Macrologistic performance and logistics commitments in sales contracts in international supply chains

• DOI: https://doi.org/10.1108/IJLM-12-2018-0323
• Pages: 59-76
• Published date: 13 March 2020
• Date: 13 March 2020
• Author: Đurđica M. Stojanović,Jelena Ivetić
• Subject Matter: Logistics,Management science & operations

Macrologistic performance and

logistics commitments in sales

contracts in international

supply chains

Ðurdica M. Stojanovi

c and Jelena Iveti

c

Faculty of Technical Sciences, University of Novi Sad, Novi Sad, Serbia

Abstract

Purpose –This study aims to illuminate the relationship between the logistic performance indexes (LPIs) of

trade countries and sharing obligations related to logistics services in delivery among parties in international

sales contracts.

Design/methodology/approach –A comprehensive one-year database of Serbian international trade flows

is used. The LPIs of 148 countries are related to the Incoterms

®

rules in international sales contracts that

designate the division of obligations between exporters and importers for moving goods. Empirical data were

subjected to statistical analysis, where nonparametric correlation and inferential methods were applied. The

differences between countries with the highest and lowest LPIs were also examined.

Findings –LPIs positively correlate with logistics commitments in exports and imports. Their impact on the

choice of Incoterms

®

rules differs among the groups of trade terms. Waterway and D-terms are the most

sensitive. LPIs of trade countries clearly impact “emission”and “attraction”of the most extended sellers’

delivery obligation “packages,”expressed in Drules.

Research limitations/implications –The empirical data are limited to a single country. Further research

must explore the relative impact of macrologistic factors on exporters and importers’logistics commitments for

building better decision-making support tools.

Practical implications –The results may support suppliers and buyers in sharing their experiences on

Incoterms

®

practice and encourage more rational than intuitive decisions.

Originality/value –This is the first empirical study to quantitatively evidence the sensitivity of groups of

Incoterms

®

rules on the macrologistic environment of trade countries.

Keywords Buyer–supplier relationships, Supplier management, Performance measurements, Supply chain

competences, Global logistics

Paper type Research paper

1. Introduction

Coupling the procurement of goods and services in international trade may reduce costs and

increase the total efficiency of supplying goods (Choudhary and Shankar, 2013). It may also

add value, create economies of scale, lead to discount rates for transportation costs, increase

competitiveness in international markets (particularly in distant markets), increase profits

and help maintain control over delivery (Malfliet, 2011;Russell and Krajewski, 1991;

Swenseth and Godfrey, 2002). The delivery service is the second most important criterion for

supplier selection, followed by the cost of goods and delivery (Ho et al., 2010). However,

studies exploring integrated products and delivery service procurement usually use a

simplified approach for the procurement or purchase of the latter.

The logistics commitments in international sales contracts are not binary decisions,

namely, to purchase or not to purchase the delivery service. The supplier’s part of a delivery

service may be completed at any point between the supplier (seller) and the buyer. Thus, the

negotiations usually include an agreement of sales contract among parties regarding their

logistics commitments –that is, the sharing of costs, risks and responsibilities for delivery

between suppliers and buyers. Leveraging the sellers’logistics obligations in global supply

chains increases the logistics routing flexibility, improves consistency and brings financial

Logistics

commitments

in sales

contracts

59

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0957-4093.htm

Received 26 December 2018

Revised 2 June 2019

24 August 2019

31 October 2019

Accepted 11 November 2019

The International Journal of

Logistics Management

Vol. 31 No. 1, 2020

pp. 59-76

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-12-2018-0323

benefits (Kumar, 2010). In this sense, commercial terms, or Incoterms

®

rules, are of crucial

importance for international procurement. Being a part of the international sales contracts,

they express the extent of the purchased delivery service and the seller’s logistics obligations

for delivery. Despite their significance in international sales and delivery service and for

the support of good business practice, research on the role and use of commercial terms in

sales contracts is surprisingly scarce. The deeper analysis of their role, relationship with the

overall logistics setup in the international supply chains and importance for logistics

managers and providers is virtually missing in the literature on logistics and supply chain

management.

Many factors impact the choice of Incoterms

®

rules in sales contracts. There are generally

four levels of interrelated factors: product and shipment-related, firm-related, supply chain and

macroeconomic and macrologistic factors (David, 2018;Hien et al., 2009). The long-term and

global popularity of terms (e.g. EXW) also opens up questions regarding the relative

significance of each level of the impact factors. Can specific terms, or groups of terms, be

related to a specific macrologistic environment of trade parties? Are there one-size-fits-all rules

within a diversity of impact factors on all four levels? Would more detailed research reveal

more regularities in the use of particular terms regarding the external macrologistic factors?

Despite its obvious importance, there is limited research on the impact of countries’

logistics performance on the use of Incoterms

®

rules, i.e. on regularities in leveraging the

seller’s logistics commitments. To the best of the authors’knowledge, there is no empirical

research that includes the analysis presented in this paper.

To bridge the research gap, this study focuses on the fourth and broadest factor level to

examine the impact of the logistics environment on leveraging the seller’s logistics

commitments. The widely accepted measure of logistics performance at a national level is the

logistics performance index (LPI) (World Bank, 2016). Therefore, the relationship between the

suppliers’logistics obligations –expressed as the Incoterms

®

rules applied in international

sales contracts –and the LPIs of trading countries is examined. Implicitly, the authors

investigate if and how far macrologistic aspects of trade countries, expressed as LPIs, impact

the buyers to couple the procurement of goods and delivery service within the sales contract.

Thus, two-related research questions (RQs) are derived:

RQ1. Is there is a correlation between the extent of the suppliers’logistics obligations in

sales contracts and the macrologistic characteristics of trading countries?

RQ2. Does a country’s LPI impact used groups of Incoterms

®

rules in international trade?

A case study of Serbia is used to exemplify the presented ideas, conduct the empirical

analyses and answer the research questions. Descriptive statistics and a set of nonparametric

methods are applied to explore the impact of LPIs on Incoterms

®

rules used in trade, both

export and import. The research reveals that macrologistic performances of trade countries

impact the division of logistics commitments between the supplier and the buyer in a sale

contract.

This study’s contribution to the limited research on the subject under examination is

threefold. First, this research is among the first attempts to examine the relationship between

the macrologistic performances of trade countries and leverage of the supplier’s logistics

commitments. Second, the authors indicate the possibility of using two global standardised

measures, Incoterms

®

rules and LPI, to explore the impact of macrologistic performance on

the suppliers and buyers’preferences for logistics obligations in sales contracts. Third, this

study contributes to the scarce number of empirical studies on the practice of Incoterms

®

rules use. The limited research on the use of Incoterms

®

rules covers either the most

developed European countries or coastal and island countries. In such research, the use of

surveys to report respondents’preferences is predominant. Thus, the authors examine a

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