Chapter 2

REVIEW OF RELATED LITERATURE

The literature and studies cited in this chapter tackle the different ideas, opinions, and

different generalizations related to study from the past up to the present, and which serve as the

researchers’ guide in developing the project. This chapter also presents the synthesis made from

the study.

Local Literature

According to the Philippine Institute for Development Studies (2015) on its study for a system-

wide study of the logistics industry in the Greater Capital Region. The study employs a

system-wide approach to analyze the whole logistics industry in the Greater Capital Region.

The first part of the study reports the findings of the focused group discussions and key

informant interviews with shippers, freight forwarders, logistics service providers, and

truckers regarding their port usage. The latter part discusses the rail option model that looks

into the revival of the rail system in transporting goods to and from the ports. The study

also gives a crude approximation of the economic cost of the seven-month truck ban. In

addition, it provides a review of existing policies in the Philippine logistics sector, discussions

among concerned agencies, other study recommendations, as well as lessons from other

countries.
Evidently, the Manila Truck Ban triggered congestion at the port of Manila and adversely

affected exporters, importers, and manufacturers whose operations have been disrupted and

face increasing transport cost. Freight forwarders, logistics services providers, shipping lines,

truckers, and terminal operators are likewise negatively affected since congestion at the Port

of Manila leads to difficulty to off-load cargoes and resulting to delays and longer waiting time.

On the other hand, the Manila Truck Ban was instigated by the congestion of Manila’s streets

caused by huge cargo traffic coming in and out of the Port of Manila, the lack of depot by

shipping lines for their containers, and the lack of depot for cargo trucks which use Manila’s

streets as their parking garages.

Under a 50%, 75% and 100% shift of road-based freight transport to the use of the rail transport

from locators and shippers in the periphery of Metro Manila and even for those freight coming

from the North and going to the South and vice-versa, the percent shift only translated to around

1 to 4 percent of truck traffic being removed from the road during both the peak and off peak

periods resulting to an insignificant impact on the overall road network travel speed. The average

travel speed is quite low along roads used by trucks compared to the overall average travel

speed. And the average travel speed during the off peak hour is much better compared to the

peak hour especially along the truck routes. It should however be noted that there may be some

significant improvement in vehicular speeds and level of service along truck routes directly in

competition with the rail route. Although the use of the rail for freight transport may not provide

a significant impact on the improvement of road congestion, giving shippers/locators an

alternative way of transporting their goods would be good for the freight industry. With traffic

congestion going to get worse in Metro Manila, shippers/locators could opt to bypass Metro

Manila by using the rail system to transport their goods while at the same time truckers can still
provide their services when moving the goods from the inland container terminals to the end

destination of the goods or the other way around. It may also be high time to consider moving

or developing new export processing zones near the railway line with the primary objective of

using the rail system to transport the goods coming from or going to these export processing

zones. An efficient rail system that connects these export processing zones to the ports as well as

airports should be a major component of the plan.

According to Altejar, et.al. (2019) in its study of the effects of customer service quality and

product quality on customer satisfaction and customer loyalty and its relationship between four

variables in the context of food-chain industry. Customer loyalty is the key part behind a

business’ success, as it also extends the market esteem. Furthermore, the connections between

quality, consumer satisfaction and loyalty are one of the most mainstream research points

among service researchers. Pilkington and Chai (2008) studied the significance of product

quality and services on consumer loyalty and discovered that loyal customers for the most part

lie in segments who have utilized higher quality products. Customer Loyalty is characterized

by one author as “the assessment of the apparent error between prior desires and the expected

execution of the product or service are perceived after its utilization” (Tse and Wilton, 1988,

p.204) consequently thinking about fulfilment as a by and large post-buy assessment by the

shopper” (Fornell, 1992, p.11). Researches by Chai and colleague (2009) show that nature of

services to a customer is one of the most significant factors in distinguishing new customer needs

and as we as a whole know, the way to consumer loyalty and devotion is furnishing the clients

with their unfamiliar needs. A Few studies additionally shows some purposes behind customer

satisfaction which conforms to the determinants of customer loyalty expressed by Wilson et al.

