Core criteria affecting intention to select a supplier of less than container load (LCL) import service in ho chi minh

MINISTRY OF EDUCATION AND TRAINING University of Economics Ho Chi Minh City  DANG NGOC HOANG CORE CRITERIA AFFECTING INTENTION TO SELECT A SUPPLIER OF LESS THAN CONTAINER LOAD LCL I

MINISTRY OF EDUCATION AND TRAINING

University of Economics Ho Chi Minh City



DANG NGOC HOANG

CORE CRITERIA AFFECTING INTENTION TO

SELECT A SUPPLIER OF LESS THAN CONTAINER LOAD (LCL) IMPORT SERVICE

IN HO CHI MINH CITY

MASTER THESIS IN ECONOMICS

Ho Chi Minh City – 2018

MINISTRY OF EDUCATION AND TRAINING

University of Economics Ho Chi Minh City



DANG NGOC HOANG

CORE CRITERIA AFFECTING INTENTION TO

SELECT A SUPPLIER OF LESS THAN CONTAINER LOAD (LCL) IMPORT SERVICE

IN HO CHI MINH CITY

Major: Business Administration (Research)

Code: 8340101

Master Thesis in Economics

Supervisor: Dr Tran Thi Thanh Phuong

Ho Chi Minh – 2018.

COMMITMENTS

I commit that: “Core criteria affecting intention to select a supplier of Less

Than Container Load (LCL) import service in Ho Chi Minh city” is my own

research, which is based on the study and guidance of Dr Tran Thi Thanh Phuong This thesis includes accurate referencing cited from the vast majority of research

carried out by reputable authors in the world with detailed in-text citations The

content and results of the analysis are honest and have not been published in any form before, so the comments, evaluations and conclusions are reliable

Ho Chi Minh City, 2018.Dang Ngoc Hoang

TABLE OF CONTENTS

BACK COVER PAGE

COMMITMENTS

TABLE OF CONTENTS

LIST OF ABBEREVIATIONS

LIST OF TABLES

LIST OF FIGURES

ABSTRACT

CHAPTER 1

INTRODUCTION 1

1.1 Introduction: 1

1.2 Purpose of the study: 3

1.3 Novelty value and significance of the Study 4

1.4 Subjects and Scopes of study: 4

1.5 Limitation of the Study: Error! Bookmark not defined 1.6 The thesis structure: 5

CHAPTER 2 LITERATURE REVIEWS 6

2.1 Definition and roles of international freight forwarders 6

2.1.1 Definition of international freight forwarder: 6

2.1.2 Roles of international freight forwarder: 7

2.2 Definition and roles of consolidator and less than container load (LCL) service: 9

2.2.1 Definition of consolidator and less than container load (LCL) shipment: 9 2.2.2 Roles of consolidator and less than container load (LCL) import shipment: 9

2.3 Standard Operating Procedure (SOP) of Consolidator for LCL Import Shipment: 12

2.4 The overview of less than container load (LCL) service in Ho Chi Minh City 13

2.5 Purchasing, Purchasing process and Behavioral Intention: 14

2.6 Factors influencing freight forwarder selection 18

2.7 An overview of related researches that analysis factors affecting to select a

supplier of LCL service 21

2.8 Proposed Research Model and The Scale of Variables: 27

2.8.1 Proposed research model: 27

2.8.2 The measurement scale for selected factors: 29

CHAPTER 3 RESEARCH METHODOLOGY 33

3.1 Research Process 33

3.2 The qualitative research: 35

3.3 The tools and method of survey: 35

3.4 Target respondents and the sampling 36

3.5 Measurement scales: 36

3.6 The quantitative analysis: 38

CHAPTER 4 DATA ANALYSIS 40

4.1 Demographical Data of the Respondents: 40

4.1.1 Position of respondents: 40

4.1.2 Business type of respondents: 41

4.1.3 Consolidators were chosen by respondents 42

4.1.4 Commodities were imported by LCL import service 43

4.1.5 Frequency of using import service: 44

4.1.6 Markets imported LCL cargo into Vietnam: 44

4.1.7 The Level of Factors on Customer Selection Intention to use LCL Service 45

4.2 Reliability analysis: 46

4.3 Exploratory Factor Analysis (EFA): 48

4.3.1 EFA for independent variables: 49

4.3.2 EFA for dependent variable: 51

4.4 Correlation Testing 52

4.5 Multiple Regression Analysis 54

CHAPTER 5 CONCLUSION AND RECOMMENDATIONS 59

5.1 Conclusion of the Study 59

5.2 Limitation and future research 60

5.3 Recommendations to LCL import supplier 61

5.3.1 Recommendations for Responsiveness 61

5.3.2 Recommendations for reliability: 62

5.3.3 Recommendations for Empathy 63

5.3.4 Recommendations for Rates 63

5.3.5 Recommendation for Assurance 64

5.3.6 Recommendations for resource 64 REFERENCE

APPENDIX

LIST OF ABBEREVIATIONS

CBM: Cubic Meter

KMO: Kaiser – Meyer – Olkin

KPI: Key Performance Indicator

LCL: Less Than Container Load

EFA: Exploratory Factor Analysis

EXW: Ex-Work

FOB: Free On Board

FCL: Full of Container Load

SOP: Standard Operating Procedure

SPSS: Statistical Package Software For Social Science

Sig.: Significant Value

TEU: Twenty-foot Equivalent Units

Table 2.1 Dimension of container according to ISO standard 10

Table 2.2 The measurement scales of Banomyong et al (2005) research 25

Table 2.3 The overview of factors influencing selection international freight forwarders and consolidators in related researches 26

Table 2.4 Research Hypotheses 32

Table 3.1 Measurement scales factors affect selection intention LCL import supplier 36

