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IJPDLM 36,3

Linking financial performance to strategic orientation and operational priorities
An empirical study of third-party logistics providers
Jeff Hoi Yan Yeung
Department of Decision Sciences and Managerial Economics, Faculty of Business Administration, The ChineseUniversity of Hong Kong, Shatin, People’s Republic of China

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Willem Selen
Macquarie Graduate School of Management, Macquarie University, Sydney, Australia

Chee-Chuong Sum
Department of Decision Sciences, NUS Business School, National University of Singapore, Singapore, and

Baofeng Huo
Department of Decision Sciences and Managerial Economics, Faculty of Business Administration, The ChineseUniversity of Hong Kong, Shatin, People’s Republic of China
Abstract
Purpose – Aims to investigates the relationship of strategic choices of pure cost-, pure differentiation-, or a combination-strategy on a composite measure of financial performance for third-party logistics (3PL) providers in Hong Kong. In addition, it seeks to identify the importance of operations priorities underlying therespective adopted strategy, as well as the importance given to future competitive challenges for each strategy. Design/methodology/approach – Uses cluster analysis, ANOVA. Findings – Logistics service providers classified to follow different strategies report different financial performance, with companies adhering to the combined strategy of cost and differentiation performing best, followed by puredifferentiation companies, which in turn outperform pure cost-, commodity driven-companies. Research limitations/implications – Future research may be widened to include customer, and not solely competitor, perceptions. Further studies could elaborate on technology adoption, information sharing, strategy formulation, operations practices, and benchmarking. Other studies could focus on thedifferences between high and low performers in terms of business performance, and the processes that enable low performers to become high performers; as well as comparing logistics strategies and practices between different countries.

International Journal of Physical Distribution & Logistics Management Vol. 36 No. 3, 2006 pp. 210-230 q Emerald Group Publishing Limited 0960-0035 DOI10.1108/09600030610661804

This research was supported by the Li and Fung Institute of Supply Chain Management and Logistics.

Practical implications – Third-party logistics providers, solely competing on cost and offering basic services only, need to differentiate to gain improved financial performance. Logistics companies can improve along multiple operational dimensions to achieve competitive advantage in themarketplace. Research identifies operational areas to be emphasized to drive strategy according to strategic orientation, as well as generic factors that will drive future logistics management in Hong Kong. Originality/value – Linking perceived financial performance to strategic choices of pure cost-, pure differentiation-, or a combination-strategy for 3PL providers in Hong Kong. KeywordsOperations management, Third-party vendors, Logistics data processing, Financial performance, Hong Kong Paper type Research paper

Linking financial performance

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Introduction Over the past decade, third-party logistics (3PL) providers have extended their scope beyond traditional transportation and warehousing activities to also include procurement, distribution, inventory management, packaging,manufacturing, and even customer services (Titone, 1996). Globalization, lead time and cost reduction, information technology, outsourcing, and ever increasing customer expectations are some of the reasons that have contributed to changes in the logistics landscape. Companies nowadays are realizing that they can no longer compete as stand-alone entities, and are better off as part of an...