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Integrating
Integrating logistics and logistics and IT
information technology strategies strategies
for sustainable competitive
389
advantage
Michael Bourlakis
School of Agriculture, Food and Rural Development,
University of Newcastle upon Tyne, Newcastle upon Tyne, UK, and
Constantine Bourlakis
Department of Business Administration,
Athens University of Economics and Business, Athens, Greece
Abstract
Purpose – To investigate the integration process of retailer’s information technology strategy within
logistics strategy and to find out those aspects of the retailer’s distribution and operational
performance that are mostly influenced via that integration.
Design/methodology/approach – A qualitative case study methodology is used where the
managers of the major domestic and multinational firms operating in the Greek food multiple retail
market are interviewed. The integration process of the information technology and logistics strategies
of these retail firms is linked to their relevant distribution and operational functions. Secondary data
for the Greek food multiple retail sector are also employed.
Findings – The findings show that logistics and information technology strategies are developed
and implemented in a parallel way by both local and multinational food multiple retailers in Greece. A
financial ratio analysis carried out for these firms, suggests that multinational firms possess greater
operational efficiency at both secondary and in-store distribution operations compared to domestic
firms, something that is largely attributed to their integration of logistics and information technology
operations. Multinational firms’ superior operational efficiency is also resulting in a higher
profitability performance.
Originality/value – The paper proposes that a successful integration process between the logistics
and the information technology functions seems to confer a competitive advantage upon retailers’
distribution operations. The paper will assist retail managers and researchers responsible for the
development of logistics and information technology strategies to understand that fully absorbed
information technology and logistics strategies and operations will be rewarded with superior
pecuniary and operational efficiency benefits.
Keywords Food products, Retailing, Distribution management, Information systems
Paper type Research paper

Introduction
Information technology (IT) encompasses the gathering, processing, storage, retrieval,
display and communication of information or data, normally by means of
microprocessor equipment (Willcocks and Fitzgerald, 1993). A critical issue for Journal of Enterprise Information
examination is the integration of IT and logistics operations, as firms employ logistics Management
Vol. 19 No. 4, 2006
information systems to deliver on logistics information needs (Fitzgerald and pp. 389-402
Willcocks, 1994). Recently, IT has led to an increase in the availability of information q Emerald Group Publishing Limited
1741-0398
on product movement within the supply chain (Prasad and Tata, 2000). For example, DOI 10.1108/17410390610678313
JEIM within food multiple retailers’ logistics operations, a large amount of information flows
19,4 is generated due to the extensive product range, the broad supply base, the numerous
store outlets and the need to monitor product stock at different supply chain stages, i.e.
from manufacturer’s and retailer’s warehouses to retail stores (McKinnon, 1990).
Dawson (1994) outlines the main IT available to retail firms with the most popular
ones being the collection of sales data at the retailer’s point of sale (EPoS) and the
390 electronic transmission of information via Electronic Data Interchange (EDI)
technology that facilitates supply chain firms’ co-ordination.
The joint use of EPoS and EDI brings many logistics-related benefits to the retail
firm including fewer stock outs, better product planning and the shortening in the
order lead times between a retail shop and a retail distribution centre (Institute of
Grocery Distribution, 2000).
Ciborra and Olson (1989) also note that EDI reduces the transaction-related costs of
co-ordination between firms via a standardisation of tasks and communication
between chain members. Other IT applications used within retail logistics include the
inventory control systems that can receive, store, pick and move goods during
warehousing operations under an integrated manner (Davison and Scouler-Davison,
1997) while recently, the use of internet has become extremely common as it supports
the dissemination of information among the chain members (Alshawi, 2001). In the
light of these developments, IT has enabled the transformation of food retail logistics
operations (Smith and Sparks, 1993) and has played a significant role towards the
development of warehousing operations (Davis, 1995). However, past studies indicate
the strong relationship between the size of the logistics company and the level and type
of use of IT. For example, Pokharel (2005) found that this use is accelerated with an
increase in size of the logistics firm while Morrell and Ezingeard (2002) show that
smaller companies faced problems to benefit from the IT use due to a lack of financial
resources and relevant capability.
In the section to follow, the authors propose an integration process between IT and
logistics functions in an attempt to provide an insight into the actual formulation of the
food multiple retail logistics strategy in relation to the formulation of the IT strategy.
Retail operational efficiency is also investigated at secondary distribution that is from
retail warehouse to store, at in-store and at entire retail distribution operations. The
impact of operational efficiency towards retailer’s profitability is the last issue for
examination.
These issues have not received much attention in the retail logistics literature,
although Bowersox and Closs (1996) regard performance measurement as one of the top
three areas of logistics research needs. Separate sections of this paper discuss the
research methodology and the research findings. The final section concludes with a brief
discussion on the resultant managerial implications and the areas for further research.