Table 4.1 Position of respondents 41

Table 4.2 Business type of respondents 42

Table 4.3 Consolidators were chosen by respondents 42

Table 4.4 Commodities were imported to Vietnam by LCL import service 43

Table 4.5 Frequency of using LCL import service 44

Table 4.6 Markets imported LCL cargo to Vietnam 45

Table 4.7 Mean and standard deviation of six predictors 45

Table 4.8 Reliability Statistics 47

Table 4.9 KMO and Bartlett’s Test of Independent Variables 49

Table 4-10 Rotated Component Matrixa for Indepentent Variables 50

Table 4.11 KMO and Bartlett's Test 51

Table 4.12 Rotated Component Matrix for The Dependent Variable 52

Table 4.13 Correlations 53

Table 4.14 Model Summaryb 54

Table 4.15 ANOVAa 55

Table 4.16 Coefficientsa 55

Table 4.17 The results of testing all hypotheses 57

LIST OF FIGURES

Figure 2.1 Proposed research model……… 28 Figure 3.1 The research process 33

ABSTRACT

Importers and manufacturing factory in Vietnam are using more of their no inventory strategy to reduce storage cost and catch up with the changing need of the market Thus, there is significant change on quantity of import purchase order, from Full Container Load (FCL) into Less Than Container Load (LCL), but more in frequency of shipments The consolidator who is supplying the shipping service for LCL import shipments must always respond to their customers’ demand to ship LCL cargo with competitive cost, short transit time and good at handling service quality This study was conducted to find out the variables which impact the customer’s intention to select the supplier of LCL import service Understanding the customer’s behavioral intention will be one of the keys to competitive advantage, which improves the organization’s service level

The requirements for LCL import service providers are becoming more severe, customers want their cargo must be shipped on time without delay and fastest service, cargo must be handled safely and always receive a willingness on resolving troubles and updating information also

The criteria selected to examine the impact on customer selection intention to use the LCL import supplier based on the previous studies written by authors of the same topic in the world The result of research did showed that all six factors included Responsiveness, Rate, Resource, Assurance, Empathy, Reliability would positively affect customer intention to select the company's service, while the Responsiveness, Reliability, Empathy factors were the best significant impacts The findings will be the foundation for choosing strategy to develop a better service and getting more on LCL import shipping market share

Keywords: Selection Intention, Less than container import service, Ho Chi

Minh City

CHAPTER 1

INTRODUCTION 1.1 Introduction:

Less than container load (LCL) import shipment is the small purchase order which cannot be shipped by full of container load (FCL) transportation mode because

of the limited budget The small shipments will be placed with an organization called consolidator who provides the collecting and shipping LCL import service Consolidators combine a large amount of LCL shipments from different shippers and arrange with the same schedule and destination to utilize container space and reduce cost (Vitasek, 2006) The consolidator buys the FCL ocean freight from carrier and sells the LCL ocean freight to the freight forwarding companies or direct shippers based on the cubic meter (CBM) of volume

The number of LCL shipments imported to Vietnam is increasing which was mentioned in Vietnam Logistics Reports in 2017 The report showed that the global maritime shipping market was expected to exceed 730 million TEU of full of container method while the volume of consolidated container reached 500 million TEU in 2017 and expected to increase %30 in 2018 (Ministry of Industry and Trade, 2017) This figures demonstrated that more importers and manufacturing factories select “Just In Time” strategy with no inventory to reduce the storage cost, shipping cost and make sure that their import goods and materials can follow up the trend of market In case of keeping zero inventory, many smaller order will be shipped with higher frequency, it’s a good solution for supply chain management Thus, LCL import shipment becomes very common in logistics business and LCL import shipping market between consolidators in Vietnam becomes more and more competitive

Nguyen Hanh Tam (2017) reported Shipping gaze magazine that there are more than 3000 forwarders and more than 100 consolidators in Ho Chi Minh city The LCL shipping market has been become highly competitive when many global consolidators penetrate Vietnam market The annual sales volume of import ocean freight in Less than Container Load (LCL) to Vietnam is accounted for more than

100 million shipments Most of them are exported from Europe, Asia, USA with over

%70 of Asia, over %20 of Europe and %10 of USA and others

In order to create the competitive advantage and expand the marketshare, consolidators must improve to create their competitive advantages in providing LCL import service Most previous researches were related to the factors influencing to LCL service quality or intention to select LCL supplier for export shipments For instant, namelyDang Huynh Kha (2015) focused on finding the factors which affect

to decision to select a supplierof LCL export service, Bien Thi Mai Duyen (2014) concentrate in finding the criteria influencing to the LCL export service quality Pisoot (2010) researched on the factors impacting on the selection intention supplier

of LCL export service Banomyong et al (2005) researched on influential factors

toward exporter and importer on selecting service from freight forwarder in Thailand None of these mentioned factors influencing intention to select a LCL import service supplier in Vietnam Recently, many import shipments were controlled booking ocean freight at Viet Nam in order to earn more trading profit Consolidators are more focusing on approaching and offering quotation for these import shipments from destination side instead of origin side

This study will focus on the criteria which impact on a customer's intention to select a LCL import service supplier The thesis will research on retail importers, freight forwarding companies and also consolidators who co-load out their shipments when they are not able to serve by their own service to find out what the best factor

is The relevant theories will be reviewed in the next chapter

1.2 Purpose of the study:

The less than container import service market in Vietnam is more and more competitive because of considerable increasing demand The importers in Vietnam are using more less than container load service instead of full of container load service

to reduce shipping cost and storage cost Therefore, the consolidators who provide the less than container load import service must understand customer’s purchasing intention behavior to establish the suitable business strategy and perceive the strong important factors which affecting the customer intention to select a import consolidators The consolidators who focus on the right and core factors will be create the competitive advantages

The research was conducted to help the consolidators in Vietnam understand the customer's behavioral intention to select a transportation service, Identifying the core criteria and comparing the level of each factor which influence intention to select

to a supplier of LCL import service Through identifying and evaluating core criteria influencing the intention to select a LCL import consolidator, propose alternatives to improve quality of LCL import, create the competitive advantages

Six factors were used in this study: Reliability, Rates, Resources, Assurance, Responsiveness and Empathy The research model is an interpretation of the

component from researches of Parasuraman et al (1988), Pisoot (2010), Yael et al (2009), Matear & Gray (1993), Banomyong et al (2005), Min (1994) and Le Tan Buu

et al (2014) which are related to buyer's intention to select a freight supplier All these

factors are significantly important because they directly affect to company’s service performance to attract customer in current business situation Therefore, three specific research questions are:

What are the factors influencing intention to select a LCL import consolidator? How the factors influencing to selection intention a LCL import consolidator? How to improve LCL import consolidation service quality?

