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OF PHYSICAL DISTRIBUTION SERVICE: RELATIONSHIP BETWEEN THE GROCERY INDUSTRY, RETAILERS AND WHOLESALERS Abstract The objective of this paper is to present the results of research developed to determine the quality of physical distribution services offered by the grocery industry as perceived by retailers and wholesalers. A methodology was developed in order to measure the service quality, which was applied at two different moments: soon after the implementation, in 1994, of the Brazilian economic plan called the “Plano Real”, and at the end of 1995. The results show great changes in the market behavior over the time interval between the two phases of the research. The results also show customer service as a purchasing variable that is increasing in importance. Retailers and wholesalers are raising their service requirements as suppliers are decreasing their service quality level. As a result, the percentage of unsatisfied client firms substantially increased from June 1994 to December 1995. Key words: customer service, physical distribution, channel relationship.