Int. Journal of Business Science and Applied Management, Volume 10, Issue 1, 2015

The Effects of Collaboration on Logistical Performance and

Transaction Costs

Hugo Tsugunobu Yoshida Yoshizaki

Department of Production Engineering. Polytechnic school at University of São Paulo

Av. Almeida Prado 128, travessa 2 - 2º andar. São Paulo – SP/Brazil. Code – 05508-070

Phone: +55 11 30915450, Extension 407

Email: hugo@usp.br

Linda Lee Ho

Department of Production Engineering. Polytechnic school at University of São Paulo

Av. Almeida Prado 128, travessa 2 - 2º andar. São Paulo – SP/Brazil. Code – 05508-070

Phone: +55 11 30915450, Extension 404

from the viewpoint of retail sector suppliers. The methodology consists of an empirical study conducted over

nine months in the logistics department of a large Brazilian supermarket retailer and a survey of 125

representatives of 90 manufacturers. The results show collaboration contributes to an improvement in logistical

performance related to urgent deliveries and deliveries that occur during periods of high demand. Interpersonal

collaboration and joint actions contribute to the reduction of uncertainties among the participants. These joint

actions, together with strategic collaboration, contribute to an increase in investment in specific assets, such as

dedicated production lines or specialised vehicle fleets to serve partners. The study provides an analysis of

logistical performance and transaction cost elements not previously investigated, including urgent deliveries and

deliveries during periods of high demand, contract negotiation and renegotiation, waiting time for agreements to

be reached, contingency logistics planning, and various cultural, psychosocial and geographical aspects of the

Acknowledgements: This work was supported by CAPES

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1 INTRODUCTION

Studies of collaboration and operational logistical performance have been extensively reported in literature

on supplier–retailer relationships (Sheu, Yen, & Chae, 2006; Simatupang & Sridharan, 2005; Xing, Grant,

McKinnon, & Fernie, 2011; Vlachos, Bourlakis, & Karalis, 2008; Vlachos & Bourlakis, 2006) and supplier–

retailer–distributor–wholesaler relationships (Whipple, Lynch, & Nyaga, 2010; Nyaga, Whipple, & Lynch,

2010). Collaboration and performance in the supply chain are key topics in supply chain management (SCM)

collaboration is positively correlated to logistical performance; collaboration positively affects asset specificity

and negatively affects uncertainty. Collaboration reduces transaction costs (Cao & Zhang, 2011) because

specific assets increase with contract frequency and higher levels of interdependence (Bunduchi, 2008).

Negotiated volumes are greater, information exchange is more intense, and contract renegotiation is facilitated.

Previous researchers have investigated many elements related to collaborative relationships, logistical

performance, and transaction costs. Our findings are in line with their qualitative results. For example, they find

trust is an important determinant of the success of a relationship (Vlachos et al., 2008), and leads to

improvement in logistical performance (Whipple et al., 2010). Trust is the unique element that contributes to the

relationship (Vlachos & Bourlakis, 2006). Nyaga et al. (2010) examine a collaboration model from the

viewpoints of both buyers and suppliers. Results show that buyers focus on relationship outcomes and suppliers

‘waiting time for agreements to be reached,’ and ‘contingency logistics planning.’ It may be useful to suppliers

and retailers to understand how these elements are modified by degree of collaboration (Xing et al., 2011). We

expect a high level of collaboration results in less time lost to renegotiation and resolution of logistical

contingencies and that it correlates positively with extra deliveries. Simatupang and Sridharan (2005) have

investigated two similar non-conventional elements: ‘agreements on order changes’ and ‘delivery guarantee for

a peak demand.’ We use the collaboration model developed by Vieira, Yoshizaki, and Ho (2009), based on

strategic, tactical, and interpersonal collaboration, to examine the influence of collaboration on the logistical

performance of suppliers serving large retailers and the transaction costs involved.

Performance depends on supply chain integration (SCI) and is strongly based on a culture rooted in

teamwork, cooperation, information sharing, interdependence (Didonet, Frega, Toaldo, & Diaz, 2014), and

distances between partners within Brazilian territory that create difficulties in attending meetings, developing

projects, and developing close relationships (De Leeuw & Fransoo, 2009). Cultural differences between local

and foreign partners may also increase instability in development of collaborative business (Meschi & Riccio,

2008).

This paper aims to assess the effect of supplier–retailer collaboration on logistical performance and

transaction costs. It also aims to shed light on cultural, psychosocial, and geographical aspects of the Brazilian

supplier–retailer relationship. We use an in-depth case study of a retailer and its suppliers, as well as multiple

regression analysis, to investigate the effects of supplier–retailer collaboration on logistical performance and

transaction costs, from the viewpoint of suppliers.

