IncotermsRTM Use in Buyer-Seller Relationships: A Mixed Methods Stud

The negotiation and communication of logistics management decisions between buyers and sellers of goods is critical for effective supply chain management. IncotermsRTM rules, a set of three character acronyms, are often used by buyers and sellers to communicate each party's logistics management responsibilities when transacting goods. Inappropriate application of Incoterms rules can lead to miscommunication of logistics responsibilities and expose either party to unanticipated costs and risks. This three-part mixed methods research explores the circumstances that contribute to errors in logistics management decision communication within buyer-seller dyads, the consequences of these errors, and methods to improve logistics management decision communication. Study 1 is a qualitative pilot case study that explores how buyer-seller dyads negotiate and communicate logistics management decisions and the communication errors that occur within a large, anonymous, international corporation. Study 2 conducts multiple qualitative case studies utilizing in-depth semi-structured interviews that explore how buyer-seller dyads negotiate and communicate logistics management decisions and the communication errors that occur within these buyer-seller dyads. Study 3 quantitatively tests hypotheses developed from analysis of the results of Study 2, using a scenario-based experiment deployed via a questionnaire, and seeks to find methods to improve the quality of communication of logistics management decisions in buyer-seller dyads. The hypotheses tested in Study 3 are H1: Incoterms training leads to a decrease in miscommunication of logistics decisions; H2: using fully specified and explicit IncotermsRTM definitions leads to a decrease in miscommunication of logistics decisions; and H3: using both fully specified and explicit Incoterms definitions and IncotermsRTM training leads to a further decrease in miscommunication of logistics decisions. Examining the results of the questionnaire, using binary logistic regression and ordinal logistics regression, H1 is supported, H2 is partially supported, and H3 is not supported. The findings of the research detail the process used in the negotiation and communication of logistics management decisions. While Incoterms rules appear widely used in goods transactions to communicate logistics decisions, their inappropriate use causes a variety of issues including unanticipated costs and risks. Incoterms training is shown to have the biggest impact on improving the quality of buyer-seller dyads' communication of logistics management decisions.