(2006). He stated that “a few determinants of customer loyalty are product and services quality,
value, individual and situational factors.” (Wilson et al., 2006, p. 79-80). Therefore, according to

the findings, there is a relationship between the dependent and independent variables. However,

it is not that high. But still, it affects the dependent variables. The Product and Customer Service

Quality influence Customer Satisfaction but not at a great value or scale. It only has a small

effect. Same case to Customer Loyalty. A customer’s satisfaction in the product or customer

service quality does not guarantee the loyalty of the customer.

As different business organizations espouse numerous business methodologies to improve their

performance in terms of providing different services to their customers, logistics has been a

crucial aspect for companies to attain a competitive advantage. The study was undertaken to

assist logistics service companies in knowing the different factors customers consider when

choosing a logistics service company. The study focuses on Service Quality factors which

encompasses four (4) independent variables: Preferential Influence, Service Performance,

Service Availability and Service Satisfaction. The assumption is to identify if the said variables

significantly contribute to the preferences of customers when choosing what type of logistics

company would they want to conduct their personal or business transaction/s with. Overall, it is

concluded that for logistics service companies to become the top choice of their customers and

for customers to consistently avail their service/s, their primary focal point must be ensuring that

services are available with a reasonable amount of price wherein any customer could get its

value and consistency in terms of performance of the services being offered. However, this does

not mean that other factors such as preferential influence and service satisfaction should be taken

out of the picture. All avenues should be taken into consideration to be able to provide the best

service and retain the element of valuable choice from their customers.
Patalinghug (2019) on its study on International Shipping in the Philippines, the international

shipping plays an important role in the international supply chain and in the smooth functioning

of global trade and in expanding global markets. The structure of the international shipping

industry is shown to be competitive rather than monopolistic. The regulatory environment does

not encourage forming closed conferences and the trend towards forming or joining alliances

does not pose as barriers to entry in the international shipping industry.

The justification for the practice of separating surcharge from freight rate is for the buyer to

make sensible business decision by comparing ocean transportation costs from alternative

sources or ports of origin, or from alternative carriers in a given port of origin. International laws

such as WTO Rules and UNCTAD's Convention of Code of Conduct for Liner Conferences, US

Federal Maritime Commission notices, and EU Maritime Transport Agreement allow the

imposition of surcharges by carriers provided that parties affected by the surcharges are provided

prior notices. International trade contributes to the growth and dynamism of the Philippine

economy in the recent years. And international shipping is a partner for Philippine growth and

development. The participation of private companies in port operation and management of major

Philippine ports is an appropriate policy towards improving port efficiency. Port efficiency is an

important determinant of shipping costs. Manila port is globally ranked at the low end of the

roster of international ports both in productivity and efficiency. Port efficiency is determined by

port size and infrastructure, private sector participation, quality of both cargo-handling and

logistics services, and appropriate public-policy environment. Port efficiency affects shipping

costs. Inefficient ports have higher handling costs. The regulatory trend in international shipping

is to promote deregulation and pro-competitive policies. The proposal to regulate fees and

charges of international shipping lines rests on the assumption that some shipping lines plying
the intra-Asia routes impose excessive and questionable destination charges to the consignees.

Granting, without accepting, that this hypothesis is true, the question to ask is how does this

alleged practice arise in an industry that is considered competitive? And the most important issue

is whether the burden and cost of the proposed regulations on the regulatory agencies and the

requesting parties are far below its benefits.

Global trade is the vigorous force triggering the growth of both regional and world economy.

International trade brings a lot of advantages to nations and enterprises to share the fruit of

business activities as well as provides people various options to buy their daily necessities.