1.3 Novelty value and significance of the Study

After searching the key works which was related to this study topic for reference The author detected that there have been a lot of studies researching on the factors that affect the selection of logistics services to be implemented such as Matear

& Gray (1993), McGinnis et al (1995), Banomyong et al (2005), Yael et al (2009) ,

Le Tan Buu (2014), etc These studies focus on the factors that influence on the quality of logistics services or the choice of logistics service provider A few studies focus on the core criteria influencing to decision to select Less than container load export service or factors affecting to Less than container load export service quality like: Pisoot (2010), Dang Huynh Kha (2016), Bien Thi Mai Duyen (2014), etc None

of studies mentioned the factors influencing selection intention Less than Container Load service for importation aspect

The consolidators have just focused on approaching LCL import shipments for recent years to sell LCL ocean freight at Vietnam When more importers and manufacturing factories tend to control the responsibility for booking LCL import ocean freight at destination side The Incoterms of EXW, FOB, FCA have commonly been signed in the commercial contracts created the opportunity to develop the LCL import ocean freight business for consolidators in Vietnam The findings derived from this study will significantly contribute to the critical success factors of import consolidation business It will clearly reflect the reasons why customers select a LCL shipping supplier Besides, the importance of each selection criterion will surface, together with the strengths of the relationship between reliability, rate, resource, assurance, empathy as well as the responsiveness and the intention to select the service This will contribute much to the improvement of LCL import service quality

in the future Moreover, combined with other critical success factors identified in other studies, the six factors examined in this thesis can form a set of generalized success criteria factors which can be a useful suggestion for operators in the field

1.4 Subjects and Scopes of study:

Subjects of study:

Selection intention and core factors influencing the selection intention of a LCL import consolidator

Scope of the study:

The study revolved around import-export enterprises, freight forwarding, consolidator in Ho Chi Minh City The research was carried out for importation

The target respondent:

The respondents are members in logistics companies or import enterprises in

Ho Chi Minh city They are working as import customer service, import manager, inbound sea freight manager, pricing manager or director of company… who has the responsibility for making decision to select a supplier of LCL import shipping service

320 questionnaires were issued to respondents and received 300 valued questionnaires

Time frame of research:

This thesis was conducted from April 2018 to August 2018

1.5 The thesis structure:

The content of this thesis will be presented in five chapters as below:

Chapter 1: Introduction

Chapter 2: Literature reviews

Chapter 3: Research methodology

Chapter 4: Data analysis

Chapter 5: Conclution and recommendations

CHAPTER 2 LITERATURE REVIEWS

This chapter mainly introduces theories which are proposed by many scholars

in academic field, and theoretical model in order to create foundation for this study Firstly, the general introduction is about definitions of international freight forwarders, consolidators; the roles of international freight forwarders, consolidators and LCL import shipments Secondly, the Standard operating procedure of LCL import shipment was mentioned to help audience understand about handling of LCL shipments Thirdly, the overview of previous related researches were synthesized to present the definitions of factors influencing selection intention an supplier of LCL import service Finally, this chapter proposes theoretical model which its constructs and hypotheses are discussed

2.1 Definition and roles of international freight forwarders

2.1.1 Definition of international freight forwarder:

There have been many different definitions of international freight forwarder, this study adopts the definition of international freight forwarder from paper of Murphy (1992, p.203): “An international trade specialist who can provide a variety

of functions to facilitate the movement of cross-border shipments The functions provided by international freight forwarder include: delivery and distribution services; handling payment arrangements; assistance in paperwork required for deliveries; and organizing local and international shipping; information services; insurance; customs services; warehousing and consolidation services” The other definitions of freight forwarder is a service broker that provides service for or on behalf of exporter or importer in delivery operations Service starts from packing cargo into pallet, booking the ocean freight , then loading into the container, transportation, import and export entry and customs clearance formalities, preparing the import-export documentation, trucking inland to the warehouse of buyer, etc

2.1.2 Roles of international freight forwarder:

In a paper of Slater (2007, p.160), he stated that a forwarder is expected as a firm specialize in international physical distribution The forwarding agent is established to handle the managerial detail, selection and the structure of an international physical distribution operation To compare with it, Barrar & Davies (1985) mentioned the purpose of a forwarder is being an export specialist who takes

an active role in promotion for the documentation and transportation process In some extent, the direct customers are not professional in integrating further downstream, therefore, they are less proactive in estimating the cost of shipping than their logistics partner In spite of many studies about forwarding, Barrar & Davies (1985) concluded that the forwarder’s function is hard to determine because of the development from its original meaning He also stated that in the time before the industrial revolution,

an organization who owning none of goods and transportation mode was emphasized

In recent years, the forwarders seem to serve more activities namely the cost and freight, routing advisor and also the online track and trace system Likewise, the role

of an international freight forwarder is added by Perlman (2009, p.29), he regards a forwarder as an international solution expert advising the trading companies the movement of cross-border consignments The feature of an international forwarding company includes delivery and distribution, handling documentation, international payment, local trucking and worldwide shipping, custom broker, insurance, warehousing and consolidation service

Pisoot et al (2010), has mentioned nine duties of a freight forwarder as follows

First is Custom Broker: a clearance broker for an exporter (sender/consignor) or importer (receiver/consignee); Second is forwarding agent of international shipping service for exporter’s and importer’s consignments Third is Transportation provider who provides air, sea and rail modes shipping service; Fourth is Packing service for cargo Fifth is Warehousing sharing their own warehouse or co-operate with other suppliers Sixth is service for labor, stevedores in container stuffing Seventh is multimodal transports which can be seen as a delivery service in multiple modes of

transportation Eighth is Logistics service which operates the cargo distribution Last but not least is Business consultant who consult and give advice for import and export activities As can be seen, a forwarder may be considered as a representative in the name of the shipper in delivery, or take on the exporter’s function of the shipment, with all these service

In the forwarding role, the brokerage on carriage and charges for documentation bring the earning for a forwarder The forwarder who is located at or near a port, inland clearance depot or other customs point, takes the larger advantage in custom procedure than the direct importer/exporter Furthermore, the settlement of computerized customs provision is the next evolution in documentation process that provides the paperless interchange system As a mediator, the forwarder is responsible for updating the latest status concerning a transiting shipment and estimating the time of arrival to ensure the high quality service According to (Barrar

