Service quality gap between the expectations of shippers and carriers in Asian dry bulk shipping

It is well known that bulk shipping is a highly competitive market and is subject to volatile freight rates caused by an imbalance between demand and supply as well as changes in input costs. As such companies constantly face challenges of being competitive in the market and making profit. Companies need not only to keep operational costs low but also maintain a high level of customers' satisfaction and service quality. On the other hand, the scope and terms of shipping service are subject to negotiation and agreement between the shipper and the carrier; the delivery of shipping services are governed by a mutually agreed charter party that documents the terms and conditions of the contract of carriage. Charter parties have historically favoured owners and left charterers dissatisfied with the services provided, even though the services provided are as per the contract. This is mainly because the expectation of service is not well communicated; carriers monitor the expectation of service quality based on their past experience and market research, while the service quality expectations of shippers are beyond the terms and conditions of the charter party that often cannot specify the intangible elements of service quality. This study is the first and critical step in determining the overall gap between the perceptions and expectations of service quality in dry bulk shipping in Asia. Although the concept of service quality is not new in dry bulk shipping, it is often not well understood. The current study extends previous research on service quality to dry bulk shipping in Asia and investigates the contribution of the key factors to service quality as a means for carriers to differentiate their service and improve company competitiveness in the market. To achieve the above research objective, the quantitative primary data for the study are collected through an online survey and are then used to measure the gap between the service quality expectations of shippers and carriers. A survey questionnaire is developed based on Parasuraman, Zeithaml and Berry's (1988, 1992, 1995) approach adapted to dry bulk shipping. The results of descriptive and inferential statistical analysis suggest that a significant gap exists between the service quality expectations of shippers and carriers. It has also been found that shippers are willing to pay a premium for better service quality. This implies that carriers need to align their service quality with the expectations of shippers if they want to improve customer satisfaction and gain competitive advantage. Alternatively, improved service quality that is aligned with shippers' expectations would result in higher productivity, less delay, increased market share and profits. The study highlights that dry bulk shippers consider intangible elements of service to be more important than tangible elements. Shippers expect their carriers to do more than just fulfilling the terms and conditions of the contract of carriage. While, 82% of the dry bulk carriers believed that fulfilment of the terms and conditions of the contract of carriage constitute good service quality, only 27% of the surveyed shippers considered the same.