According to Huang, et.al (2019) on its article with an objective to improve service quality of

international freight forwarders and explore practical business solutions to enhance customer

service level. The result of their research reveals important technical measures for quality

improvement of freight forwarder in East Asian countries, and we collect practitioner’s

comments and feedback regarding to our research findings as managerial implication. They

explain the relationship with customer is particularly significant because the import-ance of

private relationship may be key factor for long term contract and partnership especially in East

Asia. Therefore, strengthen the relationship with shipper may be the primarily mission. On the

other hand, investment of IT facilities is indispensable to maintain the satisfactory service level.

The integrated information system with carriers may help forwarder to improve efficiency.

Finally, the comprehensive service network is also essential to provide shipper the global

service. Freight forwarders may strengthen their network by cooperating with more reliable local

partners such as truck or railway firms.

Local Study
Numerous logistics companies are founded every year to cater the needs of their customers.

Common purpose among these companies is to create convenience to customers regarding

delivery of services. According to Bundan, et.al (2014) in its study which primarily aimed to

determine the following: which player is most preferred by the consumers; the socio-

demographic profile of respondents in terms of sex; the number of outlets each logistics

company is operating; the factor which has the most influence on their judgment towards the

satisfaction level in terms of price, place, service, process and packing; and the problems

encountered by the customers. Also, its study revealed which of the logistics companies’

customers experienced most delays in deliveries.

As a result, the most preferred logistics services of respondents was LBC. This was followed by

2GO and FedEx. The aggregate satisfaction level of consumers with the logistics companies in

Davao City was high. Based on the result, the customer satisfaction level of LBC, DHL, FedEx

and 2GO was high while that of JRS was very high. Further, the respondents rated the logistics

companies based on customer satisfaction and LBC was chosen as the most preferred company.

Though JRS had a very high satisfaction, it was not the most preferred logistics company.

Popularity could be factored in apart from the factors indicated under customer satisfaction.

According to DAP-CFG policy research office Director Gilbert E. Lumantao presents the results

of the 2021 customer satisfaction survey to the Transco Counterparts he results of the customer

satisfaction survey conducted by the Development Academy of the Philippines’ Center for

Governance (DAP-CFG) for the National Transmission Corporation (TransCo) revealed that

primary customers were satisfied with its services. This was reported by Gilbert Lumantao,

Director of the DAP-CFG Policy Research Office, during the presentation of the 2021 Customer

Satisfaction Survey results to the TransCo Management Committee last January 20.
The survey determined the level of satisfaction of the primary customers on the quality of

TransCo’s services and facilities and evaluated its responsiveness to the needs of its primary

customers, namely, the Renewable Energy Developers (RED) who are eligible to receive Feed-

in-Tariff (FIT) allowance, Utility Management Department (UMD) customers, and the National

Grid Corporation of the Philippines (NGCP).

Director Lumantao further recommended that TransCo should sustain its current efforts to ensure

that its services exceed the expectations of its customers and address the priority areas identified

by some to further improve its service delivery.

According to Excelsior, 2021 on its study about the current state of the Freight Forwarding

industry in the Philippines, other than regular shipments, many freight forwarding companies

offer freight forwarding services for specific reasons. One of these is when a business or

individual needs to ship their goods to a specific destination outside the country. For instance, if

an American company wants to ship its products to China, it will first search for a freight

forwarding company that can do so. After finding a provider, they will tell what products they

want to ship and where they want the products to go. The provider will then search for a

container in the area suitable for storing the shipment until it is shipped to its intended

destination.

The freight forwarding industry is still growing in the Philippines. Many factors contribute to the

growth of this industry, including the country’s economy, the growing number of international

businesses that choose to ship goods to the Philippines, and the increasing popularity of shipping

services such as Air Asia and Oceania. This growing industry has shown no signs of slowing

down and will continue to thrive in the years to come. The key to success in the freight

forwarding industry in the Philippines lies in continued research and development to improve on
existing freight forwarding trends and develop new methods to make shipping easier and more

efficient.

