The effect of logistics service providers’ diversification strategy on financial performance

ABSTRACT

LSP’s service offerings and their financial strength are a core issue for supply chain partners and a decisive selection criterion for purchasing logistics services. Therefore, the purpose of the paper is to examine how logistics service providers’ (LSPs’) diversification strategies affect their financial performance during the stages of an economic cycle. Based on secondary data for the period from 2006 to 2016 this study carries out regression analyses and ANOVAs. The results show a U-shaped relationship between the LSPs’ level of diversification and their financial performance during all stages of an economic cycle. In detail, analyses provide evidence that a moderate level of diversification represents the inferior diversification strategy and that specialisation as well as high levels of diversification can be defined as superior diversification strategies. The study’s findings enable logistics managers and purchasers of logistics services to assess the performance of LSPs based on their individual diversification strategies and to be able to predict their performance development more precisely.

KEYWORDS:

• Logistics service providers
• supplier selection criteria
• diversification
• specialisation
• financial performance
• curvilinearity

Acknowledgments

The authors would like to thank Dr. Nikolai Kramer and Prof. Dr. Rudolf O. Large as well as the editor-in-chief and two anonymous reviewers of Supply Chain Forum: An International Journal for their helpful and constructive comments on previous versions of the paper. Furthermore, we would like to express our thanks to the editors from the Fraunhofer Center for Applied Research SCS of the Fraunhofer IIS in Nuremberg for their “Top 100 in European Transport and Logistics Services” study, which is published every two years. Based on the data provided in it, we were able to test our hypotheses.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Andre R. Sulzbach

Andre R. Sulzbach works as a research assistant and doctoral candidate at Department IV for Logistics and Supply Management at the University of Stuttgart. In addition, for the past six years he has been a lecturer for logistics, supply chain management and supply management at the International School of Management, Stuttgart and at the University of Applied Sciences, Esslingen. His research interests lie in purchasing and supply management, supply chain management and logistics management. In these fields of research, he focuses on interoganizational business relationships. In particular, the management of buyer-supplier relationships is examined from the perspective of behavioural economics. He holds a M.Sc. degree in technical oriented business administrations from University of Stuttgart.

Alexander Rapp

Alexander Rapp works as a research assistant and doctoral candidate at Department IV for Logistics and Supply Management at the University of Stuttgart. In addition, for the past three years he has been a lecturer for logistics, supply chain management and supply management at the Baden-Wuerttemberg Cooperative State University, Stuttgart and at the University of Applied Sciences, Esslingen. His research interests lie in purchasing and supply management, supply chain management and the strategic management of logistics service providers. In these fields of research, he focuses on environmental strategies of logistics service providers and their strategic selection. In particular, he is interested in combining these topics with other economic disciplines, like marketing. He holds a M.Sc. degree in technical oriented business administrations from University of Stuttgart.