effects of judgmental structure, complexity, and consistency on managerial performance, The

Journal of Business Logistics, 1995 by Waller, Matthew A, Novack, Robert A

The implementation of the supply chain concept requires several basic objectives to be met. First, customer requirements must be accurately defined and completely satisfied. Second, seamless operations and information flows among supply chain partners are necessities. Third, decisions made by people concerning the operations and information must be consistent with customer and supply chain objectives. For example, the initiative in the grocery industry called Efficient Consumer Response (ECR) requires that all grocery supply chain members focus on providing better value to the grocery consumer in the forms of better product, better quality, better assortment, better in-stock service, and better convenience with less cost throughout the total supply chain.(1) These efforts must be coordinated from manufacturer through distributor to the retail shelf. Marketing, finance, and logistics personnel must coordinate product, information, and cash flows and make decisions concerning how they should be managed to provide value to the consumer.

Logistics managers are often questioned about their perceptions of the needs of their customers, firms, and supply chain partners. This is done to confirm similarities in service requirements between supply chain members and their customers. For example, research by Novack, Langley, and Rinehart asked logistics executives about their perceptions concerning the value that logistics adds to their firms' products.(2) Logistics executives in the research agreed that customers perceive logistics to add value through such services as on-time delivery and product availability. An assumption is made that if an individual perceives that a particular service is important to customers, the individual will make management decisions consistent with this perception. This assumption might not be valid. Differences can exist between what an individual states and the actions taken by that individual. This difference between customer expectations and supplier perceptions was also identified as a quality gap by Zeithaml, Parasuraman, and Berry.(3)

Decisions made by a manager are influenced by what can be called a judgment structure, that is, by those variables that the manager believes to be important to a customer. The complexity and consistency of this judgment structure are also critical to a manager's decisions and decision making process. The better a manager accurately perceives and satisfies customer and supply chain requirements, the better the manager's performance should be within the firm as judged by upper management. This research proposes to use a technique called policy capturing to determine whether: (1) the judgment structure a manager uses in providing logistics services to customers and supply chain members affects his or her performance in the firm; (2) the complexity of this judgment structure used by a manager affects the manager's performance in the firm; and, (3) the consistency that a manager uses in applying this judgment structure affects his or her performance in the firm.

BACKGROUND

Policy capturing is used in business research to model human judgment and decision rules, deriving a linear model of the judgmental process. This technique involves presenting a manager with multiple scenarios that contain information cues (e.g., on-time delivery) that vary in magnitude, and the manager makes a judgment about firm performance for each scenario as to the impact it might have on customer satisfaction. The individual firm in the supply chain is the basic unit of performance measurement because of the value it adds to supply chain output. The information cues and their values are independent variables and the judgments and their numerical values are the dependent variables. Regression is then used to derive a linear model of the manager's judgment. Such a linear model is referred to as a judgment structure. The regression coefficients can be thought of as the weights a manager puts on the information cues in forming judgments about the scenarios. The manager is unaware of the exact weighting, although he or she may be aware of the fact that various information cues are considered in making judgments.

Studies of human judgment processes have been conducted in the psychology literature using policy capturing(4) and have found that about 70% of the variation in judgment can be explained by linear models of information cues.

This methodology can be useful in determining whether or not a firm's managers are aware of and making decisions to support the objectives of the firm and the supply chain. If not, upper management can identify where the conflicts exist between a manager's actions and the appropriate supply chain goals and make adjustments to eliminate these discrepancies.

METHODOLOGY

A sample of 54 managers was obtained from a third-party logistics firm. This firm is an asset-based provider of transportation, warehousing, and manufacturing services to industrial customers. The importance of third-party services in the management of the supply chain cannot be overstated; these firms provide services critical to the coordination of the supply chain members. As such, a third-party firm's managers must be attuned to the needs of the customer and supply chain and must make decisions consistent with those needs. The 54 logistics managers in this study were all top managers of particular customer accounts and were responsible for managing all logistics services provided to these accounts.