We contribute to literature on supplier–retailer relationships by studying logistical performance and

José Geraldo Vidal Vieira, Hugo Tsugunobu Yoshida Yoshizaki and Linda Lee Ho

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2 LITERATURE REVIEW

Barratt (2004) classifies collaboration elements as strategic, cultural, and intrinsic. Strategic and cultural

elements are the most important. Among these elements, the main focus of SCM research has been on

collaborative culture based on trust, information exchange, and effective communication (Whipple et al., 2010).

Simatupang and Sridharan (2005) and Kanter (1994) define complementary attributes and Vieira et al. (2009)

sort them into three dimensions: (1) strategic elements, referring to an integral aspect of the goal of business

partnerships and consisting of sharing inventory information and awareness of the partner’s logistical difficulties

and strategies, (2) elements of interpersonal integration, consisting of trust, reciprocity, flexibility, and

interdependence, and (3) elements of tactical integration, referring to managers, an individual, or a dedicated

team, working on specific projects or joint activities (e.g., working for the resolution of logistical contingencies

or the establishment of information systems for automatic data exchange). Tactical integration elements also

organisational heterogeneity. Our research shows communication skills are important; contacts between

suppliers and retailers happen in the same places and in frequent meetings, balancing logistical indicators in the

face of differing cultures. In accordance with Dyer (1997), when cultural aspects surround the business

environment, rules and operational proceedings should remain unaltered to achieve efficiency in both the

exchange of information and operations (personnel and machinery).

According to Ring and Van de Ven (1994), interpersonal contact among agents establishes positive

conditions for negotiations and facilitates the execution of joint actions. As noted by Zaheer, McEvily, and

Perrone (1998), effective cognitive relationships get incorporated into the transaction environment over time.

Therefore, psychosocial aspects of relationships are studied either at the beginning of the transaction, through

cultural and interpersonal knowledge, or while the relationship is nurtured by the partners. Based on

in knowledge of systems and technology, culture, and standards (Pfhol & Buse, 2000).

2.2 Logistical performance elements

Elements of logistical performance are divided into two theoretical groups: ‘order-winning’ and

‘qualifying’ (Slack, 1994). The qualifying group encompasses common elements of logistical performance, such

as the need to meet high retailer standards (Slack, 1994). It represents the basics of good supplier service, such

as on-time-in-full delivery, availability of products, error-free ordering and delivery, fulfilment of delivery date

and time, frequent delivery, resolution of damaged orders, high order fill rate, and adequate minimum stock

levels. The order-winning group encompasses distinctive logistical performance elements that, according to

Slack (1994), provide a crucial advantage compared to common elements and are the main thrust of

competitiveness (“urgent delivery” and “order fill rate during periods of high demand”).Typically, the order-

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Table 1. Logistical performance elements – qualifying and order-winning

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performance, retailers and their suppliers must also share commercial information and information about such

factors as vehicle capacity to deliver, target inventory turnover, order frequency, lead times, product availability,

vehicle availability, and supplier capability in working with urgent deliveries or during peak seasons (Vieira et

al., 2009). With regard to interpersonal collaboration, relationships that include trust, commitment, cooperation,

common interests, and sincerity (Mentzer, Foggin, & Golicic, 2000) lead to improvements in service levels and

cost reductions related to inventory, transportation, and order processing. Accordingly, we derive the following

hypotheses:

H1a: Strategic collaboration has a positive impact on high level of logistical performance.

H1b: Tactical collaboration has a positive impact on high level of logistical performance.

H1c: Interpersonal collaboration has a positive impact on high level of logistical performance.

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By analysing Japanese and American automotive chains, Dyer (1997) concludes that increasing

collaborative efforts through joint actions and sharing information between partners reduces transaction costs

and increases specific asset investments. However, increasing specific asset investments does not always result

in greater transaction costs, because partners share operational gains and costs.

According to Muckstadt, Murray, Rappold, and Collins, (2001), tactical collaboration reduces uncertainty

in a relationship. Sharing information (e.g. Electronic Data Interchange - EDI) contributes to improvement of

information processing capabilities and thereby reduces uncertainty and transaction costs (Tan, Kannan, & Hsu,

2010). Because there are many suppliers and few large retail chains, the purpose of joint actions (from the

retailer’s point of view) is to gather the players to improve logistical performance and negotiation. Many

companies create a favourable environment for long-term investments and lower uncertainty when they

acquired while trust exists. Trust in a relationship is sufficiently strong to reduce safekeeping (Zaheer &

Venkatraman, 1995) and negotiation costs. We derive a second set of hypotheses as follows:

H2a: Strategic collaboration has a positive impact on high asset specificity.

H2b:. Tactical collaboration has a positive impact on high asset specificity.

H2c: Tactical collaboration has negative impact on uncertainty.

H2d: Interpersonal collaboration has negative impact on uncertainty.

4 METHODOLOGY

The methodology consists of a survey and a case study. Detailed qualitative analysis, combined with the

rigor of quantitative analysis, allows for in-depth investigation (Voss, Tsikriktsis, & Frohlich, 2002). Our

elements identified by our literature review (collaboration, logistical performance and transaction costs

elements). The literature review also guided our construction of the interview protocol used with retailer and

supplier managers during two annual seminars; to increase content validity, we transcribed the interviews and

had respondents review the interview notes.