Logistics strategy, IT and retailers’ operational efficiency: the integration

process
The firm’s corporate strategy can be defined as the rational process designed to
achieve a competitive and sustainable advantage of one organisation over another. It
includes the effective development, execution and synchronisation of separate
strategies for individual firm’s functions such as production, marketing and finance
(Whittington, 1993). For retail firms, separate strategies are formed for the logistics and
IT functions that are of increasing importance for the successful management of retail Integrating
distribution operations (Smith and Sparks, 1993). The logistics strategy is the logistics and IT
development of actions based on the firm’s logistics capabilities (Fabbe-Costes and
Colin, 1999), while the IT strategy aims to create a competitive advantage differential strategies
by giving firms new ways to outperform rivals and by driving firm’s costs down
(Porter and Millar, 1995).
In general, most studies consider the overall influence of IT upon the firm’s 391
corporate strategy (Atkins, 1994; Baets, 1992; Lucas and Turner, 1987), and limited
work has been devoted to its influence upon specific firm functions such as logistics
and upon supply chains in general (Lewis and Talalayevsky, 2004).
Lucas and Turner (1987) discuss the three levels that exist in the process of IT
systems’ integration within the overall strategy adopted by firms (Table I).
In the first level of integration in Table I, independent IT systems such as EPoS,
assist the firm to implement its strategy by enhancing operational efficiency. These
systems are not directly linked to the strategy formulation process and most
information systems fall into this category.
In the second level, policy support IT systems such as activity-based costing
systems that deal with financial planning, are designed to aid the strategic planning
process. In the third level, IT is fully incorporated within the company’s strategy and a
differential competitive advantage is gained. This is the case for EDI, that its early
users enjoyed a competitive advantage over rival companies (McKinnon, 1990).
In an extension to the work of Lucas and Turner (1987), Figure 1 shown the
integration process of the IT function within the logistics function of the retail firm.
In the first stage in Figure 1, logistics and IT strategies are developed in isolation to
each other and subsequently, independent and non-integrated logistics and IT
operations are formulated. Roche (1992) supports the above and notes that IT starts to
play a greater part in the strategic expansion plan of the firm only from the 1970s
onwards, a time where the necessary IT systems were available. Hence, from the 1970s
onwards, retail firms start to invest proportionally more on logistics and IT operations
to support logistics planning and to reduce the cost of distribution operations. At the
second stage (Figure 1), the logistics and IT strategies become closely associated
resulting in the formulation of integrated distribution strategies and operations.
The third stage is where IT and logistics are no more cost reduction functions but
have been transformed to fully integrated distribution co-ordination weapons. The
retail strategy process enters the phase where these integrated operations reward the

Level of IT systems’ integration

within strategy formulation Primary objective Secondary effect

First level – independent IT Increase operational efficiency Managerial information

systems
Second level – policy support IT
systems
Third level – fully integrated IT
systems
Source: Lucas and Turner (1987)
Aid the strategic planning
process
To open new strategic options
and to provide the company with
a competitive advantage
Better understanding of problem
dynamics
To change the decision-making
process and to assess strategic Table I.
alternatives The evolution of IT
systems’ integration
within firm’s strategy
JEIM
19,4

