Challenges of Import Logistics Outsourcing by Manufacturing Firms in Nairobi

Abstract

Outsourcing is in great demand in most companies due to the tremendous structural changes that have resulted to shrinking budgets, shrinking in house staff and downsizing. The option to transfer all or part of a company’s business function to an external entity plays an increasingly important role in the strategic alignment of organizations. The objectives of this research were to determine motivating factors in the outsourcing of import logistics services and to establish the challenges faced in the process of outsourcing import logistics services among manufacturing companies in Kenya

The research design of this study was a sample survey of the importers in the manufacturing industry as per the Kenya Association of Manufacturers. The total population of the companies in the manufacturing industry in Nairobi was 455 manufacturing firms. Primary data was collected via self administered questionnaires with both open ended and closed questions that were designed to elicit specific responses for qualitative and quantitative analysis respectively. The data was analyzed by use of descriptive statistics.

The results generated through data analysis indicate that the importance of reasons of outsourcing were satisfactory in explaining the decision by manufacturing companies to outsource. The reasons of outsourcing are a key determinant in deciding to outsource import logistics. The extent of challenges the importers face when importing services also determined the decision to outsource in the firms.

Based on the objectives, the following recommendations were made; the manufacturing firms should put more focus on core business functions and ensure reduction of overhead costs. They should take advantage of external expertise and experience and put measures to improve internal capabilities and expertise. The firms should reduce the total overall costs and where third party logistics providers provide a better service contract them. They should also emphasize on improved customer focus put measures to enable them compete effectively in the market.