How do companies lose orders? A multi-country study of internal inconsistency in operations strategies

What is it about?

We investigate the so-called order losing effect in an operations strategy context, i.e. what happens if a company fails to deliver a high enough performance in strategically important areas. Using two databases containing more than 450 manufacturing companies each, we find that costs represent the most frequent factor in which companies fail to deliver the performance expected by their customers. We also show that a misfit terms of (a) costs and (b) after-sales services have the strongest order losing effect, having a significant and immediate negative impact on business performance (sales, market share, ROS, ROI).

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Why is it important?

To the best of our knowledge this paper is the first large-scale investigation of the order losing effect. We show that if companies fail to deliver high operational performance in strategically important dimensions their business performance will suffer. On average, costs and after-sales services turn out to be the most critical operational areas for manufacturing companies.