392

Figure 1.
The integration process of
the IT function within the
retail logistics function

retail firm with a unique competitive advantage. This advantage is operational

efficiency leading to the fourth stage that is higher profit returns. This sequential,
stage-by-stage process is also an iterative one, considering that retailers achieving
heightened operational efficiency and profitability gains will readjust, reformulate and
reinvest in more advanced integrated distribution strategies and operations.
The above is fully shown in Figure 1 with two arrows starting from stage 3
(operational efficiency) and stage 4 (profitability) accordingly, both returning back
to stage 2 (integrated distribution strategies and operations). To our knowledge, no
empirical research work has examined the relationship between integrated logistics
and IT operations, and operational and profitability performance with specific
emphasis upon the retail firm. Hence, light must be initially shed on the retailer’s
distribution strategy formulation process and more specifically, on how an IT
strategy is developed alongside the logistics strategy. This leads to a research
proposition that is explored via interviews with managers:
P1. The IT strategy follows the logistics strategy in a food multiple retailer’s
strategic planning.
Empirical findings in line with that proposition will provide information on the
integration process between the logistics and IT operations while another issue for
investigation is whether that integration results in operational efficiency and
profitability gains. The latter is examined via a financial ratio analysis for firms Integrating
operating in the Greek food multiple retail market. During the 1990s, this market has logistics and IT
witnessed the advent of few multinational firms (Delhaize Le Lion,
Promodès/Carrefour, Makro, Lidl) which developed warehouses and installed EPoS strategies
and EDI systems from almost the start of their operations. Gradually, these firms have
become market leaders in terms of sales (Table II).
Under a similar fashion, the local food multiples restructured their operations and 393
from 1995 onwards, they developed their warehouses and started using IT systems in
their logistics operations (Bourlakis and Davies, 1999). To conclude, logistics and IT
operations which enjoy a critical role in the local distribution channel (Papavassiliou,
1988), gained extra importance due to the entry of multinational firms and the
formation of the Efficient Consumer Response (Hellas) in 1996.

Qualitative research methodology

In general, the qualitative methodology is based on an unstructured research strategy
that provides the means to explore the actors’ interpretations. The focus is on a

Sales (in million No of

Firms eurosb) stores Operating retail formats

Carrefour 1,727 440 French retailer that operates hypermarkets

(Continent), supermarkets, neighbourhood,
discount stores (DIA). It acquired
Marinopoulos, the largest domestic food
retailer during 2000
A/B Vasilopoulos 1,074 106 Belongs to Belgian firm Delhaize Le Lion that
operates hypermarkets, supermarkets,
neighbourhood stores. It acquired Trofo, a
major domestic food retailer at the end of 2000
Sklavenitis 765 36 Greek company that operates hypermarkets
and supermarkets
Veropoulos group 632 193 Greek company that operates hypermarkets,
supermarkets, neighbourhood and cash and
carry stores
Atlantic group 538 192 Greek company that operates hypermarkets,
supermarkets and cash and carry stores
Masoutis 482 159 Greek company that operates hypermarkets,
supermarkets, neighbourhood and cash and
carry stores
Metro 423 63 Greek company that operates hypermarkets,
supermarkets, neighbourhood and cash and
carry stores
Makroc (data 365 6 Food wholesaler owned by the German firm
based Metro and operates cash and carry stores
on year 2000)
Notes: aFood retail buying groups (e.g. ELOMAS, ELETA) are not included; beuro was the local
currency in 2003 replacing the previous local currency (drachmae); cIn Greece, Makro attracts Table II.
numerous small business owners that make their primary family shopping in its premises. Makro The major food multiple
operates as a retailer in that perspective. retailers in Greece ranked
Source: Self Service Review (2004) by sales (2003)a
JEIM rounded form of an explanatory type of analysis of rich, deep and flexible data. In
19,4 comparison, the quantitative methodology employs a structured research strategy,
analyses hard and reliable data and aims only to confirm or disconfirm the relationship
per se between the tested theories and the empirical research findings (Bryman and
Burgess, 1999).
The issues under the current investigation were quite complex in nature and our
394 primary aim was to get a deeper understanding of contemporary phenomena within a
real life context and to generalise theories. Hence, we resorted to a qualitative case
study methodology implementation (Yin, 1984). The case study is the Greek food
multiple retail sector that represents an ideal “laboratory” for an investigation on
retailer’s distribution operations given the aforementioned logistics-related
developments implemented for the first time during the 1990s. Four domestic and
three multinational firms are investigated that are the leading food multiple retailers
based on sales. Nevertheless, one of the multinationals has established separate
subsidiaries for its hypermarket and discount format. Each subsidiary formulates an
individual corporate and logistics strategy as it uses separate warehouses and issues
separate accounting statements. For these reasons, the two subsidiaries are examined
on individual basis and in total, eight cases are formed. This number follows
Einsenhart’s (1989) view that the number of cases should be between four and ten. The
cases are subjected to comparative analysis where underlying similarities and
systematic associations are exposed (Ragin, 1987). These firms were the only
multinational food multiples operating in the domestic retail market in the winter of
1998 when the interviews were implemented with 42 “key informants” (Seidler, 1974), a
number that is regarded as adequate (Miles and Huberman, 1994). Strict confidentiality
was guaranteed to the interviewees who were senior managers in various retail
operations (Table III).
Semi-structured interviews were conducted based on open-ended questions. The
authors have selected the most representative and informative interviewees’ quotes,
which are cited in the next section, aiming to offer some value in defining, supporting
or elaborating the researchers’ interpretation of events (Glaser and Strauss, 1967).

