Drawing on service-dominant logic to expand the frontier of physical distribution and logistics management

Citation

Lusch, R.F., Vargo, S.L. and Fisher, R. (2014), "Drawing on service-dominant logic to expand the frontier of physical distribution and logistics management", International Journal of Physical Distribution & Logistics Management, Vol. 44 No. 1/2. https://doi.org/10.1108/IJPDLM-07-2013-0209

Drawing on service-dominant logic to expand the frontier of physical distribution and logistics management

Article Type: Guest editorial From: International Journal of Physical Distribution & Logistics Management, Volume 44, Issue 1/2

This special issue, consisting of nine articles, focusing on service-dominant (S-D) logic and physical distribution and logistics, vividly illustrates how S-D logic provides a transcending perspective and integrative framework for the field. These articles help to further broaden the lens and application of S-D logic in a manner that expands the frontiers of practice and research. Collectively, these articles, with an S-D lens, indicate physical distribution and logistics are not, or should not be, understood as being about the things and stuff that need to be transported, stored, and handled but rather about the service(s) the system provides.

Over the last decade a siren call has been well heard throughout the world of physical distribution, logistics and supply chains. This siren echoes a emerging focus on partnerships, relationships, networks, value creation and value constellations. While this emerging focus was already offering significant advantage in both research and practice, it has been disquieting to many practitioners and academicians alike that a more general organizing framework remains absent. This special issue was created to address this gap in the extant literature and to begin to illustrate why S-D logic is, arguably, the leading candidate for the development of a more general organizing framework.

For those not familiar with S-D logic, we suggest, in addition to reading the articles in this issue, that several of the foundational articles on the topic (Vargo and Lusch, 2004, 2008a, b, 2011) and the book Service-Dominant Logic: Premises, Perspectives and Possibilities (Lusch and Vargo, 2014) be carefully studied. S-D logic begins with a simple but revealing historically grounded observation that is increasingly reinforced by contemporary practices: the fundamental basis of exchange in all economies is service. That is, very simply all economic and social actors are reciprocally exchanging service, either directly or indirectly. When goods are involved, they can better be understood as appliances for service provision, thus providing service indirectly, likewise, intermediaries can be seen as playing an indirect (as well as direct) service-provision role. One such intermediary is monetary currency (a common medium of exchange), which S-D logic views as a right to future service.

This basic understanding of the foundational premises of S-D logic provides a foundation that weaves together the fabrics in the nine articles in this special issue. Collectively, these articles form a tapestry that brings greater understanding of the context of physical distribution and logistics and more broadly the field of supply chain management. In one of the more applied articles, Engelset, Halse and Hammervoll present an extensive case study of innovative ship contracting in Norway. They show how firms exchange service and co-create value and develop several interesting research opportunities dealing with the development of competences in clusters and value networks. Maas, Herb, Gebhard and Hartman, in their article, “Supply chain services from a service-dominant perspective: a content analysis”, confirm the rising importance of service. The authors present a half dozen S-D logic grounded research propositions on how the type of service influences value co-creation.

One of the challenges in adopting S-D logic is the internalization of a new lexicon and a new way of thinking about business and economic exchange. One difficult lexical distinction is between “services” and “service”. Services (plural), like goods, are historically thought of as units of output. In the case of logistics this output orientation might be expressed in metrics such as percent of orders filled on time, percent of shipments arriving on time, or percent of goods not damaged in transit. On the other hand, service (singular), is defined the application of resources (e.g. knowledge and skills) by one actor for the benefit of another. The service perspective addresses the application of knowledge and skills, often bundled into capabilities and competences, enabling the logistics system to provide beneficiaries with the resources they need at the time and place that offers the best value. For logistics, this service perspective translates into facilitating this resource application process so that value (benefit) can be realized at the appropriate time and place (i.e. effectively) and efficiently.

In S-D logic, value is unique and phenomenologically determined by the beneficiary. For this reason, firms cannot create or add value, as often claimed in the traditional goods-dominant literature, but can only make value propositions and then, if accepted, co-create value through service provision. In a globally competitive world it becomes increasingly important that the value propositions are compelling. Ehrenthal, Gruen and Hofstetter, in their article “Value attenuation and retail out-of-stocks: a service-dominant logic perspective”, take a value co-creation perspective on out-of-stocks. This perspective treats the shopper as a dynamic actor, whose response to out-of-stocks influences other actors in the service ecosystem. Importantly, by taking this broader perspective, new costs of a stock-out are revealed and this understanding, in turn, can help retailers and manufacturers better align their interests and jointly make more competitively compelling value propositions.

Value propositions are also the focus of the article by Cakkol, Johnson, Raffoni and Raja, “From goods to solutions: how does the content of an offering affect network configuration?” Using the context of the new truck manufacturer supply chain they show how the configuration of a supply network can result in more traditional “goods” focused value propositions versus service-focused value propositions, which are directed at solutions.

