial to longer-term competition to aggregate or
bundle all requirements together in a way that results in sourcing from a single supplier or a small supplier-base.
The majority of managers believe that China and India are still considered as the main markets for procurement.
This creates the problem of high transportation costs and lead times. At the same time, the trend of the de-
globalization is getting higher. According to managers many multinational companies move their manufacturing
facilities / plants and distribution centers to the West and/or East European countries in order to be close to the
areas of higher demand.
Warehousing
The implementation of pull philosophy and the practices of Just-In-Time, the drastic reduction of inventory
levels and the existence of close relationships between customers and suppliers lead to the raise of the frequency
of orders and the receipt of s maller quantities. Therefore, with decreasing rotation, decreasing amount of
additional services, and low stock levels many managers argued that “the warehouse space becomes only a
cost”. As a result -as most managers reported- the staff at the warehouses works more hours and the productivity
of warehouses is declined especially during peak times. Hence, managers try to find ways in order to increase
the productivity and, simultaneously, to minimize the operational costs of warehouses.
Inventory Management
During the economic crisis Greek consumers re-evaluate their spending habits. The decrease in their
consumption has led to a significant decline in national trade, severely affecting the logistics industry. Overall,
the crisis lowered production and reduced the need for transport and storage. The radical reduction of inventory
levels and the corresponding costs as well as the dominance of the pull philosophy are the two most important
impacts of the economic crisis in the inventory management tasks and decisions. Inventories are created based
on customers’ demand and not to set up safety stocks. The dynamic and volatile business environments and the
globalised market do not support reliable forecasting of demand. Although managers noted that they understand
the key role of demand forecasting, only a small minority of them noted that they plan to develop alternative
systems in order to predict the future demand. This reluctance to apply more sophisticated methods of demand
forecasting relies both on their inability to spend money (in order to hire specialized employees) and the
complex market situation, which makes difficult the forecasting of customers’ needs. As a participant explained
“It is difficult to predict the demand even for the loyal customers”. Since most of the customers attribute -due to
the economic uncertainty- higher importance to the price rather than to the other service relationship attributes,
it is difficult for companies to create customer loyalty and retention. Under such circumstances, the inventory
management becomes more difficult, especially for the companies located in the large urban centres, where the
competition among firms is greater.
Transportation and Distribution
Market demand (both consumer and business) for goods and services inevitably translates into higher
demand for transport and logistics services. Consequently, economic crisis caused decrease of trade volumes
and has a severe impact on the transport and logistics industry. Most managers pointed out the reduction of
orders’ size and the need of sma ll lots as the two most effects of the economic crisis to the transport ation and
distribution area. Most 3PL’s try to find alternative and cheaper transportation means and to redesign their
distribution networks in order to be closer to the areas with the higher demand.
Moreover, the majority of the managers recognize the constant increase in fuel costs and the toll prices as
two of the most critical factors that affect negatively the transportation and management activities. It is worth
stating that 2 managers predict that the possible rise of the outsourcing approach will lead to the need of higher
Dimitrios Folinas abd Dimitrios Aidonis
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capacities, facilities and expertise regarding warehousing and especially the transportation and distribution. This
will probably increase the mergers and acquisitions of SME’s in the examined sector. Furthermore, the inability
to find capital and get funded by the banks will lead to the shrinkage of the sector.
4.4 Part D: Predict the future trends of the logistics services providers
In this part managers were asked to identify their predictions and expectations about their companies and
sector in the next 2 years.
First, to the question “Which are your predictions for your company for the next 1-2 years?” almost 70
percent of the managers reported that the competition will increase, as well as, the transportation costs (62
percent) due to the increases of fuel prices. They also believe that there will be a shrink of activities / operations
in the Greek market due to the overall shrink of demand. Less than half of respondents expect to outsource some
of their functions and to concentrate to foreign markets. Next to that the decrease of the number of suppliers is
considered to be as the next most significant expectation (Figure 3).
Figure 3: Predictions for 3PL’s for the ne xt 1-2 years
Next, managers were asked to make their assumptions about the logistics services’ sector for the same -as
the above question- time-period (1-2 years). As illustrated in Figure 4 the vast majority of the respondents
(almost 83 percent) report the shrinkage of the sector as the most expected fact that will happen in the next few
years (while no one believe that the sector will be expanded!). Moreover, managers argue that there will be an
increase of the demand for specialized services (almost 750 percent). This, apart for other reasons, will raise the
number of the mergers and acquisitions at the examined sector (65 percent). Most managers claim that the
consolidations will support their companies to expand their companies’ capabilities across many sectors and
regions. Some managers of SME’s argue that for their companies the consolidation may be crucial to their
survival.
Figure 4: Predictions for your business sector for the next 1-2 years?
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65
4.5 Part E: Strategic decisions
In the last part of the questionnaire we asked managers to identify the decisions they will be making in the
next 1 to 6 months about Logistics Management and Supply Chain Management issues in order to confront with
the negative effects of the economic crisis.