& Davies, 1985), the forwarder commercially demands on insinuating between the custom and consignor in data exchange Having been a customer broker, the forwarder must offer the paperless system that supports the direct communication between the trader and customs with the useful information and soft copy of documentation More or less, both forwarders and consignors seemly agree that the importance of forwarding has gone down since the shipper and the carrier adapted more with the traditional forwarding functions A Freight forwarder may manage all its own facilities, or outsource by hiring, renting, sourcing, booking through other freight supplier, and earning commission or service charges The forwarder business requires the long-term connection and a wide network, this was stated in Logistic Corner (2009) A wide network is significant for both local and international partners

to meet their customer’s high demands And no doubt, a large amount of cash flow is necessary for making payment of freight charges, port charges and documentation fee Lastly, all the terms of trading must be agreed by both partners

2.2 Definition and roles of consolidator and less than container load

at destination ports and delivering cargo to consignees, etc

2.2.2 Roles of consolidator and less than container load (LCL) import shipment:

Role of LCL import service for buyers and consignees:

The LCL import transportation offers many benefits to buyers/consignees For the small and medium businesses in the start-up time To fit in with the business scale, the small and medium importers just buy the small order which not fully utilizing the space of a smallest 20' container with approximately 33 cubic meter of goods Therefore, it would be ineffective if these businesses would pay for the entire container and then transport the small amount of their goods For the big organization

or manufacturing factories who frequently import with for production or commercial purposes, LCL import transportation is the good solution to pursue the Just in time strategy which they can minimize the inventory cost and make sure that their materials or commercial goods always keep up with the trend of market

By saving a lot of money from using of LCL import ocean freight, importers can reduce the production cost As a result, their market share will be increase, they can create the competitive advantage on pricing products and the demand for

importing and exporting goods has increased, thus contributing to the continued development of LCL transportation services

Importers using the LCL / LCL mode of transportation have the advantage of simply having a deal with a forwarding company that can ship goods from many different locations around the world instead of having to look for each one as each carrier only provides LCL container for certain routes as their strengths In addition,

a consolidator can also provide service of picking up cargo from warehouse at origin and delivering to door at destination that this one is not provided by the shipping lines

It is possible to summarize the interests of the importers/consignees as follows: importers are subject to lower rates and enjoy good service quality The importer increases the return on investment The assets that should be invested in the logistics sector are now exploited for the main business of the business so the higher efficiency Importers can increase their flexibility and respond quickly to market changes as logistics service providers are prepared to cope with seasonal needs, sudden demand, and This helps the importers stay on the market and still save money

Table 2.1 Dimension of container according to ISO standard

(Wikipedia) Role of LCL import service for carrier (shipping line):

Shipping lines do not have to pay much attention to individual shipments so that they can save huge amounts of time, money and human resource In addition, shipping lines can improve their cargo handling capacity in the FCL mode by consolidating LCL shipments of consolidator and using FCL transportation is

Container type Container 20’ Container 40’ Container 45’ Dimension

Length 5,758 m 12,132 m 13,556 m Width 2,352 m 2,352 m 2,352 m Height 2,385 m 2,385 m 2,698 m Volume 33,1 cbm 67,5 cbm 86,1 cbm

provided by shipping line Shipping lines can also save costs for equipment, warehousing and labor in tracking individual LCL shipments Shipping lines are also avoiding the risk of late payment of LCL shipments from a wide variety of individual retail customers because the risk is now being borne by the consolidators

Role of LCL import service for consolidator:

Despite facing many risks, consolidation still be profitable business because of the difference in the freight collected from the LCL shipping service and FCL ocean freight charged by shipping carrier The demand of market on using LCL import shipping service is creasing will be the opportunity for consolidators not only the chance to ear profit but also help consolidator diversity their routing import service

In addition, as a 3PL (third-party logistics service provider), consolidation companies are also on behalf of owners of manage and perform logistics services such as: on behalf of the shippers or consignees to carry out the export/import procedures, provide documents of delivery and transport inland or clear the customs and bring the goods to the point regulations, etc

Role of LCL import service for society:

LCL transport mode helps the society save the cost of oversea shipping, thereby reducing the cost of import materials and export finished goods, improving the competitiveness of products in the global market However, a consolidator needs to meet the following requirements: Firstly, a consolidator needs to have adequate facilities such as a warehouse, container loading and unloading equipment at both origin and détination ports Secondly, the consolidator needs to have a good partners

or agents in the origin area to release booking confirmation, receive cargo, arrange and load cargo into consolidation container and issue the related documentations, etc Thirdly, it must have the necessary expertise and financial capacity as well as the insurance responsibility to ensure their reliability on business In the fourth quarter, consolidator’s staff need to have experience and knowledge in packaging and storing cargo in containers to maximize the capacity of containers in use Finally, the consolidator should have a long-term business relationship with the shipping lines to

ensure the ability to purchase FCL shipping services from the shipping lines quickly

Step 1: The Consignees who have responsibility on booking LCL import ocean freight at destination port which mentioned in the commercial contract will contact Sales executive or Customer service staff of Consolidators to get the quotation, schedule, transit time, cut off time for routs which they need

Step 2: After checking and comparing the offers and related criteria from consolidators, consignees make decision to choose and book with one of them Step 3: Consignee sends information of Shipper's the person in charge of this shipment to chosen consolidator and request the schedule for their shipment

Step 4: Consolidator's customer service staff sends the shipment details and shipper contact to their agent at origin to contact and release booking confirmation Step 5: When shipper sent cargo into warehouse at origin, agent will send photos, cargo receipt and draft bill of lading to Viet Nam for updating to consignee Step 6: Customer service also advise delay notice or support to amend documentation if any

Step 7: Documentation coordinator will send arrival notice, debit note, photos

or un-stuffing container, cargo situation information to consignees

Step 8: After payments are completed, consignees use the delivery order which released by consolidator to get cargo from warehouse to complete the procedure

2.4 The overview of less than container load (LCL) service in Ho Chi Minh City

Saigon new port - Cat Lai is currently the largest and most modern international container port in Vietnam in District 2, Ho Chi Minh City, The location is near industrial parks and manufacturing zones in the north of Ho Chi Minh city and industrial zones of Binh Duong and Dong Nai province Cat Lai port has a total area

of 120 hectares with a length of 1.424 meters (8 berths) It’s equipped with 20 modern Panamax quay cranes with TOP-X's modern container terminal management system (RBS) from Australia and synchronous hardware system that enables real-time container management, optimizes port usage, reduces delivery time According to the statistic in 2017 of Saigon new port logistics joint stock company mentioned that 80%