Research findings
Managers stressed that during the 1980s, IT was restricted in playing a supporting role
in logistics operations. Therefore, logistics strategy was developed in advance of
logistics and IT operations. However, during the 1990s, progress in IT elevated the
necessity of a specific IT strategy. Nowadays, the IT strategy is drawn simultaneously
with the logistics strategy, an issue that enjoyed strong consensus between the
managers of the domestic and the multinational firms:
Logistics and IT strategies are not planned, developed and implemented in isolation to each
other but alongside each other. Both strategies are planned well in advance of our
international expansion, and we resolve issues such as warehousing and IT systems before
the start of operations (IT manager of a multinational retailer).
Whenever there is a meeting for a logistics task, there is always a manager representing the
IT department to verify if this issue can be supported by his department or not (Logistics
manager of a Greek retailer).
 Integrating
Local Local Local Local MNE MNE MNE MNE Number
firm firm firm firm firm firm firm firm per logistics and IT
1 2 3 4 1 2 3 4 position strategies
Position
President 1 1 1 3
General manager 1 1 1 1 1 1 6 395
Commercial manager 1 1 1 1 1 5
Logistics manager 1 1 1 1 1 1 1 7
IT manager 1 1 1 1 1 5
Marketing manager 1 1 1 1 4 Table III.
Store development 1 1 1 1 4 Interviewees per firm
manager (local and multinational –
Store manager 1 1 1 1 1 1 1 1 8 MNE) and company
No per firm 6 6 5 4 5 5 6 5 42 (total) position