Since multiple answers per participant were allowed, the managers proposed a number of practices and
approaches. Ninety percent reported that the decisions that will be taking in the next 6 month will be
concentrated to the improvements of the internal functions in terms of cost, time, errors and quality (Figure 5).
That means that Logistics managers concern themselves with the goal of continuous improvement, which can
have a significant impact on a company's bottom line. A significant part (70 percent) is going to monitor and
control the suppliers with awareness. Almost one-third will decide for the decrease of overtimes (60 percent).
Provision of new logistics services and the cut off prices are follow as there are stated by half of the
respondents.
Figure 5: Decisions that managers will make in the next 1 to 6 months about Logistics Management and
Supply Chain Management issues in order to confront with the negative effects of the economic crisis
Finally, in the question ”In which areas the strategy of managers’ companies about Logistics Management
and Supply Chain Management issues will concentrate to”, almost all of them report the decrease of operation
costs. Next to the above, the optimization of the logistics processes and their continuous performance
measurement are both high on the 3PL’s agenda. Moreover, internal auditing and the alignment of the supply
chain decisions with the strategy of the company are of a great interest. All the answers are presented in Figure
6.
Figure 6: Over the next two years, the strategy of the 3PL’s about Logistics Management and Supply
Chain Management issues will concentrate to:
5 CONCLUSIONS
The findings of various researches continue to validate the Logistics service providers’ critical role in
today’s global and national markets. During the last decades the supply chain has become more complex and
fragile. The outsourcing paradigm can bring many benefits to the effective and efficient management of
companies’ supply chain and today -more than ever- 3PL’s are not just contractors they are strategic partners.
Dimitrios Folinas abd Dimitrios Aidonis
66
The global economic crisis has led to many changes of the logistics service providers’ sector and the
Supply Chain Management in general. However, at the same time it has encouraged managers of both fields to
find new ways and practices to address current concerns and position themselves for the recovery. So, there is a
two-fold paradox: downturn has drastically affected the Logistics and Supply Chain Management but
simultaneously the Logistics and Supply Chain Management can help companies to overcome the problems.
In this paper we investigated the first part of the above paradox by trying to identify the effects that the
economic crisis has on the logistics services sector in Greece. The key findings of a research among managers of
3PL’s are the following (Most of them are aligned with the findings of the previous researches that were
presented in the Section 2):
Logistics providers are stricter to the selection of their customers. That simply means that their managers
seek to cooperate with effective and more reliable customers who have the ability to fulfil their financial
commitments as the problem of cash liquidity is getting more and more intense. Further more, 3PL’s provide
cheaper services so as to be aligned with the press of their customers and the market. They aim to improve their
competiveness in a very dynamic business environment. Therefore, shrinkage of their customers’ market is a
reality because 3PL’s cannot maintain the required balance among cash flow’s inputs and outputs.
As a result, logistics providers in Greece restrict their business activities and investing. They are
concentrating to the core logistics and business activities for their survival. Some of them reduce their staff both
part-time as well as full-time. Similarly, Logistics providers seek cheaper suppliers but on the other hand they
are selecting them under stricter criteria and continuously monitor their performance! Even if that sounds
strange this is common practice during an economic crisis period when companies try to balance their cost with
the level of quality they offer.
In warehousing the main effect of the current economic slowdown is the need for less products /
commodities per order and per customer. Instead of logistics providers in West European countries who are
facing a radical increase of the frequencies of the receipts that makes more intense the problem of reduced
volumes that are transported or distributed. Moreover, companies in the logistics sector try to reduce their
inventory levels by completely applying the Pull philosophy and Just-In-Time practices. Managers prefer not to
keep safety stocks; instead they try to safeguard the amount of their sales. Logistics providers as they battle
against the reduction of lot sizes, the high fuel prices and tolls are planning to re-design their distribution
strategies re-plan their distribution networks and try to find cheaper transportation means.
Managers are not optimistic about the future of both their companies and of the overall sector; they believe
that the sector will be significantly decreased in the next couple of years and the competition will be much
higher. For example, they predict that the demand of the Greek market will be decreased more. Moreover, they
believe that the number of the consolidations will be significantly raised.
Finally, there are two main strategic aims for the companies of the examined sector: first, the performance
measurement and optimization of their processes and functions, and second the decrease of their operations
costs. These findings were expected because they are also the main objectives of the Logistics and Supply Chain
Management. Decrease of overtimes is proposed by two-third of the companies. This may cut off costs but at
the same time will increase the workload. Another interesting result is their unwillingness to invest in new
systems, infrastructure for supporting Logistics Management and Supply Chain Management activities and
tasks.
To conclude, it is vital for all companies that wish to keep on existing, to occupy a significant part of the
market, to maintain a competitive advantage over rivalry and to make a considerable profit; they also need to
understand and realize that investing money on logistics and supply chain management can be a lifesaver,
especially in cases when domestic and foreign markets are in danger that the economy of a country or even the
global and social life is threatened.
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