Interorganizational management in the service sector: A case study of how freight organizations manage interorganizational relationships

Abstract: This study seeks to investigate how the service sector functions in the context of interorganizational management. Researchers in the field of interorganizational management and supply management argue that there is a gap in the literature concerning how organizations manage services regarding methods and techniques in an interorganizational setting. There have also been shown that the service industry lacks in many regards concerning performance relative to the manufacturing sector due to the absence of established best practice methods and techniques. Hence, it is argued there is a need to fill this gap. In the manufacturing sector, there have been a considerable amount of research concerning interorganizational cost management (IOCM) techniques, which have shown to be efficient to reduce costs and improve quality. It has also been suggested that interorganizational cost management techniques are heavily dictated by three characteristics – relationship, component, and transactional characteristics. Though there is no evidence of this in the service sector and it is unknown whether these techniques even are suitable in the service sector and what dictates the usage of them. Furthermore, a suitable arena to study IOCM in the service sector is the freight industry. In this particular industry, third party logistics providers (3PL) are recognized to procure external services to carry out freights. Thus, the study aims to answer in what way does the IOCM characteristics dictate the way how 3PL organizations manage their outsourced services and what role has IOCM in these relationships? To answer the research question, three 3PL organizations have been investigated by interviews and analysed through the notions of IOCM characteristics and transactional cost economics. Ultimately the findings suggest that the characteristic that dictates whether IOCM can be utilized in the manufacturing sector is usually recognized to carry the same effect in the service sector. However, there are exceptions. Interestingly we found that non-complex services sometimes are carried out as if they were complex. This is sometimes the case when an outsourcer manages a service for an important customer. Hence, the use of IOCM can be more flexible in the service sector, and one should consider that these types of services are managed in a triadic setting (i.e. where one also has to put emphasis on the outsourcers customers).