- 85% of LCL import volume was exploited at Cai Lai, the rest are scattered at other ports such as ICD Phuoc Long, ICD Transimex, ICD Tanamexco The quality of LCL import to Cat Lai warehouse approximately 300 -500 million TEU per year

The number of consolidator in Ho Chi Minh city is greatly increasing because LCL import shipping demand is considerably developing The importers want to control on booking ocean freight to reduce production cost and conduct their strategy

of no inventory so they are using more LCL import transportation instead of FCL shipping There are more than 100 consolidators in Ho Chi Minh participate in the competition of approaching the LCL import shipments to Vietnam However, most

of consolidators in Ho Chi Minh city are only at small and medium level of business size They just provide the limited routings of LCL import service to Vietnam because they don’t have good agent system in over the world, don’t have enough cargo to open the consolidation direct routings as well as the financial ability to establish the strong human and equipment resource for meeting the huge of workload Most consolidators just offer some LCL import routings they have their own based volume and the volume supported from their agent The popular LCL import routings offered

by many consolidators from the main import market such as Busan, Shanghai, Shenzhen, Keelung, Taichung, Bangkok, Hongkong, etc There are a limited

multinational company approached Vietnam market and established a professional business, offered the various of LCL import routings such as USA, Europe, Asia to Vietnam namely Shipco Transport, Eculine shipping, Vanguard shipping, etc However, the difficulty for the multinational companies who have the strong at finance and good at experience on LCL handling is the lack of knowledge Vietnam business culture

When the market of LCL import service more and more competitive, importers not only focus on comparing the ocean freight to select a service supplier but also they consider on service quality, assurance, professional service, reputation, etc Therefore, the consolidator who want to create the competitive advantages must to find out the criteria affecting to customer’s purchase behavior which to be continue mentioned in the next parts

2.5 Purchasing, Purchasing process and Behavioral Intention:

Purchasing

Webster (1991, p.156) defined the organization's purchase as "a decisive process in which organizations formally shape the demand for purchasing products

or services then format, evaluate and select among different brands and suppliers "

In fact, in many cases the purchasing department is not a direct user of the products, goods and services purchased but it involves many different departments Buyers often consult with each other's departments, such as using department, colleagues, and senior executives Therefore, an organization's purchasing decision is not simply

an individual's job, it is the result of a process of interaction between professional purchasing staff, users of goods or services and other individuals and departments involved

Purchasing process

From a marketing perspective, the buying behavior of an organization is the apparent or latent impact of making step-by-step decision The organization's decision-making process includes the following stages: (1) determining the need for the product or service, (2) finding and identifying potential suppliers, (3) comparing

price, promotion and distribution of potential suppliers, (4) negotiation and agreement on terms of purchase, (5) completion of purchase target, (6) evaluating the quality of purchases for the achievement of the organization's goals

Robinson et al (1967) proposed eight stages of purchasing process: (1) conceptual perception, (2) general description of the demand, (3) specification of the product, (4) finding suppliers, (5) requesting offers, (6) selecting suppliers, (7) Ordering procedures (8) evaluating results

Behavioral Intentions

It is said that managers are able to create a decision environment in which desirable behavior and outcomes are encouraged if they learn knowledge of behavior deeply because the desire of client is stretchy and tied to customer service (Tokar

2010, p.92) In the same way, Bendoly, Donohue, & Schultz (2006) come to the conclusion that the intention category is relevant to presumption about decision maker’s aim The goals of a decision maker are dramatically effected by other issues namely trust, justice and connection with co-workers and supply chain partners As Tokar (2010) observed, maturing knowledge about human behavior, making discernment or verdict, and applying the knowledge of intention are not paid much attention in logistics research and SCM journals Consequently, there is a school of thought that service quality does meaningfully influence to customer’s satisfaction

It is stated that the service dimensions which is desired to reduce perceived risk, namely the Assurance and Reliability dimensions, are the most important for patients

in types of service encounters

2.6 Factors influencing freight forwarder selection:

The SERVQUAL model, formulated by Parasuraman et al (1988), is regarded as one

of the most popular model to measure the service quality It helps to identify the perceived service quality along the following five aspects:

(1) Tangibility which involves the appearance of physical facilities, including the equipment, personnel, and communication materials

(2) Reliability which involves the ability to perform the promised service dependably and accurately.

(3) Responsiveness which involves the willingness to help customers and to provide prompt response

(4) Assurance which involves the knowledge and courtesy of employees, thepositive declaration intended to give confidence Thus assurance includes competence, courtesy, trustworthiness and security

(5) Empathy which involves the provision of caring, and individualized attention to customers Empathy includes access, communication and understanding the customer

On the farther side of the mentioned 5 core factors, Banomyong et al (2005)

proposed six of major features that exert influence on the decision to select one logistics service provider as following: (1) reliability, (2) assurance, (3) responsiveness, (4) tangibles, (5) empathy, and (6) service costs Definition and the element belong of six factors used in this thesis will be presented as below:

Reliability

The reliability is signaled by the adequate service supply and binding

commitments to importers/exporters (Parasuraman et al., 1988) Accuracy in

document preparations, consistent service performance along lower transit times should be the shippers’ expectations for the service quality offered by logistics enterprises and obviously, it does affect decisions on logistics services suppliers

(Banomyong et al, 2005) Baily et al (2005) mentioned that service is performed by

both before and after sales It will be included accuracy, reliability, professional handling, implementation of commitments, technical availability, and facilities Reliability is an issue of trust or confident expectation, because a service supplier has

to handle high value cargo much greater than the freight cost amount Thus, the reliability will affect the purchase intention before a purchase decision is made, this factor includes formalization, flexibility, understanding, integrity, liking and trust

The reliable logistics may be created with at least of risks, not only confidence in the service for reputation on physical movement but also in financial terms

Yael et al (2009) mentioned the reputation of agent system is an important

element which supports the forwarder to get importers/exporters’ trust The agent participates in the standard operating process as the oversea representation on releasing booking confirmation, receiving cargo, arranging, packing and loading cargo into container as well as submitting related documents If one agent in the network stops their business, it creates a number of problems, with cargo held in a port without any one to operate it A importer will be confident to select a consolidation service supplier if they receive the satisfied comments from seller at origin with the good service quality which is provided by consolidator’s agent Therefore, “Reliability” factor is not only the reputation and trust of consolidator but also includes the reputation and profession of their agent system