Managers of the Greek retailers stressed that the strategy to be followed for
logistics-related IT issues such as software packages, hardware and systems, is planned
within the company. Nevertheless, the actual development and implementation of most
of these issues is externalised to third party and consulting IT companies. On the other
hand, interviewees from multinational retailers argued that they develop
logistics-related IT systems in-house either at headquarter or at subsidiary level.
The relevant expert skills gained are then transferred to every country they
operate following the transnational strategic pattern of international expansion
(Bartlett and Ghoshal, 1989):
We developed in our Greek subsidiary an IT system that deals with product movement at the
warehouse level. This idea came to us when we started implementing warehousing
operations during the early 1990s where we noticed that the headquarters could not support
us with an efficient system. The system we developed at subsidiary level was a great success,
and I proudly announce that the parent company has already installed it in its world-wide
operations (IT manager of a multinational retailer).
Another issue discussed during the interviews is the large amount of financial
capital/costs required for the initial establishment of the logistics and IT fixed asset
infrastructure (e.g. warehouses, trucks, IT hardware and software) and the managers
provided relevant information (Table IV). However, Table IV does not include any
labour costs and does not account for the learning curve costs both occurring during
the initial fixed asset infrastructure investment and the subsequent need to run and
integrate efficiently the logistics with the IT strategies and operations.
Specifically, the multinationals established most of their IT systems from the start
of their operations and ahead of domestic firms. The third and fourth columns in
Table IV illustrate the existing gap of the establishment of the EPoS and EDI systems
between the domestic and the multinational firms. Domestic firms introduced in-store
EPoS systems in 1997 and based on the third column in Table IV, it is clear that they
need much time before these systems are installed at each store. That operational delay
can be attributed to the domestic firms’ limited IT experience, skills and capabilities
and the resultant need to get support by third party and consulting IT firms for
implementing that installation.
JEIM No of retailer’s
19,4 Logistics and IT stores with EPoS Starting year of
infrastructure costs (total number of Applications of warehousing
Firms (in drachmaea) stores) logistics IT systems operations

Multinationals
A/B
396 Vasilopoulos
(Delhaize Le 3.1 billion 31 (31) EPoS, EDI-D93A 1994
Lion) and radio frequency
DIA 2.4 billion 66 (66) EPoS, EDI-D93A,
(Carrefour) radio frequency
Continent 1.3 billion 6 (6) EPoS, EDI-D93A 1994
(Carrefour)
Makro Not given 4 (4) EPoS, EDI No warehouses
(Metro) in use
Domestic
Sklavenitis 800 million 10 (107) EPoS, EDI planned 1998
for 2000
Marinopoulos 2.5 billion 110 (110) EPoS, EDI-D93A 1999
planned for 2000
Trofo Not given 10 (43) EPoS, EDI planned 1998
for 2000
Veropoulos 4 billion 93 (157) EPoS, EDI planned 1997
Table IV.
for 2000
Logistics and IT
infrastructure issues in Note: aCosts are given in drachmae, the local currency in 1998, the time period the interviews were
Greek food multiple conducted (1euro ¼ 340 drachmae).
retailing (1998) Source: Authors’ interviews

