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In the past decade, logistics has always been a supporting function for production and consumption. From the very beginning people are delivering their mails and message towards the destination address through animals. The most well-known is the pigeon. Homing pigeons were actually very useful. They could actually be trained to find their nest so they could always find their way back. They have been used during the world wars, by sending the letters to base if that was where their trained home was. (Couriers, 2016) The rapid growth of technology and improvement on the transportation, there are more and more substitutions on the delivering and logistic services provider. These have bringing up the convenience towards the people and society which need not required a longer lead time to send out those parcels and mails towards the destination address.

Logistic service is a kind of process that including with planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods. It includes not only with the services, also with related information from the point of origin to the point of consumption, for the purpose of conforming to customer requirements.  (BARCELOC, 2014) For the traditional courier service companies, functions are only considered as a cost. However, since the 1990s, this perception started to change in the marketing principle to determine the capacity of courier service leading to greater customer satisfaction level. (Jessica Sze Yin Ho, 2012) Meanwhile, the courier services industry in Malaysia is beginning to experience the mounting competition since the entry of the first foreign courier service provider into the country, DHL in 1970s. (GmbH, 2011)

Period Development

Prior to the 1980s Logistics was primarily concerned with the outbound flow of finished goods and services, with an emphasis on physical distribution and warehouse management. As a managerial activity, logistics focused on its role to support an organisation's business strategy and to provide time and place utility.

During the 1980s The industry globalisation and transportation deregulation led to the expansion of logistics beyond outbound flows to include recognition of materials management and physical distribution as important elements. In 1986, CLM (now CSCMP) defined logistics as 'the process of planning, implementing, and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information flow from point of origin to point of consumption for the purpose of conforming to customer requirements'

During the 1990s Logistics was defined as 'the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory and related information flow through the organisation and its marketing channels'. The definition was changed as a result of accelerated market changes due to shrinking product lifecycles, demand for customisation, responsiveness to demand, and increased reliance on information' (Christopher, 1998).

During the 2000s These years experienced further changes as to how logistics is defined. Development in international trade, supply chain management, technology and business process re-engineering generated a need to re-evaluate the logistics concept. As a result, in 2001, it was defined as 'that part of supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customer requirements'.

Table 1.1 The Development of Logistics Management

Source: (Gundlach, Bolumole, & Eltantawy, 2006)

No doubt, customer satisfaction is important for the overall. It is to measure how the products and services supplied by a company meet or surpass a customer's expectation. Also it is provides marketers and business owners with a metric that they can use to manage and improve on their businesses. (Beard, 2014) Therefore, logistic service provider need to benchmark their service quality in order to fulfil the consumer desire and needs. To meet customer expectation that is a must so that can create a great prestige of company in between that also able to gain more on the customer loyalty towards their service quality.

1.1 Research problem

A study by McKinsey and Company (2011) highlighted about the unclear communication between logistics services providers and users lead to business interruption is one of the challenges. Before that, the logistic service providers' management is the outsourcing of logistics operations to a third party. Companies, or clients will choose for these third parties on processing the all the logistics services. These logistic service providers may provide logistic services to one or more clients at any given time. Also clients may choose to outsource a portion, or all of their logistics services to one or more logistics service providers. When sending the information to logistics service providers, the client communicates the receipts or shipment to the logistics service providers, which then runs the transaction of behalf of customers. Therefore, the client may be buyer or seller for a transaction. (Nurul Izzah Mohd Shah, 2015) In between there have many filtrations process and somehow will influence on the information accuracy such as the origin and destination details, clients' basic information, the weight and etc. Therefore logistic provider need to figure out a better solution so that able to maintain the information accuracy and genuine.

Moreover, Logistics management cost indicates the performance of logistics management, efficiency level and its competitiveness. Despite of its significance, current state of logistics cost accounting and management in Malaysia has not properly addressed and the challenges surround logistics cost measurement remains incoherent (Sahidah et al., 2013). There is lack of uniformity in the definition of logistics cost or the method used in the calculation of logistics cost. In many cases, the reported logistic costs of companies are defined differently even within the companies of the same business. (Nurul Izzah Mohd Shah, 2015) Frequently, the cost of logistics management differs more than justified by their logistics activities performed. Thus, the definition of logistics management cost and method to calculate logistics cost remain incoherent. Therefore, it is difficult to compare the findings. Besides, it also leads to more complexities in cost of logistics management measurement and benchmarking process (Sahidah et al., 2013).

So, the logistic service provider need to provide and find out the alternatives way to resolve the current situation in order to gain competitive advantages among other courier services

1.2 Problem Statement

The establishment of competitive advantages among the other courier services in Sungai Petani that able to capture customer attention towards the company. The logistic service providers are required to improve on the service quality in order to maintain the customer reliability and integrity on their company. It is important that logistic service company need to identify the service quality that provide to their clients as different kind of service that will impact on their options on the logistic provider.

