Logistics providers that have received awards for customer service and environmental sustainability have reported better revenue growth and improved cost efficiency, according to a study published in the Journal of Supply Chain Management.
The study was completed by Sebastian Garcia-Dastugue, clinical assistant professor in the Sam M. Walton College of Business at the University of Arkansas, and Cuneyt Eroglu, associate professor at Northeastern University.
“Investing in areas like service quality and environmental sustainability can be a contentious issue for many companies because they lack the ability to determine whether these investments will pay off,” Garcia-Dastugue said. “So often these decisions are based on economic forecasts rather than actual data. We’ve removed some of the guessing that happens during this process.”
Garcia-Dastugue and Eroglu studied the relationship between a company’s economic performance and its service quality and environmental sustainability. They looked at 195 awards that were granted in these areas over a 10-year period, between 2004 and 2013. The companies that received the awards were logistics companies and companies in which logistics services were an integral part of their business. But the focus of the study was on the logistics services the companies provided.
The researchers considered five service-quality awards given by transportation industry organizations, such as Logistics Management and the National Shippers Strategic Transportation Council. For the environmental sustainability awards, the researchers looked at those handed out by Supply & Demand Chain Executive, and the Environmental Protection Agency, which based its awards on emissions data and freight efficiency.
The study shows the previous awards were associated with improved economic performance in the three-year period following the award announcement. Performance benefits related to the service-quality awards were greater than those as a result of the environmental sustainability awards. In a previous study, Eroglu and others found a correlation between a company’s increased stock price and the announcement of an award for service quality, environmental sustainability or safety in logistics.
Investors have seen the awards “as a positive sign that a company possesses unique and inimitable capabilities that improve operating performance and cash flow,” Garcia-Dastugue said. But no studies have confirmed the relationship between companies that win awards and their economic performance.