The third, fourth and fifth columns in Table IV also indicate that the multinationals
have already achieved the full implementation and integration of their in-store EPoS
systems and their EDI systems within their warehousing operations.
The above analysis shows that the multinationals have achieved integration on
their logistics and IT strategies and operations in the secondary distribution and it can
be reasonably suggested that they are in the second stage of the integration process in
Figure 1. Domestic firms are in the first stage of the integration process as they have
not managed to integrate their logistics and IT operations. Managers of multinational
retailers stressed that this integration brings extra efficiency and profitability returns
and supported the third and fourth stages of the integration process (Figure 1). In order
to shed some light on the above, the authors made use of the annual volumes of the
leading periodical for the Greek food retail sector (Self Service Review, 1995-2001).
These volumes contain financial information extracted from retailers’ annual balance
sheets and, based on that information, the domestic and multinational food multiples’
distribution and operational performance is assessed via a financial ratio analysis
(Table V).
For consistency reasons, the authors analyse only the firms that participated in the
qualitative part of this research that are cross-examined via a range of
distribution-related efficiency ratios.
 Based on the literature, (Cook and Walters, 1991; Institute of Grocery Distribution, Integrating
2000; McGoldrick, 2002; Walters and Hanrahan, 2000; Walters and Laffy, 1996), these logistics and IT
ratios are the most relevant measures for examining retailer’s operational and
distribution performance. The analysis starts in year 1994, when most multinationals strategies
achieved complete integration of their logistics and IT practices. The analysis ends in
year 1999, when most domestic firms finalised their warehouses and the year where the
majority of domestic firms engaged in the installation process of the EPoS and the EDI 397
systems. Therefore, the authors cross-examine the multinational retailers which enjoy
integrated distribution operations, and the domestic retailers which still opt to achieve
that integration aiming to reveal possible efficiency performance differentials between
the two groups of firms.
The fixed assets turnover is the ratio of retail sales to fixed assets and is a measure
of sales productivity to fixed assets utilisation. The logistics-related fixed assets
include trucks, warehouses and IT equipment that co-ordinate the product and
information flow in secondary distribution. As logistics outsourcing is not a common
practice in the Greek environment (McKinnon, 1999), these assets are, in most cases,
owned and managed by retailers. Table V shows that with the exception of years 1994
and 1995, multinational retailers have a higher fixed assets turnover ratio against
domestic retailers and are more efficient in their secondary distribution operations. The
lower performance found for the multinationals in 1994 and in 1995 can be attributed to
their limited number of stores at the time. In addition, multinationals were in the
process of integrating their logistics and IT operations (Table IV) to support store
expansion. Additionally, in 1999, the ratio decreased significantly due to
multinationals’ expansion to northern areas of the country. These multinationals
invested in logistics infrastructure in that region with new warehouses being built and
IT operations being installed.
The above created integration problems primarily because the managers of the
multinationals did not take into account the substantial extra time, effort and
distribution-specific investment needed for implementing the appropriate linkages
between the new distribution operations and the rest of the retailers’ distribution
network operations. In addition, these managers did not expect that dealing with
regional manufacturers/suppliers based in Northern Greece could create an extra
integration problem. For example, these manufacturers/suppliers lack logistics and IT
capabilities, were using different logistics and IT processes and systems and were not
be sympathetic to retailer’s distribution needs, at least from the start of their
co-operation. Overall, this expansion to the northern region created a noteworthy
organisational disruption as was evident by, inter alia, the initial occurrence of product
stock-outs, the disorderly product deliveries at both warehouse and store level and the
poor information dissemination within the retail network. On a positive note, these
problems were rectified gradually.
The second ratio in Table V is the ratio of total sales to floor area used for the
company’s total sales. The cross-examination shows that multinationals enjoy higher
sales per square meter (sq.m.) of selling space compared to domestic firms. The above
should be attributed to multinationals’ integrated secondary distribution operations
and to their in-store product management and merchandising techniques. The latter
techniques support the promotion and the selling of non-food products that generate
higher sales per sq.m. in comparison to the sales from food products. On the contrary,
JEIM
1994b 1995 1996 1997 1998 1999
19,4
1. Fixed assets turnover
Average fixed assets turnover for the four domestic
retailers 8.42 7.69 6.97 6.69 6.09 5.83
Average fixed assets turnover for the four multinational
398 retailers 4.04 5.1 10.16 13.57 16.15 6.69
2. Sales per sq.m
Average sales per sq.m. for the four domestic retailers (in
million drachmae) N/A 1.51 1.2 1.75 1.48 1.5
Average sales per sq.m. for the four multinational
retailers (in million drachmae) N/A 1.54 1.55 1.83 1.9 1.93
3. Stock turnover
Average stock turnover for the four domestic retailers 7.57 6.65 6.59 6.25 5.81 6.75
Average stock turnover for the four multinational
retailers 11.79 11.38 9.41 10.97 11.92 9.28
4. Distribution costs/sales
Average total distribution costs as percentage of sales for
the four domestic retailers (per cent) 10.82 12.19 13.16 14.87 15.05 15.5
Average total distribution costs as percentage of sales for
the four multinational retailers (per cent) 9.98 18.48 12.55 10.77 10.19 13.7
5. Return on total assets
Average return on total assets for the four domestic
retailers (per cent) 5.98 5.86 4.93 3.63 2.95 2.52
Average return on total assets for the four multinational
retailers (per cent) 5.21 2.74 3.87 3.59 4.41 0.99
Average return on total assets for the three profitable
multinational retailers (per cent) 5.21 5.88 5.61 5.84 6.25 3.09
6. Net profit margin
Average net profit margin for the four domestic retailers
(per cent) 1.66 1.77 1.52 1.07 0.94 0.86
Table V. Average net profit margin for the four multinational
Distribution and retailers (per cent) 2.59 0.11 1.78 1.4 1.79 0.34
operational performance Average net profit margin for the three profitable
ratios for four domestic multinational retailers (per cent) 2.59 2.94 2.68 2.59 2.64 1.25
and four multinationala a
Note: Two subsidiaries of one multinational are examined on individual basis as they publish
firms that operate in the separate accounting statements and formulate different corporate and logistics strategies. bOne
Greek food multiple retail multinational firm is not included, as it was established in 1995.
market Sources: Self Service Review (1995-2001)