According to Lidasan (2011) on its study of how logistics and transport initiatives can help in

developing a framework, which may eventually contribute to alleviating the negative impacts of

freight transport on urban environment. Urban logistics, including physical distribution and

supply chains in urban areas, is a promising subject that can be looked at while developing a

framework on addressing the issues in urban environment in the context of transport and land

use. The environmental problems, brought in by freight traffic in urban areas, such as impacts on

air quality and energy conservation, also have direct or indirect effects on climate change.

Measures, involving transport planning and logistics in urban areas, called city logistics have

promised to solve many traffic and transport problems. However, there are a number of studies

that showed the negative impacts of transport, notably freight transport on urban environment.

Remedial measures involving transport planning and logistics, within the concept of city

logistics were found promising in addressing the negative impacts of urban freight transport on

traffic and urban environment. The policy objectives of city logistics, ranging from

efficiency/economic to urban structure to environmental aim at improving the level-of-service of

the urban freight transport systems. They can ensure economic growth and at the same time

address the negative impacts of urban freight transport on the environment. The concept of city

logistics promotes green logistics and reverse logistics, which can also contribute to urban

environment improvement.

Foreign Literature

There are ten dimensions consumers use to frame the expectations and perceived services

(Parusuraman, 1985). As Parasuraman (1985) indicated, there are five major gaps regarding the
quality of services from the service provider’s side that affect the quality of service seen by

consumers. The five key gaps from the study of Parasuraman, et al. (1991) indicated that gaps

exist between consumer expectation and management perception, management perception and

service quality specifications, service quality specifications and service delivery, service delivery

and external communication, as well as expected service and perceived service. The first ten

dimensions identified by Parasuraman et al. (1991) were reduced to five dimensions, i.e.,

tangibility, reliability, responsibility, assurance, and empathy.

Figure 3. Service Quality Model by Parasuraman et al. (1985)

Customer satisfaction is very important for logistics companies seeking competitive advantage,

because they realize that if they do not satisfy the expectations of customers, their place will be

taken by other companies whose activities will be more concentrated on customer expectations.

According to Kavaliauskienė, et.al (2014) Logistic service users are fairly conservative,

cautiously consider innovations, and have the greatest need for basic logistical activities –
transportation and storage, they skeptically evaluate the ideas of logistics as a model of the whole

business management, increasingly applied in the global markets, however, they properly accept

IT integration and feel lack of technological innovations in logistics processes at different stages

of the customer service. Logistics services are evaluated primarily according to their price and

safety.

Service providers, seeking to attract potential service users, must first properly understand the

expectations of consumer needs. The research demonstrated that it directly affects customer

satisfaction. High quality of services increases the service provider’s competitive advantage,

consumer loyalty, and reduces the number of competitors; the research demonstrated that a

company prefers that company which has been providing quality services, reducing the number

of partners serving it, rejecting offers from competitors without a detailed assessment of other

parameters. The research also proved that logistics company, properly carrying larger quantities

of logistic operations, receives better performance evaluations, thereby also increasing its

competitive advantage and creating favorable conditions for the development of economics of

scale. Consumers, while selecting from potential providers, evaluate not only service quality

(physical), but also the cost of services, servicing, the applied technological solutions, the

provider’s experience and the range of services.

Several studies have been conducted in the field of retail. But few are those who have studied the

internal logistics performance of a point of sale. Again, very rare or nonexistent studies that deal

with the happiness of the consumer and its effect on their satisfaction in the area of retail and in

the field of marketing in general. According to Ltifi and Gharbi (2014) with goal to understand

how the internal logistics performance of a retail store may have an impact on the happiness and

satisfaction of the customer in the retail sector. The results show that the internal logistics
performance of a point of sale has positive and significant effects on happiness and customer

satisfaction, especially in the retail sector. In addition, preliminary studies in our study address

the consequences of internal logistics performance of a store as the store image, satisfaction and

loyalty (e.g. Bouzaabia, 2013), but not the happiness of the consumer.