Rates

Regarded as an overriding concern, pricing is seen as an initial factor relating

to logistics enterprises perceived by customers This is also essential to influence consumer’s satisfaction and decisions to use the service provided and select logistics

services suppliers (Banomyong et al, 2005) The more competitive and reasonable

logistics services pricing is assessed as, the greater it affects the selection decisions

Furthermore, according to Banomyong et al (2005), logical payment methods and

high discount rates will result in more effects on such decisions

Baily et al (2005, p.371) explained that it was important to get customer’s

impression in the first quotation which was offered in the starting approach stage A consolidator who offers the uncompetitive ocean freight in the first time will be hard

to convince customer while customer don’t know about their service Consolidator need to survey and update the market rates to adjust their quotation reasonably Most importers want to reduce their production cost, shipping cost, inventory cost to get more profit and launch their finished products with competitive price Therefore,

“Rate” is evaluated as the key element to select a transportation supplier

Pisoot (2010) mentioned the “Rate” factor is not only the LCL ocean freight but also included the local charges at both origin and destination and currency exchange rate Local charges and currency exchange rate must be acceptable which was standardized by market

Resource

According to Baily et al (2005) the key criteria that create the company success

on developing effective strategies was managers’ perception at all levels, company structure, internal communication, business experience and the available resource

He emphasized resource is a factor which affects customer’s selection to match their customized requests Because space should be always available at the time of booking request, the frequency of schedule need to be reasonable and meet the delivery planning requirement

Matear and Gray (1993) did mentioned prompt service, staff and equipment are also necessary elements belong to supplier’s availability Customer is satisfied with chosen service when they work with easily contact supplier to get quotation, local charges, schedule by phone, skype, email, website and supplier’s staff and equipment are always ready for tracking and tracing the shipment information

Besides, Parasuraman et al., (1988) and Banomyong et al (2005) proposed that

the trend of e-commerce and use of electronic documents in logistics services are growing increasingly popular Swift progress of information technology has enabled logistics enterprises to conveniently gather process and exchange information in the transportation of goods and documents Yet, in the context of Vietnam where ecommerce and electronic documents have yet to be perceived as comprehensively developed and widely accepted by public authorities, the positions of logistics enterprises prove a criterion affecting decisions to select appropriate suppliers due to convenience in trading with electronic documents, as compared to paper ones

Assurance

Customer’s trust built on staff qualification is evaluated as a criterion to select service provider Seemly, a logistics enterprise demonstrates the assurance by time of

delivery, keeping at a minimum damage in transit and constancy system

Furthermore, according to Parasuraman et al., 1988; Banomyong et al., 2005,

customer trust is also begun with basis of knowledge, experience of the staff dealing with consignor

Pisoot (2010) stated in their paper that the more risk is managed, the better the company and shareholders will be protected from harm As a result of these duties, the following organization's primary income-producing base including tangible and intangible are defended reasonably:

• Land, buildings, plant and equipment;

• The technology employed and associated intellectual property rights;

• The employees;

• Financial resources;

• Corporate image and reputation;

• Customers and suppliers

Leenders et al (2002, p.244) made a point of the perceived risk is related with routine, which means the first purchase carries much of risk than the next times Similarly, according to Baily et al (2005), purchasing carries risk It was explained

by Matear and Gray (1993) that people rarely alert with the usual risk until it breaks their routines In fact, many people are not more careful of the current risk and the remedies are not pointed out as an important aspect for risk assessment As a result, many current plans are viewed with alarm by relieving the existing risks

Assurance and uncertainty avoidance influent significantly to reduce indirect cost or hidden cost, which can support service quality In addition, Min (1993) demonstrated the important of quality assurance and perceived risk to customer’s behavior Also, they are helpful to clarify if the potential providers are qualified and reliable Seemly, the higher the risk perception is, the lower the hidden cost will be

In general, the international purchasers must bear with many kinds of risk, namely the mistake or exclusion caused by labor conflict, the fluctuation of exchange rate

and currency The insurance policy sea freight service contains the compensation for cargo loss and damage

Responsiveness

A study determined that responsiveness required the readiness, willingness and

of the service supplier (Parasuraman et al., 1988) Customer always demand the

quick reaction from the person they contact Moreover, the enthusiasm and responsiveness of the representatives are the core factors to determine the loyalty of customer and make the negotiation become more comfortable To support this idea,

Banomyong et al (2005), having the up-to-date quotation from supplier is the essence

for importer/exporter to estimate costs and profits

Nowadays, purchasing concepts is buying not only a thing but also the service, the brand, the reputation of a supplier Also, the vendors cannot be the seller simply They are required more feature, especially the ability to identify and deal with trouble

flexibly As stated in the paper of Yael et al (2009), the main point to compare a

supplier with a vendor is their attitude to find out solution when something goes wrong in trading process Both buyer and seller must corporate in suffering a loss or damage to make the best profit Thus, the researchers focused on the supplier’s capability only Whereas, Bhatnagar & Viswanathan (2000, p.13) showed the vitally important of time based and facilitate competition which were mentioned as two positive business strategies

In the same way, Matear and Gray (1993) said that the development of

technology brings much convenience to the connection and responsiveness The vast majority of current carriers serve an online system for tracking and tracing a shipment with high speed and correct information This is useful for both customer and supplier, the supplier may reduce cost and save time for handling calls and the clients are impossible to follow their consignment online for 24 hours per day

Empathy

This expresses attention and care for each individual customer, and it is the

human factor itself that is vital to the success (Parasuraman et al., 1998) Having their

interests and needs looked after, information kept safe and a long-lasting cooperation with logistics enterprises established are aspects all importers/exporters care about

and they would directly affect the selection of logistics providers (Banomyong et al.,

2005) Importers/exporters want to have their problems quickly handled by logistics enterprises If service providers offer a sound customer relationship system, importers/exporters should highly appreciate their services, which could also become

a top standard for selecting the providers because the customer relationship system not simply supports the management of customer base but improves the relationship between the staff and customers and well manage customers’ information to provide them with better services

