Trust and Relationship Commitment in Logistics Alliances: A Buyer Perspective

Firms are trader increasing pressure to reevaluate logistics outsourcing decisions. To remain competitive, many firms are focusing on their core business and reducing costs by restructuring organizations to become lean and efficient. Simultaneously, to meet global competition, firms are using global marketing strategies that significantly complicate sourcing and distribution operations. With this increasing emphasis on cost reduction, leaner organizations, and global marketing and sourcing strategies, managers are more likely to outsource logistics activities by establishing logistics alliances or partnerships with third parties. These relationships allow firms to transfer financial risk, improve service quality and productivity, and reduce costs. [1] Although interest in logistics outsourcing is increasing, third parties face many challenges in establishing successful logistics alliances. In traditional arm's-length exchanges between third parties and buyers, it is not uncommon to find an adversarial relationship. Alliances, however, require third parties to overcome corporate concerns of control over logistics operations and build trust and credibility. [2] LaLonde and Cooper indicate that factors may be present that make outsourcing a good idea, but there is no guarantee that a relationship will be successful. [3] Many logistics managers are not accustomed to trusting third parties, and many third parties do not want to make the commitment necessary to form real alliances. Thus, the role of trust and commitment in logistics alliances becomes an important issue. Trust and relationship commitment are important constructs in both conceptual and empirical models of various interorganizational exchange relationships. [4] All definitions of trust suggest that trust involves one party having confidence in or relying on another party to fulfill its obligations. [5] The existence of trust in a relationship reduces the perception of risk associated with opportunistic behavior and allows each party to believe that its needs will be fulfilled in the future by actions taken by the other party. All the definitions of relationship commitment[6] indicate that it involves continuity or a long-term orientation with both parties cooperating to maintain the relationship. Commitment is believing that an ongoing relationship is so important that it warrants maximum efforts to maintain it and ensure that it continues indefinitely. Several authors suggest that trust and relationship commitment are important elements in successful logistics alliances. LaLonde and Cooper indicate that some outsourcing relationships evolve over time into alliances as mutual trust develops between a buyer and third party. [7] Bowersox suggests that, as an outsourcing relationship matures, high levels of dependency and trust build as both parties focus on a long-term orientation. [8] Ultimately, commitment in a logistics relationship is characterized by a long-term perspective, a lack of a distinct endpoint, and a focus on future transactions rather than current transactions. [9] The increasing popularity of logistics outsourcing underscores the need for a better understanding of logistics alliances. Therefore, the primary objective of this research was to gain a better understanding of logistics alliances by examining the roles of trust and commitment in such relationships. A model of logistics alliances from a buying firm's perspective is first proposed and then empirically tested. The following specific research questions were addressed: 1. To what extent are trust and relationship commitment important elements in logistics alliances from a buyer's perspective? 2. What factors affect the development of a buyer's trust and relationship commitment in logistics alliances? TERMINOLOGY Logistics alliance relationships are described in various ways. [10] To provide some continuity in reporting research results, a definition of a logistics alliance was developed by drawing from previous research on interorganizational exchange and logistics relationships. …