1.3 Research Objective

' To identify the impact of logistic service performance towards the customer satisfaction level.

' To investigate the impact of logistic service challenges towards customer satisfaction level.

' To identify the impact of the logistic service quality on customer preference for the logistic provider.

 

1.4 Research Question

' What is the impact of logistic service performance towards the customer satisfaction level?

' What is the impact of logistic service challenges towards customer satisfaction level?

' What is the impact of the logistic service quality on customer preference for the logistic provider?  

1.5 Scope of Study

This research is aims to study the impact of the logistic service quality on the customer satisfaction in Sungai Petani, Kedah. Sungai Petani was chosen as the location for the study due to the fact that it is the second largest city in Kedah Darul Aman. Over the past few years, Sungai Petani had been experiencing a rapid growth and developmental progress (Citizen: Sungai Petani Municipal Council, 2014). Hence, the main purpose of the research is to understand on the logistic service quality that affecting on the customer reliability and satisfaction level.

1.6 Significance of Study

The findings of the research can be used as a guide for the logistic forwarder top management on how to improve and gain competitive advantages compare with others. Besides, this study also can identify further on the customers' preference and concern while choosing on their logistic providers. Further that also can understand which behaviour and services that able to influence on customer integrity and satisfaction.

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

Service has intangible feature which is unlike the goods and products that can be touched and seen. It is a series of activities of a person or an organization that delivering the value to another party or person. It has the characteristic that becoming extinct after providing the service and has corresponding time of supply and demand. The logistic service quality has been defined as the level of subjective expectation of received service through comparison of level of service expected by customers before supply and sensed level after receiving the actual service. (Il-seok Sun, 2016) Logistics service quality is satisfying the demand of customers who receive logistic service in which it is a significant tool that can lead success of company by increasing firm flexibility and improve level of service supply that it can be considered as a essential factor to secure competitive advantage among competitive firms. (Stank, 1999)

Most researchers realized the importance of the satisfaction and looked into the importance of customer satisfaction. It is often defined as the customers' post-purchase comparison between pre-purchase expectation and performance received. Satisfaction is the emotional reaction to a specific product or service experience, and these emotional reactions come from the disconfirmation of a consumer's perceived performance of product or service and his or her expectations of performance. (Sze Hui Chin, 2013) There are some inconsistency exists across the findings on quality perception and customer satisfaction towards logistic service quality, there is considerable evidence that service quality perception is among the antecedents factors that influence customer judgment of satisfaction. This theoretical perspective portrays customer satisfaction as a holistic construct resulting from judgment about a variety of factors. In addition, an array of effort in service quality research explored its relationship with satisfaction in logistic environment. (Bienstock, 2010) These researchers include research on physical distribution on by determining the logistic service quality dimensions that influence customers' satisfaction in courier service industry focusing on Timeliness, Accuracy of order, Logistic Security Solution. (Jessica Sze Yin Ho, 2012)   

2.2 Logistic Service Quality

2.2.1 Timeliness

Based on the customer value theory, timeliness is among the essential elements in the relationship between logistic provider and customers. Timeliness refers to whether orders placed are delivered on time as promised. (Yu, 2010) It is essential as it helps in reducing the overall operation process in terms of times between service stops. It is found that the customer satisfaction can be further enhanced given the availability of flexible timeliness based on demand. According to Xu and Cao, (Xu, 2010) this variable is measures the average effectiveness and success of a courier provider when they received customers' orders. It is also involves the accuracy of billing, accuracy of record keeping and the completion of service at designated time.

Moreover, it is very important that the company need to meet the demands stated in a particular order in terms of quality and quantity upon arrival. By the way, they also need to double check on the parcels and packages, once there are any damages of the outer box, they are required to repack the whole box. Also there will have exception case which the inner package and outer box that is under damage status and hence they need to either refund the money back to the sender or provide other rebate vouchers so that can soothes down on their emotional. Else, these complaints were brought forward to the top management and will cause further issue and cases in the firm. Further, this will lead on the customer dissatisfaction and prompt a switch to the other competitors in the industry too. (Jessica Sze Yin Ho, 2012)

Subsequently, all these issues are interrelated. Hence, the revenue and profit of the company will be impact and cause the other pressure occurs among the team in the firm. The employee will feel anxious about their work and result in the organization if there are too much of negative compliance is keep on boosting to their company. Therefore, a proper management and training are required to provide to all the employee when managing the parcels in order to provide a qualified service to all their value clients. The accuracy on the timeliness is important for all the logistic service since that is the promise made towards their clients. Unless it is happened with natural disasters such as flood, landslide and others which may cause the delay during the delivery services. (Thai, 2013)

2.2.2 Accuracy of Order

There are another relation to measure upon the quality in the logistic industry. It is interrelated between the personnel and customers which also contributing in the customer satisfaction level. (Xu, 2010) Lu, Tu & Jen (Lu, T., Tu, R., and Jen, W., 2011) brought forward the idea of switching the barriers in addition to personnel competence as a pair in a model in examining behavioural intentions to address the possibility of customer switching to a competitor. The employee are required to improve on the accuracy on getting the orders details by checking and make on double confirmation with the clients before proceeding with any transaction and delivering process.