2.7 An overview of related researches that analysis factors affecting to select a supplier of LCL service

This part reviews the previous related researches which were conducted to examine the core factors influencing to intention or decision to select an international freight forwarder or consolidator Through this review, author want adapt the novelties and significations, select the new suitable elements to apply in to Vietnam market, evaluate the limitation to find out the gap for this research

Pisoot (2010)

This research was conducted in Thailand to figure out the core criteria affecting intention to select supplier of less than container load export service Based on the previous literature of papers such as Min (1994), Matear and Gray (1993), Whyte

(1993) and the model SERVQUAL of Parasuraman et al (1988) Pisoot proposed 5

variables included reliability, rate, resource, risk fee, responsiveness to examine these factors’ relationship with the selection intention The result showed that responsiveness and reliability were verified as two criteria considerably support the intention to select the supplier of LCL export service in Thailand

The similarity of Pisoot’s paper and this study is the same purpose in finding the criteria influencing intention to select a supplier of LCL service However, the research that was conducted in Thailand focus on exportation aspect and the customer

interviewed was direct shipper or export manufacturing who had demand to ship the LCL export while the author research on LCL import shipments and the respondents were direct consignee or import manufacturing companies in Vietnam Limitations

of Pisoot’s research is the number of respondent was 35 people, this was a quite small sample size and the respondents were only from the freight forwarding companies and the result of two factors responsiveness and reliability just explained %50.21 the relationship between dependent variables and independent variable

Yael et al (2009):

The research was conducted at Ramat-Gan, Israel in 2009 to examine main factors influencing the decision to choose an international forwarding company The conceptual model was developed by describing the relationship between the characteristics of the business environment and the factors that affect the decision to choose a freight forwarding company The author has identified 18 factors in the selection of a company These factors were analyzed and then organized in related groups including: reliability, reputation, information management, service and price Reliability Group: Includes service reliability, accuracy of information and transit time factors

The reputation group of the company: the company size, reputation, quality certification, business experience and the elements of logistics extra services

Group on information management: including online quotes, reporting tools, classification and storage of information available

Service and price groups: Flexible response, ability to work, service diversity, and competitive pricing

In these four groups, the result presented that reliability group is the most important In this group the transit time factor is the highest, the ability of the companies to meet delivery deadlines and provide accurate schedules for customers The next important factor is competitive pricing Choosing a transportation partner is fundamentally an economic decision, based on consideration of cost and benefits In addition, the factors of service quality are also considered as one of the important

factors influencing the decision to choose a service of a company: flexible response, professional working ability, the diversity of services available

The limitation of this study was all above observed variables are organization elements, no one mentioned private issues If we apply this research model into Vietnam market, we should to add one more individual factor as “empathy” to consider on resolving the individual requests, demand and create the closed relationship with customers

Le Tan Buu et al (2014):

The research was conducted in Vietnam to figure out the core factors affecting

to selection an international freight forwarder The author adapted from the researches

by Valarie et al (1985), Parasuraman et al (1988), Bienstock et al (1997), Wilding

& Juriado (2004), and Banomyong et al (2005) to propose the model with 6 variables

as reliability, assurance, responsiveness, tangible, empathy, rate The research was conducted within the four leading export-import industries: footwear; garment; electronics, electronic components, computers; and chemicals The findings pointed out that the core criteria that affect the decision to choose logistics service providers, there are six components: Reliability, Assurance, tangible, Empathy, Responsiveness and Price Through exploratory factor analysis and binary logistic model, the study identified eight core criteria affecting the choice of the logistics service provider in

Ho Chi Minh City include: prompt response to customer requests; updating service charges; prestige brand of logistics service providers; making accurate records; interest in and interests of customers; location of logistics enterprises; providing e-commerce services and e-document; and reasonable price

The novelty of this research is the new proposed factor “service cost” which was not mentioned in research of Parasuraman (1988), the “service cost” factor was

adapted from study of Banomyong et al (2005) which was conducted in Thailand to

verified the core criteria to select a freight forwarder and was also fit in with Vietnam market’s nature However, the limitation of this thesis was the services which offered

by a freight forwarder is very various included trucking, customs clearance, packing,

submitting e-documents, LCL shipping, FCL shipping, airfreight shipping, etc Most freight forwarders in Vietnam can’t provide the totally service as a logistics company, they just focus on one or some aspects which they have the competitive advantages Therefore, the decision to select a freight forwarding company was evaluated generally, no one of service was specifically analyzed to examine the customer’s purchase behavior

Matear and Gray (1993):

Matear and Gray conducted this study in the Irish market to examine the differences between the shippers and the freight forwarder in the use of logistics service selection criteria This research proposed 5 factors which affect to decision to select logistics service as reliability, responsiveness, rate, resource and assurance The result showed that shippers or consignees are companies that own goods, can buy direct services from airlines or shipping lines or from a freight forwarder The three most important factors that are shown to the shippers or consignees are: responding

to customer complaints quickly, avoiding the loss or damage to cargo and delivery time on time Meanwhile, for freight forwarding companies, intermediaries that lease the services of airlines or shipping lines, factors that are at the forefront are the availability the service, the accuracy and the frequency of schedule a week when choosing a logistics service of shipping line or master of consolidator

The limitations of this research is the author just focused on finding the differences between the shippers and the forwarding company in the use of logistics service selection criteria in Irish market Author was not aiming for the goal of proposing the suggestions to improve the core factors which were significantly affect

to customer’s decision Besides, this research did also ignore the factor “empathy” which was greatly important if we want to research the same subject in Vietnam market

Banomyong et al (2005)

The research of Banomyong et al (2005) was conducted at Bangkok to explore

the core factors influencing shipper’s decision in choosing the logistics company The

author adapted the model researches of Parasuraman et al (1988) and Bienstock et al

(1997) to propose six factor groups included reliability, responsiveness, assurance, empathy, tangibility, cost which affect to selection a freight forwarder The author used 23 elements as bellow table to evaluate six factor groups The result mentioned responsiveness and reliability were the factors positively supported the decision to select a freight forwarder in Thailand The novelty of the research was the author proposed 2 new elements which were suitable to be applied in Asia market The first element was customer relationship management system (CRM) was the new management system supporting freight forwarding company on planning, approaching and managing customer’s requests, comments and volume The second new element was used to examine the Tangibility factor was “Location” because the information technology infrastructure in southeast Asia area was still not developed and the electronic document was still not widely used Therefore, the convenient location would be the important element affects to the customer’s purchase decision