S-D logic also recognizes that no single actor can have access to all of the market-facing, private, and public based resources needed to realize benefit. Thus, actors are always dependent on others and value is thus always co-created. “Consumer co-creation and the impact on intermediaries” by Siguaw, Gassenheimer and Hunter helps further our understanding of the broad nature of value co-creation. “Consumers” are viewed as contributing to manufacturer’s marketing processes and thus, subsequently, affecting the economic and relational benefits and costs of other intermediaries in the “supply chain”, what in S-D logic more broadly conceptualizes as a service ecosystem.

The service ecosystem is the central organizing frame of reference in S-D logic. A service ecosystem is defined as a relatively self-contained, self-adjusting system of resource-integrating actors that are connected by shared institutional logics and mutual value creation through service exchange. Flint, Lusch and Vargo take a close look at the emerging and rapidly growing area of shopper marketing in their article “The supply chain management of shopper marketing as viewed through a service ecosystem lens”. As the authors illustrate, the service ecosystem perspective better fits the dynamic, resource integrating nature of a shopper marketing network. It also provides a variety of supply chain solutions that are not evident from a more micro-dyadic and supply chain focus.

In the logistics literature, there is increased attention on reverse logistics and how it can help an enterprise achieve its sustainability goals. Liu uses S-D logic to develop an integrated product service system (IPSS). The result is a system that encompasses environmental and societal issues that become integrated with IT, ERP, SCM and CRM platforms. This points away from the transactional model that is so central to the neoclassical model of economics, and toward a relational S-D logic based IPSS.

An issue that frequently arises when discussing S-D logic is how practitioners can leverage S-D logic to solve practical problems. The bridge between theory and practice is built upon middle-range theory that resonates practical guidance for practitioners. Randall, Wittmann, Nowicki and Pohlen, in their article “Service-dominant logic and supply chain management: are we there yet?”, develop a mid-level theory that uses the context of performance-based logistics (PBL) as a framework that guides S-D logic in practice. This work takes a significant step forward by departing from the traditional view of firm success measured in units of output and toward an S-D logic informed view that measures success in terms of the application of knowledge and skills (what S-D logic defines as service) to help the beneficiary. PBL shifts from a return on sales (selling more parts) to a return on investment (selling performance) business model. In this way PBL contracts deliver “performance” (value in the eyes of the beneficiary) “as a service”. The authors suggest the strength of PBL is in the governance structure that drives the shift from return on sales to return on investment.

Interestingly these authors doing research into PBL and S-D logic are part of a team based primarily at the Complex Logistics Systems Research Cluster at the University of North Texas. This interdisciplinary center spans four colleges and, importantly, has adopted S-D logic as its guiding theoretical framework in its research program, which is directed at transforming public and private logistics resources to develop affordable, resilient and sustainable solutions for large-scale service ecosystems, thus broadening the field of physical distribution and logistics through S-D logic. The final article in this special issue, authored by Hammervoll takes a macro-perspective that presents a conceptual analysis of co-creation of value within supply chain relationships based on exchange- and production-economy perspectives.

In closing, we thank the reviewers for this special issue: Chad Autry, Dimitrios Buhalis, Kevin Burgess, Mawuko Dza, Mark Francis, Pennie Frow, Rod Gapp, Debra Grace, Amelia Green, Deborah Griffin, Paul Hyland, Byron Keating, John Mangan, Bill Merrilees, Don Michie, Sandy Ng, Matthew O’Brien, Wes Randall, Daniela Rosenstreich, Claudine Soosay, Kaj Storbacka, Mert Tokman, Cheng-Wang Tsai, Charlotta Windhal, Yong Wu, Atefeh Yazdanparast and all of the authors of both the published articles as well as those we were not able to publish. As we enthusiastically read and studied the submitted manuscripts and received feedback from reviewers for improving the contributions, we became convinced of the increasing research power that can be found at the intersection of physical distribution, supply chain management and S-D logic. We are especially hopeful that IJPDLM will continue to become a desired place to publish high quality articles that draw upon the explanatory strength of S-D logic. As we look at IJPDLM’s editorial goals and mission, we believe – and the journal publication records bear proof – that S-D logic offers a theoretical platform for innovative thinking about the problems and opportunities for physical distribution and logistics management. By adopting this perspective we also believe that the domain and intellectual contributions of scholars in this area will be broadened, as will the S-D logic orientation.

Robert F. Lusch, Stephen L. Vargo, Ron Fisher
Guest Editors

References

Lusch, R.F. and Vargo, S.L. (2014), Service-Dominant Logic: Premises, Perspectives, Possibilities, Cambridge University Press, Cambridge
Vargo, S.L. and Lusch, R.F. (2004), “Evolving to a new dominant logic for marketing”, Journal of Marketing, Vol. 68 No. 1, pp. 1–17
Vargo, S.L. and Lusch, R.F. (2008a), “Service-dominant logic: continuing the evolution”, Journal of the Academy of Marketing Science, Vol. 36 No. 2, pp. 1–10
Vargo, S.L. and Lusch, R.F. (2008b), “Why service”, Journal of the Academy of Marketing Science, Vol. 36 No. 2, pp. 25–38
Vargo, S.L. and Lusch, R.F. (2011), “It’s all B2B…and beyond: toward a systems perspective of the market”, Industrial Marketing Management, Vol. 40 No. 2, pp. 181–187