The Impact of Downsizing on Logistics Performance and Employees in Shipper Firms

INTRODUCTION The importance of downsizing on American life is evident from the coverage it has received of late in both the trade and popular business press (Blohowiak 1996; Bernstein 1997; Heller 1997). Downsizing is often the result or byproduct of the application of total quality management (TQM) techniques, particularly process reengineering efforts. The primary objective of downsizing is to improve productivity through cost reduction (Chitwood 1997). The downside risk is the negative effect it may have on the morale and loyalty of those employees who remain with the firm because it requires major changes for the firm's employees (Kets de Vries and Balasz 1997; Shaw and Power-Barrett 1997). For instance, downsizing may change the relationship between employees and their employers, the nature of the employees' work (e.g., job scope and design), and the expectations of the employees by their corporations (Dreilinger 1994). Thus, firms that downsize hope to achieve favorable changes in performance and to avoid the adverse impacts on their employees. The purpose of this article is to provide an empirical investigation of the impact of downsizing on the logistics performance and logistics employees of shipper firms. It is organized in the following manner: first, background on downsizing in the logistics area is provided; second, research propositions are delineated; third, the research design is specified; fourth, the results are presented; and lastly, conclusions and implications are discussed. DOWNSIZING IN LOGISTICS The logistics functional area of business has experienced TQM and downsizing on a large-scale basis (Schott and Degnan 1996; Rheem 1997). Three fundamental reasons for this trend in logistics come to mind. First, the logistics area of business was a logical candidate for TQM and downsizing because of the economic deregulation of freight transportation. The highly regulated transportation environment was akin to full employment in these industries and provided for a very stabilized, relatively high paying, and steady work environment. Shippers also needed to employ a large number of workers to manage the transportation process. The freedoms granted by deregulation allowed both shippers and carriers to change their operations. When deregulation first occurred, there were indications of the forthcoming downsizing. One earlier study showed that responding transportation and logistics practitioners were experiencing downsizing and increased stress in their job environment. However, the survivors also thought that deregulation had improved the status and role of a career in transportation and distribution management (Jerman and Anderson 1989). Second, the strong customer-orientation of quality programs in conjunction with logistics' key role in customer service makes the reengineering aspect of TQM a very good candidate for application to logistics. The logistics process is what connects customer expectations to the products or services they receive. It ensures, or fails to ensure, that services meet or exceed customer expectations. Dependability, speed and accuracy are the major customer service dimensions of logistics. Reengineering, also known as process redesign, is a type of continuous improvement with the potential to dramatically improve the quality and speed of work and to reduce its costs by fundamentally changing the process by which work gets done. Redesigning the process usually entails changes in job design and work force requirements. Finally, logistics is a very information-intensive set of activities or functions. The dramatic changes in information technology and the relative decrease in the cost of information (vis a vis inventory, transportation, storage, etc.) over the last decade or so have led many organizations to reengineer their logistics process to capitalize on the new information capabilities. Furthermore, these changes in information technology have greatly altered the nature of logistics employees' work and affected staffing requirements by making individual employees more productive. …