The right quantity, right product as well as the right price in order delivered that mandates accurate the invoices to be provided. (Hsiao, 2010) People somehow will made the mistakes unintentionally too. Thus, before proceed and begin with any of the delivery process, the employee is need to ensure all the quantity, products, weight and destination address are correctly tagged as the products weightage and the details are wrongly input will cause with different charges. (Jessica Sze Yin Ho, 2012) The order accuracy are important to ensure the smoothness of the delivery process. The logistic provider are following with the details that provided by the clients and customers and charge accordingly.  In order to reduce the customer switching to other competitors, the accuracy of data should be focused and be consistent so that can retain with more customers and gain higher trustworthy among others. (Babar, 2015)

2.2.3 Logistic Security Solution

The logistics companies should stay afloat by implementing the strategies for better network and data security. There are several kind of practices that can be done from the logistics companies which has been listed as below:

2.2.3.1 Network Security

Firewalls act as a filter between the company's network and internet service provider (ISP), as they work to inspect all traffic going in and out of the overall organization'and they are just one component of strong network security. To be adequately protected, both wireless and wired networks require (at minimum) properly installed and configured firewalls, so bringing on a certified network engineer to set up the network security is highly recommended. (Sunol, 2015) The security on the data also is protecting on the clients' privacy and details that being expose to third party.

2.2.3.2 Wireless Security

Wireless data is transferred in waves that naturally want to extend beyond the point of physical boundaries, such as warehouse walls. Hence, logistic company must ensure the wireless access points are properly secured. Wireless security protocols (such as WPA and/or WPA2) must be configured to encrypt and protect data in transit, and wireless passwords should be changed every three months, at minimum. (Sunol, 2015) Through this security is to prevent the encryption that happened without any hesitation and causing the loss on the company.

2.2.3.4 Malware Protection and Prevention

Malware comes in many forms which including viruses and spyware. The most common method hackers use to steal on the information and penetrate on systems. The first important step towards malware protection is to ensure all users are assigned proper permissions. For example, the users should never have administrator passwords or permissions. Subsequently, ensure every computer in the network has an effective antivirus solution configured to automatically download the latest updates. In addition, logistic provider's IT team should have a regular monthly schedule for installing the latest operating system security updates to ensure recent vulnerabilities are corrected at the operating system level. (Sunol, 2015)

2.3 Customer Satisfaction Level

Logistic service quality and customer satisfaction are very closely related to each other. Customer satisfaction level is the key factor in assessing the quality of the service. It can therefore be assumed that the quality of service leads to customer satisfaction. Instead, there is no doubt that both of these elements are generally recognized as the major decisive factors in maintaining long-term and successful business relationships. (Jayawardhena, 2010) Hence, both logistics service quality and customer satisfaction is especially important in the current business environment, as the relationship between the services provide and the client is usually in long-term mode. The logistics services provider has to provide the service in line with the customers' expectations, leading to the appropriate level of customer satisfaction. (Ieva Meidut''-Kavaliauskien''a, Art''ras Aranskisa, Michail Litvinenko, 2013)

It is somehow important that the logistics companies while carrying their activities to show that their actions and deeds are concentrated on customers. The current competitive condition that it is dangerous to be a non-customer-oriented company. Most of the companies are competitive, and in order to stay top ranking in the market, logistic company must provide high quality services that would make customers satisfied and loyal. (Liu, W., H., & Xie, D., 2013) It also should be considered that the logistics service companies should understand very well on their customers. As having sufficient information and knowledge about their customers that will be having more opportunities to make the right decisions on the needs of the clients, which allows companies to develop new services that provide real value to customers as well as to assess quantitatively the values desired by customers.

A customer-focused strategy meets better the needs of the customer. Juga, Juntunen & Grant (2010) believes that customer-oriented companies use market data and information to develop new services and to understand how the customers asses the services also they are more focused on their customers than their competitors and believe that their business will be exist primarily to serve their customers. Moreover, the customers' needs are always the priority. Logistic service providers are required to fulfil with the minor and major needs from the customers as soon as they can. This is to gain higher interest and higher integrity from the clients' side and having higher retaining rate.

