Abstract

This study sought to assess the effects of logistics efficiency on customer satisfaction in the public transport sector and the case study was the municipality of Buea. The study examined the determinants of logistics efficiency on customer satisfaction customers in Buea.

The study used a descriptive survey that used self-administered structured questionnaire to the target population of customers of public transport companies in Buea that offer inter urban transportation along with logistics services in Buea and one hundred questionnaires were administered.

A descriptive analysis approach was used to analyse and test relationships among variables. The study found that reliability and responsiveness are logistics service quality dimensions that were found to have significant effect on customer satisfaction among customers in the public transport sector in Buea. Other factors like image and branding were found to be factors that do not significantly affect customer satisfaction determination in the Buea public transport sector.

Moreover, logistics efficiency was found to have significant and positive effect on customer satisfaction leading to behaviour such as likelihood to recommend, switching intention and repurchase intention.

Furthermore, demographic characteristics such as gender, age, education, and income levels were found to have no significant effect on the relationship between logistics efficiency and customer satisfaction in the public transport sector. The study recommends that public transport business owners and managers in Buea should improve on their responsiveness to customers as part of their logistics service in order to improve on logistics efficiency and influence customer satisfaction positively.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Logistics has an effect on customer loyalty and satisfaction for public transport companies on processes such as planning, sourcing, and delivering, and at levels ranging from tactical operations to organisational strategy. The vast scope of logistics efficiency and customer loyalty and satisfaction has resulted in diverse and disintegrated research on the topic.

Logistics management systems have the potential to change organizations and promote the emergence of new businesses. Their main goal is to enhance information flow and facilitate the decision making process. A logistics management system is one of the few elements of supply chain that can offer both improved performance and lower cost (Van de Ven 2005).

Logistics efficiency is an integrated and complex network concept that refers to the sum of all the processes starting from the procurement of the raw material from the manufacturer/ producer and ending with delivery of the end-product to the consumer (Silver et al., 1998) as far back as the 1950’s. Due to increased competition in mass transport industry, uncertainty risk in supply chains are growing (Christopher & Peck, 2007; Hillman & Keltz, 2007) that lead to an increasing vulnerability of customers in terms of loyalty and satisfaction.

Hence the upstream and downstream integration of logistics network is the basic requirement to fulfill the objectives of customer loyalty and satisfaction. The IT enabled SCM can easily manage the flow of information with key business processes, materials, money within and outside the networks and contributes to profits by improving quality and by reducing coordination costs and transaction risks (Stroeken, 2000; Mabert et al., 2001; Sanders & 2002).

Logistics has been directly linked to the overall company performance and this has therefore made procurement practices vital to company success. Procurement practices impact an organisation’s customer loyalty, the success of acquiring new customers depends on efficiency of the logistics involved in the movement of people and their luggage.

In the global context, logistics carries out a basic function in delivery of service along with the performance of organisations. It performs the principal role of guaranteeing well-organised delivery of goods and services to customers (Uyarra and Flanagan, 2010) and engage all the processes related to the procurement of goods and services by organisations (Roodhoot and Abbeele, 2015)

Around the world, organisations are experiencing an unprecedented step of change because of competition and as a result, they are rapidly re-evaluating their operating models and market strategies not just to withstand these market forces, but capitalise on them and satisfy their customers better. Clearly, logistics has a significant role to play in helping the organisations to achieve their objectives and prepare for the uncertainty ahead in part.

This will require logistics to focus on driving costs out of the cost base. But the opportunity also exist for the function to add value in a much more strategic way implications and ensuring that the process is economical and efficiency is crucial. This requires in part that the whole logistics process should be well understood by the companies, customers and business community or suppliers and other stakeholders, including professional associations, academic entities and general public.

One of the key areas in the customer-centered organisations is ensuring that existing customers are satisfied. As a result organisations have been studying and developing strategies to satisfy customers and achieve customer delight.

According to research, a very satisfied customer is nearly six times more likely to be loyal and to re- purchase and recommend a product/service to family and friends than a customer who is just satisfied. It is again believed that satisfied customers tell five other people about their good treatment, and that five-percent increase in loyalty can increase profits by 25% – 85%.

