Purpose

To create economies of scale in operational units, service providers need to efficiently mix the right customers’ products in their different operational units. The purpose of the study is to explore how service providers/3PL create economies of scale by combining warehousing and sharing resources between customers, aka achieving advantages by unlocking the effects from economy of scale by increasing the utilization rate in operational units.

Design/methodology/approach

The paper has an explorative approach with data collected through semi-structured interviews. The analysis draws from economies of scale and service literature, to identify how service providers create economies of scale in everyday operations.

Findings

Service providers that create the right mix of customers for their different operational unit’s abilities to utilize economy of scale advantages, provide better services and lower cost to their customer. The service providers therefore need to create the right mix of customers, based of differences like fluctuating buying patterns and similarities like product size, weight, handling possibilities. Furthermore, understanding their customer’s customer is also a way to create the right mix of customers.

Practical implications

Service providers can be aware of the selective matching process to enable the sharing of resources between customers to create economies of scale. By selecting customers with different buying patterns but with similar product sizes the service provider can aggregate a stable demand and thereby increase utilization rate in their own operations.

Original/value

The paper contributes to an understanding of how service providers can enable economies of scale by integrating their customers. It also highlights the importance of relationships, trust and control.