Previous studies have focused on supplier–retailer performance (Sheu et al., 2006; Simatupang &

Sridharan, 2005). Raskovic et al. (2012) have investigated supply relationship performance from the supplier

perspective using elements based on transaction costs, collaboration, and business performance. However,

further study of a range of companies in the retail channel is required to explain in-depth relationships related to

wasted time in contract renegotiation, waiting time required for the resolution of logistical contingency, and

dyadic logistical problems and measures. To understand these factors, we followed more than 50 meetings and

The case study approach gave us the opportunity to collect data based on multiple methods, such as

interviews, observations, logistical performance indicator reports, technical visits, and interviews with more

than one informant from a different culture. This approach increased the validity and reliability of our study .

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4.1 Survey sample and procedures

Therefore, the analysis unit consists of the supplier companies.

Several pre-tests were run to check the final instrument (Forza, 2002). Next, to take advantage of the

retailer’s fixed physical location, a questionnaire was distributed to a total of 125 respondents (supplier

representatives) following on-site meetings with the retailer. To avoid bias in the study, respondents were asked

to evaluate other large retailers. Opinions came directly from individuals (not from their companies). Each

respondent was asked to choose one of their eight largest customers (measured by sales), and then evaluate the

selected customer according to collaboration, logistical performance, and specific transaction cost elements.

Retailer representatives did not participate in the survey; only supplier personnel took part.

4.2 Survey data analyses

cost elements associated with asset specificity and uncertainty are the dependent variables. The dependent

and transaction costs groups (Hair, Black, Babin, and Anderson, 2009). The collaboration variables resulted in a

reduction of the number of factors analysed by Vieira et al. (2009). In our study, collaboration variables were

comprised of five factors: strategic collaboration (CO1), joint actions (CO2), sharing of logistical costs and

gains (CO3), sharing of logistical and commercial Information (CO4), and interpersonal collaboration (CO5).

The dependent constructs are Higher Logistic Performance Factor (HPLPF), Uncertainty Factor (UF), and Asset

Specificity Factor (ASF).

These factors allowed us to use multiple linear regression analysis to measure the effect of collaboration on

logistical performance and transaction costs. Logistical performance and transaction costs were used as

dependent variables, and collaboration elements as independent variables in the regression. SPSS (Statistic

Package for Social Study, v. 20.0) software was used to obtain the regression models.

dimensions: long-term relationships, cooperative behaviour, joint improvement, information planning, physical

integration, and communication.

Table 3 shows the characteristics of suppliers who revealed their perceptions of large retailers (including

the retailer subject of the case study).

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The manufacturers (suppliers) of consumer packaged goods (CPGs) are national and multinational firms;

their sizes range from medium to large. Their annual revenue is drawn from medium and large retail firms, with

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technical visits. In contrast, the commodity sector, with few SKUs, is characterised by a high turnover ratio and

high storage costs. In addition, commodity products generally originate from an average distance of

approximately 1,000 km (in the south of the country) and are transported by road; distance adversely affects

logistical performance, creating difficulties related to delivery error, delivery delay, damage of orders occurring

director, “The delivery freight costs may be over 15% for a large retailer chain due to extra costs with

Commodity and electronic products typically originate from long distances. There are no regular logistical

meetings between the partners that involve the managers at both companies (retailer and supplier), and there are

no technical visits between these mainly multinational firms (41.6% commodity and 35.2% electronic). In

contrast to claims in literature that the history of the relationship involved may be important to the transactions,

our research shows this may not always be the case. In our study, according to the retailer’s logistics

coordinator, “The distance increases the safe stock. If the service level of the competitor is better than mine, I

will look for a new alternative in order to reduce my costs with these stocks.” In this case, the commodity

supplier to the retailer has had a good relationship with this retailer for approximately 20 years. Therefore, a

good logistical performance can be independent of the length of the relationship because the retail chain seeks

the lowest price and highest logistical efficiency available. According to the commodity supplier’s manager,

time windows, new product lines, out-of-stock products, availability of vehicle fleets, and demand levels.

According to a supplier informant, “These meetings are relevant to share information, to discuss logistic

problems and respective resolutions, to align objectives with our partner.” In business meetings, new projects

emerge from natural environments where there is trust, previous willingness to make agreements,

interdependence among partners and top management, and involvement in defining logistical agreements. Trust

may be significantly improved by effective communication. In several meetings among the partners, we noted

that cultural and psychosocial aspects are important in the retailer–supplier relationship. If the partners establish

joint social activities, such as inviting each other to attend sporting events and seminars, and if they are open to

each other, willing to hear criticism and express their opinions, their behaviour leads to increased strategic,

tactical and interpersonal collaboration. It results in a streamlining of logistical transactions, transparency in

dyadic logistical problems. On the other hand, a lot of data that we share with other is not available because we