To that end, our research focuses on physical distribution service (PDS), a type of logistics service (Bienstock et al., 1997) involving a diverse set of activities (including warehousing, transportation, inventory management, etc.) all of which are aimed at ensuring that customers receive their orders of goods in an accurate and timely manner (Bowersox, 1969 and Perreault and Russ, 1976). In examining the relationship between differentiated PDS and differential margins, our study extends prior research that has linked such financial and accounting metrics as revenue and costs to the performance of PDS activities (Netessine and Rudi, 2006 and Rabinovich and Bailey, 2004) and expands on studies that have speculated about a possible linkage between the performance of PDS activities and margins (Feinberg and Kadam, 2002 and Pan et al., 2002).