Service quality plays crucial role in the operational activities of a company since service quality

heavily affects the satisfaction and the loyalty of a customer. According to Sutrisno, et.al. (2019)

based on the result of their study, the testing of its hypothesis, customer satisfaction impacts on

customer loyalty, had the least impact compared with the other testing. The effect of the order

condition dimension on customer satisfaction had lower value than the rest of the dimensions.

The delivery service requires improvement in order condition, such as packaging supply for

liquid product or special packaging for glassware. This is necessary to ensure the safe delivery of

the product to the customers. The dimension of order discrepancy handling brought the least

impact compared with the other dimensions. Efforts to fix or handle the order discrepancies to

retain customer loyalty is crucial and this problem can be solved by following up the affected

customers. The follow up from the courier service company was done through reporting the

discrepancies and delivering the services they had promised beforehand. This, as a result,

minimizes the impact of the discrepancies. These impacted customers may also want to

recommit themselves to reuse the courier services in the near and far future.

Foreign Study

Quality performance criteria are being used effectively to improve customer-supplier relationship

and many research studies have been done on the subject. Logistics Service Providers (LSPs) are

being evaluated through performance criteria by their customers. According to Tanyaş and

SerdarAsan (2003), one of the most important issues for the logistics performance system to
work efficiently and effectively is the joint effort of logistics service provider and logistics

service recipient companies in designating collectively logistics performance measurement,

evaluation and improvement criteria. These collective efforts also reduce further possible

problems. Expectedly, in the short run, the companies in question first try to optimize their own

objectives. On the other hand, in the long run creating the win-win relationship and

compromising to achieve goals of both sides become more important. This constitutes the core of

long-range relationships and sustainable development. In order to determine common criteria a

wide range of literature has been searched and opinions of professionals from both logistics

service provider and recipient companies and academicians working on logistics in Turkey have

been taken. Logistics experts, a group of ten, have evaluated the mentioned criteria recursively

in three meetings. As a result, the following criteria have been listed after evaluating all criteria

and then extracting the inappropriate, contradicted and coincident criteria such as, lead time from

order to delivery and consistency of lead time, on time delivery performance, delivery without

defect, damage and loss, reduced partial delivery, capability of fulfilling additional logistics

activities. Also the expertise, knowledge and experience in sector and product, inventory turn

over, stock out and excess stock frequency, total logistics costs, flexibility, innovation and

creativity for new product, method and service solutions, efficient and effective work, E-

communication facilities, efficient documentation systems, customer relationship management

and problem solving, clearness in cost and pricing policy, invoice accuracy and timeliness,

insurance conditions, use of information technologies in services, accuracy and tracing of

information, facility (warehouse, vehicles etc.) usage rate, financial ratios and lastly, social and

environmental responsibility.
According to Chen & Wu (2011) presents that some frequently used criteria from literature are

price, delivery performance, range of services provided, the ability of response, human

resources, IT capability, speed and punctuality, financial status, past experiences, expertise

technology, product reliability, reputation, the quality of service, market share, geographical

location, and surge capacity.

Kozerska (2010) provided twenty-two parameters in order to determine the extent of customer

satisfaction concerning the level of quality logistics services: meeting deadlines, successful

service on the first attempt, documentation free for the mistake, good information flow between

a logistics service provider and buyer, transport of undamaged condition, the complexity of

service, kindness, politeness, competence, professionalism, realization, appearance,

availability, flexibility, quick reaction to customer requirements, interest in solving customer

issues, complains, damages, recommendation another customer, financial credibility, operation

time of the company on the market, and credibility of management.

A study done by Logistics Operator of the Year (Special Report 2009), (Special Report 2010),

(Special Report 2011) on the extent of customer satisfaction from high-quality logistics services

revealed thirteen criteria for evaluating logistics services, including: accurately of deliveries,

timeliness of deliveries, completeness of deliveries, price according to the offered quality,

information flow to the point of condition deliveries, promptness of deliveries, the flexibility

of deliveries, experience and credibility, executive potential, reply period to offer inquiry,

disputes and complaints, the geographic range of deliveries, computerization, the complexity of

services and innovativeness.