Table 2.2 The measurement scales of Banomyong et al (2005) research

Banomyong et al (2005)

The model used in this research was suitable adapted into Vietnam because of similarity of market’s nature However, this research was conducted with the small sample of 176 respondents and the subject of the research was the freight forwarding company who totally provide full off logistics services included packing cargo, trucking, customs clearance, LCL shipping, FCL shipping, air freight shipping, etc while there were not many company can offer the full services of logistics chain in southeast Asia area

Table 2.3 The overview of factors influencing selection international freight

forwarders and consolidators in related researches

The factors The researches Result

Reliability

Pisoot (2010) Supported

Yael et al (2009) Supported

Banomyong et al (2005) Supported Matear and Gray (1993) Supported

Le Tan Buu et al (2014) Supported Parasuraman et al (1988) Supported

Rate

Pisoot (2010) Un-supported

Yael et al (2009) Supported

Banomyong et al (2005) Un-supported Matear and Gray (1993) Supported

Le Tan Buu et al (2014) Supported

Le Tan Buu et al (2014) Supported Parasuraman (1988) Supported

Resource

Yael et al (2009) Supported Pisoot (2010) Un-supported

Le Tan Buu et al (2014) Supported

2.8 Proposed Research Model and The Scale of Variables:

2.8.1 Proposed research model:

The proposed research model will be adapted the model researches of

Banomyong et al (2005) research which mentioned 6 factors: “Reliability, Rates,

Tangibility, Assurance, Responsibility, Empathy” influencing intention to select the

international freight forwarder in Thailand and strong factors from Pisoot et al(2010)

research and Le Tan Buu et al (2014) for the specific reasons below:

In the past, most of import less than container load commercial contracts which were signed with transportation responsibility belong to Shippers because Consignees weren't confident in controlling booking ocean freight for the shipments which were picked up from another country They believed that shipper understood about the transport service suppliers at origin with the good quotation and quality Besides, booking LCL import transport service at origin will have many advantages than

booking at destination because information for customs clearance, departure time, delay notice, etc will be sent to shipper from service supplier more quickly and the quotation offered at origin commonly more competitive than destination because consolidators can control their volume of container at this time to give the promotion for securing shipments Therefore, importers or forwarders in Viet Nam prefer to place booking at origin than destination In recent years, when global consolidators have approached Viet Nam market with the strong agency system in over the world, they have offered to importers and freight forwarding companies the better LCL import ocean freight fixed for long time and they have trained the sales executives who can approach, take care the person in charge of booking ocean freight for individual needs and support them for specific requests at destination such as commission or promotion on quotation, offering the special local charge at destination, opening consolidate container quickly, etc Thus, importers and freight forwarding companies were more confident in controlling booking at Viet Nam and the “Empathy” factor is one of best important criteria for them to choose a LCL import service supplier.

Bellow chart is the proposed research model and the scales for each factor:

Figure 2.1 Proposed research model

This study compares factors which impact on the intention to select LCL import service in order to encourage the development of business acumen via the census survey of the existing customers who are mostly service operators in the same industry Reliability, Rates, Resources, Assurance, Empathy as well as

Responsiveness are important factors to develop the company's competitiveness In this study, the intention in selecting to use LCL import service is the dependent variable, while other service attributes are grouped into six major independent variables

2.8.2 The measurement scale for selected factors:

Reliability

• The reputation of company (Whyte, 1993; Banomyong et al ,2005)

• Relationship with reliable management or sales persons (Yael et al, 2009)

• Quality commitment (Min, 1994; Parasuraman, 1988)

• Ability to handle shipments with special requirements (Matear & Gray, 1993)

• Reliable and professional agent system (Banomyong et al 2005)

Rates (Freight, Cost & charges)

• Payment terms & Freight terms (Min, 1994; Yael et al, 2009)

• Low freight rate (Matear & Gray, 1993)

• Reasonable local charge at both sides (Matear & Gray, 1993)

• Acceptable currency exchange rate (Matear & Gray, 1993)

Resource

• Departure time from origin (Matear & Gray, 1993)

• High frequency of sailings (Matear & Gray, 1993)

• Availability of freight space and ease of contact (Matear & Gray, 1993)

• Flexibility to offer service to other destinations (Yael et al, 2009)

• Technical assistance (Min, 1994)

Assurance

• Perceives Risks, Labor disputes, (Min, 1994)

• Avoidance of loss or damages (Matear & Gray, 1993)

• Feeling of Risk is to balance with Feeling of Trust (Yael et al, 2009)

• Freedom from loss /damage (Yael et al, 2009)

Responsiveness

• On-time delivery or punctuality (Matear & Gray, 1993)

• Short transit time (Matear & Gray, 1993); Speed of delivery (Whyte, 1993)

• Fast response to problems (Matear & Gray, 1993)

• Special offers or discount on destination charge (Matear & Gray, 1993)

• Updating documents ontime (Banomyong et al 2005);.

• Ability to understand problems and willing to help (Banomyong et al 2005);

• Quick response for claim procedure as responsiveness in problem sharing

(Matear & Gray, 1993)

Empathy

• Confidentiality of information (Parasuraman, 1988)

• Care of customers’ interests and needs (Parasuraman, 1988)

• Maintenance of good customer relationship (Parasuraman, 1988)

2.8.3 Research Hypotheses :

Adapting the research model and measurement scales of previous related

studies, author proposes the research hypotheses were presented in Table 2.4 as

bellow

For the Hypothesis 1, Reliability is considered as an important factor positively affect to customer’s intention to select a import consolidator Importers and international freight forwarders trust to receive good service quality from the consolidator who has good reputation, professional agency system, high quality service commitment, etc Banomyong et al (2005) did proved that Reliability is the

best factor influencing the decision to select an international freight forwarder in

Thailand, Le Tan Buu et al (2014) found that Reliability was one of supporting factors

on choosing the logistics service supplier in Vietnam market Therefore, It’s will be suitable to examine the positively relationship between Reliability and Customer’s intention to select an import consolidator in Vietnam

For the Hypothesis 2, The author proposed the positive relationship between Rate and Customer’s selection intention that the importers and international freight forwarders will support the import consolidators who offer the competitive LCL import ocean freight, standard local charge at both origin ports and destination ports,