domestic food retailers sell primarily the food product range, and the non-food sales
account for a very small amount of their total sales (Self Service Review, 1999).
The stock turnover ratio denotes the ratio of the firm’s cost of sales over the volume
of product inventory held by the firm. It examines food retailer’s total distribution
performance and assesses how quickly the goods bought by the retailer are sold to the
final consumer (Institute of Grocery Distribution, 2000). Results in Table V indicate
that multinationals achieved a higher stock turnover performance in comparison to
domestic retail firms and are more efficient in their entire distribution operations.
Further insights are provided via the investigation of the distribution costs ratio
that evaluates retailer’s performance in both secondary and in-store distribution
operations. It is the ratio of total distribution costs to total sales including the costs of
developing, maintaining and integrating the logistics and IT strategies and operations Integrating
(Walters and Laffy, 1996). Table V shows that, taking the year 1995 apart when one logistics and IT
multinational invested heavily on new warehouses, multinationals generate lower
distribution costs as a percentage of sales over domestic retailers. Taken in conjunction strategies
with the findings of the first three performance ratios of Table V, it can be concluded
that the integration of logistics and IT operations rewarded multinationals with a
distribution and operational efficiency advantage over domestic firms. This validates 399
the third stage of the integration process (Figure 1).
The last two ratios in Table V examine the impact of operational efficiency to
retailer’s financial performance in terms of profitability that is the fourth stage in
Figure 1. The return on total assets ratio is the ratio of the retailer’s net (before interest
and taxes) profit to net current and fixed assets. The net profit margin or operating
income ratio is the ratio of the retailer’s net profit to total sales (Walters and Hanrahan,
2000). The return on total assets ratio indicates how efficiently the company is using its
assets in generating profit, while the net profit margin ratio shows the actual financial
outcome, in terms of profit creation within sales. Both ratios are regarded as
appropriate measures of retailer’s profitability performance (Walters and Hanrahan,
2000). The first two rows for ratios 5 and 6 in Table V show that in most cases,
domestic retailers outperform multinationals. However, the second row for ratios 5 and
6 includes two multinationals with heavy losses. Losses occurred for one multinational
in 1995, its first operating year, and 1999, while losses occurred for the second
multinational in 1996-1998 due to store expansion. Ramsden (1998) recommends that
during profitability performance analysis, researchers should focus on the profitable
firms and should exclude firms with substantial losses. Two additional estimations
have been included that account for the three profitable multinational firms. The third
row of ratios 5 and 6 in Table V illustrates the performance of the three profitable
multinationals, by dropping the one loss-making multinational retailer accordingly,
one in 1995 and 1999 and the other in 1996-1998. A comparison of the first and the third
rows of ratios 5 and 6 in Table V shows that with the exception of 1994 for the return
on total assets ratio, multinational retailers turn up having better profitability
performance. This should be attributed to their operational efficiency, increased sales
and heightened distribution performance compared to domestic firms; this confirms
the fourth stage of the integration process (Figure 1).