In accordance to Khan & Fasih (2014); Kaura, et al. (2012); Naidoo (2010, 2014); Jayasundara,

et al. (2009); Aga & Safakli (2007) and Ismail, et al. (2006) the most influential service quality
dimension on customer satisfaction are empathy, reliability and assurance. However, with the

aim of analysing how service quality influences customers’ satisfaction. Johnson and Karlay

(2018) have developed a theoretical model which can be helpful to enhancing customer

satisfaction in a governmental company like LRA (Liberia Revenue Authority). According to

their study, the most influential service quality dimension on customer satisfaction in Liberia is

found to be responsiveness, empathy (price of service) and assurance. This is in conformity with

Berry, et al. (1983) who find that the concept of service quality differs from organization to

organization. Price is of vital importance; the price of service has the strongest impact on

customer satisfaction in Liberia.

Synthesis

Efficient transportation and logistics systems play a significant position in strengthening the

connection between several interconnected manufacturing sectors such as agriculture,

manufacturing, and tourism. Logistics Services Providers (LSP) specializes in managing the

shipment process for business, coordinating things so that products end up where they need to be

in as efficient a manner possible. Different criteria to consider while selecting a logistics supplier

are critical for various loads and types of cargo.

However, forwarder serves as a bridge between the shipper and the carrier to find other

transportation options, and they earn money by setting up package delivery services. The Freight

Forwarding Companies offers a range of services all focused on ensuring that goods are

delivered without hassle to customers. As a service provider, they aim to find and meet customer

requirements or the specification that comes from shippers. This may include both functional and

non-functional requirements for products, services, and experience. According to Tanyaş and

SerdarAsan (2003), Logistics elements, which customers value are: time, dependability,
communication and convenience. This leads to one of the most important issues in logistics

performance, “customer service level”. The customer service level, how rapidly and dependably

a company can deliver what the customer wants- consists of three dimensions: availability,

performance and dependability. Tanyaş and SerdarAsan (2003) criteria are generic, unlike Chen

& Wu (2011) criteria which is more specific that includes price, delivery performance, range of

services provided, the ability of response, human resources, IT capability, speed and punctuality,

financial status, past experiences, expertise technology, product reliability, reputation, the quality

of service, market share, geographical location, and surge capacity. The essence of customer

service in logistics is forming a relationship that customers want to sustain over time. Yet due to

the industry’s heterogeneity, intangibility, and inseparability, measuring the service quality is not

a simple task.

Khan & Fasih (2014); Kaura, et al. (2012); Naidoo (2010, 2014); Jayasundara, et al. (2009); Aga

& Safakli (2007) and Ismail, et al. (2006) in their study about how service quality influences

customers’ satisfaction, they conclude that the most influential service quality dimension on

customer satisfaction are empathy, reliability and assurance. However, according to Johnson and

Karlay (2018) in their study also, the most influential service quality dimension on customer

satisfaction in Liberia is found to be responsiveness, empathy (price of service) and assurance.

Kozerska (2010) considers twenty-two elements in an ongoing business process to measure the

extent of customer satisfaction with the level of quality logistics services, with an emphasis on

the logistics service provider’s favorable attitude toward the buyer and the management’s

credibility. Correspondingly, a study conducted by Logistics Operator of the Year (Special

Report 2009), (Special Report 2010), (Special Report 2011) on the extent of customer

satisfaction from high-quality logistics services revealed thirteen criteria for evaluating logistics
services, focusing on overall delivery performance, computerization, service complexity, and

innovation.

Producers rely on logistics systems that support their global customer base to obtain the benefits

of growing international trade. Various authors have explored the shipper's requirements in a

Logistic Service Provider. Other authors also conducted several studies on how service quality

influences customer satisfaction resulting in various influential factors. By studying the previous

papers, it is not enough to conclude which characteristic of the freight forwarding company was

more important for the shippers and what service quality factor could influence customers to

increase their satisfaction and retention level.

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