Service Specialists Leadership

It is generally recognized that most channel situations that are engaged in continuous or repeat business formally or informally require leadership. The structural circumstances that encourage and facilitate leadership are explored. At this point it is appropriate to briefly note the channel leadership potential for service specialists.

A few years ago it would have been unrealistic to illustrate a situation wherein a service specialist could emerge as the overall channel leader. Each of the factors discussed above namely, expanded justification, increased risk involvement and service industry concentration and growth of alliances – serves to make the advent of service specialist led channels more realistic. Two additional events of the 1980s serve to further increase the potential of such leadership.

The rush of leveraged buyouts and business acquisitions of the 1980s have resulted in some strange business relationships. To illustrate, the sequence of events that led to the control RJR Nabisco and Beatrice Foods by Kravis, Kohlberg and Roberts has been well documented. The fact of the matter is that after all the smoke settled, management control of Nabisco, for example, was in the hands of a financial service supplier that was positioned to control the commitment of the giant food and tobacco firm to its primary channel arrangements and overall supplier base. The wide spread consolidation of primary participants, manufacturers, wholesalers, and retailers throughout industry has served to elevate the relative power of stockholders and insurance companies that are involved in the financial structure of such business deals. It is clear that selected service support firms of the 1990s such as financial institutions are more powerful and better positioned to take a leadership role in primary channel arrangements than in the past.

The second potential for primary channel leadership by service providers is margining out of the power of information technology. For example, a comprehensive new service firm, Global Logistics Venture, a joint venture of AMR, the holding company that controls American Airlines and CSX, a broad based transportation services company, is building service using a unique marketing strategy. Global Logistics is providing primary channel members with information technology to coordinate the purchase of essential services from a number of specialized providers. Thus, Global is positioned as a potential intermediary between the user and the provider of special logistical services. A similar information based strategy is followed by C H Robinson, which is a major provider of coordinated logistics services. Information may be among the most powerful forces to effectively lead management practices of primary channel members.

Beyond financial and information based service specialists the potential also exists for firms that actually perform logistic services such as transportation or warehousing to exercise channel leadership. A logistics service firm is typically a neutral participant that provides essential services for primary channel members at a negotiated fee. The potential does for such service to exploit power sources available to them from day-to-day operation. A transportation carrier, for example, is ideally positioned to reward shippers in the forms of arte reductions and the introduction of cost reducing technologies such as automatic tracing. Carriers also represent a source of expert knowledge concerning all forms of transportation management. Because of access to critical business information such as customer’ locations and purchase patterns, carriers are ideally positioned to have a channel wide perspective concerning business operations. As carriers provide these services and engage in routine operations they are ideally positioned to gain dependency of primary channel participants and even to resolve potential conflicts.

American president Companies (APC), a double stack rail container service that links vendors to Ford Motor Company’s auto assembly plant in Hermosillo, Mexico, is a prime example of a carrier quarterbacking a channel arrangement. APC coordinates all information, truck and rail transportation customs clearance and inventory handling necessary to collect parts and components from vendors and sequence load them into containers for delivery o a just in time basis to Ford’s Hermosillo assembly plant. APC also coordinates the return to the United States of containers carrying components produced by vendors located in the Maquiladora region. It is clear that APC’s role in the above logistic service arrangement is far more extensive than simply providing double stack container service. While service specialists are not typically considered to be prime candidates for leadership of channel arrangements, their unique positioning and the power base associated with their activities does not prohibit such a role.