Cheap Freight and Delayed Delivery: The Dilemma of Service Level Versus Costs

ABSTRACT This teaching case aims to understand the dilemma between service level and cost in business to business outbound logistics in a retail company. The company faced a disadvantage when hiring logistics providers due to its unattractive payment rates, leading to disruptions in deliveries. Therefore, this teaching case debates the following dilemma: how to increase the logistics service level and control costs? The pedagogical objectives seek to analyze potential alternatives to be used to raise the level of service and discuss forms of loyalty of the logistics service providers, as well as to increase the efficiency of distribution logistics by reducing disruptions. Thus, this case can be useful for undergraduate and graduate students, concerning the following topics: distribution logistics, service levels, operational efficiency, logistics performance, management suppliers, contract management, and risk management. Additionally, this teaching case is recommended to stimulate creativity and to prepare students for professional positions in the logistics area.