Concluding remarks
The integration process between the logistics and the IT functions seem to work in a
parallel fashion in retail firms’ strategic planning. However, domestic firms became
aware of the usefulness of the integrated use of logistics and IT functions in the
aftermath of foreign entry. Although domestic firms completed the building of their
warehouses recently, they still need much time to install the necessary logistics-related
IT systems such as EPoS and EDI (Table IV). As a consequence, domestic firms are
disadvantaged in terms of operational efficiency compared to the multinationals, as
they find themselves to be in the first stage of the integration process (Figure 1). On the
contrary, multinationals enter local markets by having integrated their IT and logistics
strategies, and therefore, are in the second stage of that process that confers a
competitive advantage upon distribution operations. This advantage was found to be
operational efficiency leading to higher profitability performance as shown in the third
JEIM and fourth stages in Figure 1. This finding confirms past studies about the size of the
19,4 firm and benefits stemming from using IT (Pokharel, 2005; Morrell and Ezingeard,
2002) as the smaller size of the domestic firms, compared to multinationals in terms of
total sales (Table II), could be an influential factor. It was also shown that these two
groups of firms possess different characteristics in terms of IT capabilities, expertise,
strategy development and implementation that could present an additional influential
400 factor.
Few management implications stem from the present research study. Firstly, retail
managers need to be aware of the key efficiency and strategic roles occupied by IT as a
medium in integrating retail logistics operations and should endeavour to have in place
appropriate IT operations that should be formulated alongside their logistics
operations. Secondly, retail managers need to examine on a continuous basis the firm’s
IT infrastructure and in particular, it is essential to assess if the existing IT
infrastructure is sophisticated enough to amalgamate with the firm’s logistics-related
strategic objectives. Thirdly, the examined financial ratios that investigated efficiency
at secondary, in-store and total retail distribution operations can assist retail managers
in their efforts to increase operational efficiency.
Although our study investigates the Greek food multiple retail sector, it is
anticipated that it will assist retail managers from other national environments. Future
research could identify the impact of specific IT systems on in-store and warehousing
stock turnover levels and in turn, on sales, or ideally, on profitability performance.
Additional research work needs to be carried for the efficiency impact of IT systems on
other key retail distribution operations such as transportation. Apart from a financial
measurement analysis, that IT efficiency impact can be also assessed via the
measurement of employees’ productivity based on hours spent on transportation
operations. Based on these recommended research avenues, the operational efficiency
impact on profitability could be revisited. Overall, there is a pressing need for the
development of extra distribution performance-related ratios given that their future
application could reveal successful distribution processes. The present work is a prime
effort to point out to retail management that the integration of logistics within IT
strategies and operations should be greatly enhanced as far as the agenda of the
strategic priorities is concerned.

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About the authors

Michael Bourlakis is a Lecturer in Marketing in the School of Agriculture, Food and Rural
Development at University of Newcastle upon Tyne (UK). Michael Bourlakis graduated in
Business Administration at Athens University of Economics and Business (Greece) and obtained
both his MBA and PhD degrees from University of Edinburgh (UK). Michael worked as a
Research Associate at the Management Centre, University of Leicester (UK) and at the Oxford
Institute of Retail Management, Templeton College, University of Oxford (UK). Research
interests include retail logistics, agricultural logistics and food supply chain management and
has published in various logistics, supply chain management and marketing journals. Michael is
an editorial board member of Supply Chain Management: An International Journal and has
secured funding from various research organisations and funding bodies. Michael A. Bourlakis
is the corresponding author and can be contacted at: M.A.Bourlakis@ncl.ac.uk
Constantine Bourlakis is a Senior Lecturer in Microeconomics in the Department of Business
Administration, Athens University of Economics and Business, Greece. Constantine obtained his
first degree in Economics and Statistics in the Department of Economics, Athens University of
Economics and Business, Greece. Subsequently Constantine completed an MA in Economic
Studies at the University of Newcastle upon Tyne (UK), and a PhD at the University of East
Anglia (UK). Constantine worked as a Research Associate at the University of Warwick (UK),
and as a Lecturer at the University of Leeds (UK), at the University of Edinburgh (UK) and at the
University of Leicester (UK). Constantine’s research interests lie in the broad areas of industrial
economics and business strategy. E-mail: cbourl@aueb.gr

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