Conversely, the average customer with a problem eventually tells eight (8) to ten (10) other people (SPSS White paper, 1996; Limayem, 2007). The focus on customer-centric marketing philosophies has received considerable attention in the marketing literature by scholars and practitioners. Both practitioners and scholars are increasingly looking for ways to understand, attract, retain and build intimate long term relationship with profitable customers (Kotler, 2006; Gronroos, 1994).

Numerous studies have established the fact that logistics efficiency drives customer loyalty and satisfaction (Heskett et al., 1997; Heskett et al., 1994; Reichheld and Sasser, 1990). It is believed that the average business spends six (6) times more to attract new customers than to retain old customers. Customer retention is, therefore, basically a product of customer loyalty and value which in turn is a function of the level of customer satisfaction or dissatisfaction (Reichheld, 1996). Organisations that have long-term perspective for growth are, therefore, increasingly developing efficiency measures in their logistics to ascertain customer satisfaction.

The value of most logistics services in a knowledge-intensive economy depends primarily on the development of knowledge-based intangibles, like technological know-how, product design, marketing, preferences of customers, and understanding of value-added networks.

As customers become more complex and market environments become more dynamic and competitive, it is likely that the logistics needed to deliver value to the end customers are no longer confined in a single firm (Hult et al. 2004; Inkpen and Dinur 1998; Lincoln et al. 1998). Firms that develop the competency of managing knowledge resources transcending organisational borders will be rewarded with higher economic benefits (Van de Ven 2005).

There is also much evidence in the literature to the fact that customer satisfaction is principally driven by logistics service quality of a firm from the perspective of its customers (Thompson, 2004; Gronroos, et al., 1996; Xu et al, 2002; Dyche, 2001; Ryals & Knox, 2001; Stone, 2000). This has empirically informed practitioners of the necessity of developing, communicating, delivering and improving the quality of the logistics service to customers. This has led to the growing interest in the development of many models of service quality for various industries including public transportation, as well as development of total quality improvement strategies for service organizations that have particular significance to the service industry.

The public transportation industry in Cameroon, like any other service organizations, has the quest to deliver quality logistic service to satisfy its customers in the midst of fierce competition for market share with its numerous businesses operating in the sector. The principal logistic services range from luggage handling, transportation of cargo and, movement of people. The public transportation in Cameroon is majorly done on land by bus agencies with offices and stop points in major towns across the country. Over the past decade, competition in the industry has greatly increased as many new entrants have joined the industry.

Customer satisfaction adds to the basic value proposition behind a product (i.e. getting more for less) for a limited time in order to stimulate consumer purchasing, selling effectiveness or the effort of the sales force (Aderemi, 2003). This implies that, customer satisfaction may be directed either at end consumer or at selling intermediaries such as retailers or sales crews.

Customer loyalty can be an effective tool in a highly competitive market, when the objective is to convince consumers to carry a new product or influence consumers to select it over those of competitors. More so, it tends to work best when it is applied to items whose features can be judged at the point of purchase, rather than more complex, expensive items that might require hands of demonstration (Kotler and Keller, 2006). Building loyalty includes communication activities that provide extra value or incentives to ultimate customers, wholesalers, retailers or other organizational customers. It also stimulates sales product trial (Kotler and Keller, 2006).

According to Thai (2000) the fundamental principles of good logistics process take account of accountability, where effective mechanisms must be in position so as to allow procuring entities to spend the available resources vigilantly, knowing undoubtedly that they will be accountable for everything to management and the board of the company.

The logistics process must also take account of competitive supply, which requires logistics to be executed with regards of competitive environment, taking on transparency and efficiency in the process, unless there are compelling reasons for single sourcing. Logistics process must also uphold consistency and must emphasise equal treatment of all bidders irrespective of nationality, race or political affiliation.

However, these areas of logistics have, for so long, been overshadowed with ineffectiveness, corruption as well as with disregard of essential considerations of value for money. This has negatively impacted the rate and quality of progress in accomplishing the performance objectives of some organisations, particularly in developing and transition countries (Tan, et al., 2009).

A good quality logistics plan ought to explain the process in detail needed to collect, handle and deliver goods from and to customers. At the start, the goods required to be delivered are defined, and then the acquisition process for those goods is illustrated in detail. Ultimately delivery the timeframe is scheduled (Peter, 2012).

