Outsourcing of Logistics: a Survey of the Practices of Medium and Large Kenyan Manufacturing Firms

Abstract

The tough economic times in the country have endeared firms to reconsider their options in order to acquire and sustain competitive advantage. To ensure this, they have adopted a number of strategies. There has been a move to strategically manage the operating of the business unit that demands the evaluation of the core activities and competencies so as to stay in what the firm does best or what is the 'raison d'etre' of the firm. However the other activities found to be either non core or that the firm does not do well still have to be done. This has led to the outsourcing of these activities to other firms in the industry that could do these activities better and contribute positively in the value addition function of the organisation. Logistics has been identified as one of the functions that are very frequently out sourced by firms. Indeed the study found that about 80% of the firms surveyed outsourced at least one activity in the logistics function. The study found that both medium and large sized firms equally outsource logistics services and the ownership of the firm does not have a significant influence on the prevalence of outsourcing of logistics services in Kenyan firms, Firms quoted three reasons as being most influential in outsourcing of the logistical activities. The first one is the need to avail time for other crucial activities for managers. The second is the need to reduce overall cost and the third, the need to make use of the expertise of service providers. The triggers found to lead to outsourcing were the need to improve overall efficiency, need to focus on the core business and the demand from customers for a higher service level. The study found that staff resistance to change was the factor that was an obstacle to the implementation of outsourcing of logistical services. The surveyed firms did not identify any serious pitfalls in the outsourcing of logistical services in Kenya. The evidence for a partnership relationship is not very strong; hence, Kenyan firms need to strengthen their relationship with suppliers for optimal realisation of benefits and value addition for customers. The area of logistics is not well developed in Kenya hence investment in the sector could boost trading and enhance operational effectiveness. Outsourcing of logistics if carried out properly is a very important practice for firms in Kenya that may want to maintain competitive advantage in the industry.