CHAPTER 3

METHODOLOGY

3.1 Research Framework

Based on the literature review on the independent and dependent variable, the following research framework was developed to test the relationship between the both variables.

Figure 3.1: The Research Framework

3.2 Hypothesis

H0 1: There is no impact of logistic service performance towards the customer satisfaction level.

H1 1: There is an impact of logistic service performance towards the customer satisfaction level.

H0 2: There is no impact of logistic service challenges towards customer satisfaction level.

H1 2: There is an impact of logistic service challenges towards customer satisfaction level.

H0 3: There is no impact of the logistic service quality on customer preference for the logistic provider.

H1 3: There is an impact of the logistic service quality on customer preference for the logistic provider.

3.3 Population

The research of the target population is focus on all the users and consumers that has used the logistic located in Sungai Petani, Kedah, which has been identified for the research.

3.4 Sample

3.4.1 Sample Size

While according to the statistical rule of the thumb, the sample size determination which are suitable for all types of researches is from 30 to 500 (Howell, 2014).  The sample size for the study would be a total of 150 respondents was identified for the finding for a particular period of 2 weeks. The questionnaires will be distributed for 200 to account for any damaged, losses and incomplete forms.   

3.4.2 Sampling technique

The research will be using a stratified random sampling method which involves the process of segregation, followed by random selection of subjects from each group (Sekaran & Bougie, 2010). For this findings, the data collection would be collected from all the consumer that used the logistic service providers in Sungai Petani, Kedah.

3.4.3 Unit of Analysis

The target respondents which are the users that has been used the logistic services provider from different area in Sungai Petani, Kedah. In addition, by getting the feedback and response from different area will have different perspectives to be recorded in this study.

3.5 Measurement of variables

The objective of the research is aim to identify identify the impact of logistic service performance towards the customer satisfaction level in Sungai Petani, Kedah. The research is about the relationship of the dependent variable is the customer satisfaction level whereby the independent variable is logistic service quality.

3.6 Questionnaire design

' Section A: Demographic Data

Section C consists of items on the demographic data of the customers. The items will be covering the age, gender and income level of the customers.

' Section B: Independent variable

Section A consists of 3 different sections which will be testing each of the 5 service qualities attributes: timeliness, accuracy of order and logistic security solution. The timeliness dimension consists of 5 items. The accuracy of order dimension consists of 5 items. The logistic security solution dimension consists of 5 items. The total number of questions in section A is 15 items. The section will be measured using a 5 point Likert scales with strongly agree on one end of the scale and strongly disagree on the other end of the scale.

' Section C: Dependent Variable

Section B will be testing on the overall satisfaction of the customer on the logistic service provider. There will have with feedback and satisfactory result that provided by the company. The question will be tested using the Likert scales with strongly agree on one end of the scale and strongly disagree on the other end of the scale.

Variables Items Contributions Status

Logistic Service Quality

Timeliness 1-5 (Varanya T., Peraphon S. ,Achara C., 2012)

Adopted and Adapted

Accuracy of order 6-10 (Jessica Sze Yin Ho, 2012)

Adopted and Adapted

Logistic security solution 11-15 (Varanya T., Peraphon S. ,Achara C., 2012)

Adopted and Adapted

Customer Satisfaction level

16-20 (Ieva Meidut''-Kavaliauskien''a, Art''ras Aranskisa, Michail Litvinenko, 2013)

Adopted and Adapted

Demography Self-Developed

Table 3.1: Distribution of items for Questionnaire

3.7 Data Collection Method

A total of 200 questionnaire forms will be issued to the users in Sungai Petani, Kedah to ensure that there is a higher return rate. The questionnaire form will be distributed to all the areas in Sungai Petani, Kedah. The duration for the data collection will be two weeks.

3.8 Techniques of Data analysis

' SPSS

SPSS (Statistical Product and Service Solutions) would also be utilized to run the data collected from the questionnaires. SPSS is a Windows based program that can be used to perform data entry and analysis and to create tables and graphs. Result of the data will be produced in the form of tables or graphs that simplifies the process of reading.

' Descriptive statistics

Descriptive statistics will be used to analyze the demographic data. Specifically, the analysis will be focusing on the number of business and leisure travelers visiting each of the hotels. A descriptive statistics calculating the mode will be used to analyze the sub-variables of the service quality to identify which service quality customer felt is most important. The number of customers that are willing to return to the hotel will also be covered.

' Multiple Linear Regression

The data from the questionnaire will be analyzed using the multiple linear regression analysis. Multiple linear regression analysis will be used to analyze the influence of the independent variables consisting of tangibility, reliability, responsiveness, assurance, and empathy on the dependent variable is customer loyalty.

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