Furthermore, Fleming (2003) contends that logistics planning is essential because it facilitate to make a decision on what to buy, when to buy and from what sources. It also let planners determine if prospects are realistic; particularly the prospects of the requesting entities, which as a rule look forward to their requirements to be met on short notice as well as over a shorter period than the application of the related procurement method permits.

Consumer buying behaviour however is the process by which the individual search for, selects, purchase, use and dispose of goods and services, in satisfaction of their needs and wants. The consumers’ behaviour has a direct effect on the success of the firm and therefore must ensure that they create a marketing mix that satisfies consumers.

The consumer mostly goes through about five steps in taking one purchase decision. These include Problem recognition, Information search, Evaluating of alternatives, Purchase decisions, Purchase and Post Purchase evaluation. Actual purchasing is only one stage of the process and not all decision processes lead to a purchase. Also not all consumer decisions will include all the stages but will depend on the degree of complexity and risk involved.

Most logistics managers believe that logistics adds value to the operations of the company and they use the process to improve performance by increasing lowering operational cost while increasing the value delivered to customers relative with other competitors in the market (Odunlami and Ogunsiji, 2011). In determining the relative importance to place logistics and its correspondent value in overall performance, an organisation should consider its budget, the logistics practices, the nature of competition in the market, the target customers and the efficiency of the logistics services offered to customers (Odunlami and Ogunsiji, 2011).

The increased competition in the public transport sector in Buea has pushed the industry to be customer oriented and focus most of customer satisfaction to gain customer loyalty. The essence of this is to attract potential customers, retain its existing customers and boost sales as well. One area identified is the logistics service which mainly handles mails, goods and movement of people from one town to the other. Over the years the operators have experienced both increase and decrease in their market shares.

1.2 Problem Statement

Competition continues to increase as the number of public transportation companies in Buea and customers seeking better service quality to determine their loyalty.

The number of companies operating in the public transportation sector in Buea has increased over the years as evidenced by observation of the number of bus agencies at Mile 17. As the population of Buea has grown so to there been an increase in demand for logistics services offered by these companies from customers. This naturally increases competition that installs on all markets regardless of the industry.

Innovation is a daily requirement for all companies. Today, to permanently satisfy existing customers and attract new customers and increase profits, companies must look for better logistics practices to create new products both for competitiveness and for the sustainability of business activities. The innovative company is not the end of his troubles once the new product developed for it is one thing to produce and quite another to keep supplying the products repeatedly

The role of logistics efficiency on customer loyalty and satisfaction has been examined by different scholars in different sectors in different countries. Although previous studies (for instance, Kabega, et al., 2016) have been conducted to examine issues relating to logistics efficiency and customer satisfaction, there are still existing complaints from customers regarding delayed parcels, missing parcels, unfair and inconsistent pricing and poor customer service. This has resulted to a high number of customers switching between the companies in search for better value in terms of logistics service quality and efficiency.

The problem of this study is principally informed by the fact that there is high rate of customers switching public transportation companies in search for better logistics efficiency which will deliver them value.

Many scholars have endeavored to examine customer satisfaction with logistics service quality in many industry contexts (Gyasi & Azumah, 2009; Mehdi, 2007; Asubonteng, McCleary, & Swan, 1996; Rust, & Oliver, 1994; Gronroos, 1994; Rust & Zahorik, 1993), few have related it to the public transportation industry context in developing economies, like Cameroon.

There is the need to increase understanding of the factors that drive customer satisfaction in the industry in order to provide management with empirical basis for developing efficient logistics services. In view of the above, the main problem of this study is: How can determinants and effects of logistics efficiency regarding customer satisfaction in public transport sector in Buea be examined.

1.3 Research Questions

The main research question for this study is; what is the effect of logistics efficiency on customer satisfaction for customers of the public transport sector in Buea. The study seeks to answer the following specific research questions:

1. What are the determinants of customer satisfaction for public transport companies in Buea?
2. To what extent does logistics efficiency influence customer satisfaction for public transportation companies in Buea?
3. How is the relationship between logistics efficiency and customer satisfaction influenced by customers’ background data (gender, age, education, income level)?

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